The past year has been busy for the Japan Fair Trade Commission (JFTC).

Cartel enforcement has been an important portion of the JFTC’s enforcement as ever, and aggressive enforcement was taken against domestic cartels, which mainly consisted of bid-rigging in various industry sectors including the construction sector. Also in the cartel area, the Supreme Count handed down an important judgment dealing with the territorial reach of the Act on Prohibition of Private Monopolisation and Maintenance of Fair Trade (AMA) and supporting the JFTC’s enforcement in the Cathode ray tube cartel case.

The JFTC maintained a steady level of enforcement in merger control. There was a slight increase in the number of notifications, an increase in the number of notifications of transactions involving foreign companies and a limited number of cases reviewed in Phase II. In multiple cases a clearance decision involving remedies was issued, and in some cases the JFTC refused to give clearance.

The JFTC has recently been focusing on enforcement in various industry sectors including IT and public utilities, including energy, and agriculture, and it has been achieving results in these areas.

In addition, the JFTC was very active in policy work. It issued important reports that may influence future enforcement, such as the report on big data and competition policy commissioned from the Competition Policy Research Centre (CPRC), and the report on the liquefied natural gas (LNG) sector, as well as amendments to the guidelines dealing with vertical restraints. The Study Group on Antimonopoly Act (Study Group on the AMA) issued a final report suggesting reforms to the surcharge payment systems and leniency policy, and showing a framework to design future surcharge payment systems, which constitutes an important part of the JFTC’s enforcement efforts.


The JFTC may issue a cease and desist order, a surcharge payment order, or both as administrative sanctions for violations of the AMA.

Cease and desist orders aim to eliminate illegal acts, to restore an appropriate competitive environment and to prevent a recurrence of such violations of the AMA by ordering the party or parties to cease the actions in question and to take preventive measures. In addition to cease and desist orders, surcharge payment orders may be given in cases such as cartels and bid riggings. The JFTC issued cease and desist and surcharge orders for seven cartel or bid-rigging cases in 2017, all of which related to domestic markets in Japan.

The total amount of surcharges imposed in 2017 was approximately ¥7.5 billion compared to approximately ¥9.1 billion in 2016. While surcharges over ¥10 billion in total per year were levied before 2014, the total amount of surcharges imposed has remained ¥10 billion or less in the past few years.

Moreover, the JFTC has a policy to seek criminal penalties in the following cases: serious cases that are considered to have widespread influence on citizens’ welfare; and firms or industries that are repeat offenders, or that do not comply with administrative measures issued by the JFTC.2 In 2016, the JFTC filed a criminal accusation on a bid-rigging case regarding the disaster restoration paving works for the Great East Japan Earthquake.

i Significant cases
Ruling of the Supreme Court concerning a cartel in a market of cathode ray tubes for televisions3

In December 2017, Japan’s Supreme Court ruled that the AMA may be applied even to cartels conducted outside Japan when they damage free and competitive economic order in Japan. The applicability of the AMA to the following situation was addressed in this case, and this was the first judgment by the Supreme Court on the territorial reach of the AMA over cartels conducted overseas.

The key facts of the case were as follows:

  1. manufacturers of cathode ray tubes (CRTs) supplied CRTs for televisions to companies in Southeast Asia that were subsidiaries of Japanese manufacturers of the CRT-based televisions;
  2. Japanese manufacturers negotiated the terms and conditions for the supply of the CRTs directly with the manufacturers of the CRTs;
  3. a subsidiary of a Japanese manufacturer purchased the CRTs in accordance with an instruction from its parent company based on the negotiations between its parent company and the manufacturers of the CRTs; and
  4. the salespersons of the CRT manufacturers held meetings outside Japan and agreed the minimum target prices, etc., of the CRTs for the negotiations with the Japanese manufacturers.

A surcharge payment order was issued to Samsung SDI in Malaysia by the JFTC in 2010 for engaging in price-fixing of CRTs (the amount of surcharge was approximately ¥1,370 million). The company challenged the JFTC’s decisions, arguing that there was no impact on the Japanese market, and that the AMA should not be applied to this case since the cartel activities were conducted in Southeast Asia (i.e., outside Japan) and the products were supplied outside Japan to Japanese companies’ subsidiaries in Southeast Asia.

Both the JFTC hearing court and the Tokyo High Court rejected the appeals. On 12 December 2017, the Supreme Court also rejected the appeal and approved the surcharge payment order by the JFTC to Samsung SDI in Malaysia.

Contrary to the company’s arguments, the Supreme Court ruled that when a Japanese company negotiates prices and other terms and conditions for the purchase of products subject to a cartel directly with suppliers, and its overseas subsidiaries purchase such products in accordance with the instructions of the parent company, it should be considered that the products subject to the cartel are purchased by a Japanese company and its overseas subsidiaries as a single entity. In these circumstances, the cartel will be deemed to damage competition in Japan, and therefore the AMA may be applied to such an overseas cartel.

The ruling upholds the JFTC’s standpoint, and the JFTC is likely to pursue further international cartels relying on the support of this judgment.

ii Trends, developments and strategies

While the cartel or bid-rigging cases for which cease and desist orders and surcharge payment orders were issued by the JFTC in 2017 were related to domestic markets in Japan, the number of international cartel cases that may violate competition laws in multiple jurisdictions is increasing with globalisation. Cooperation between competition authorities in several jurisdictions is therefore also increasing. The JFTC cooperated with the authorities in other jurisdictions in the Automotive cartel cases, and it has been strengthening international cooperation.

iii Outlook
Reform of the surcharge system

The surcharge system in Japan, introduced in 1977 as an administrative sanction, aims to prevent violations of the AMA by imposing a financial penalty for violations. While it has been amended several times since then, increasing globalisation and complexity of business structures has led the JFTC to conduct a further review for the current surcharge system.

The JFTC therefore established the Study Group on the AMA, and 15 meetings were held starting from February 2016 to reconsider the surcharge system and address problems with the current system. The Study Group on the AMA issued its report4 in April 2017, identifying the problems of the current system and proposing future revisions of the surcharge system.

The main problems of the current system the Study Group identified are as follows:

  • a as surcharges imposed are ‘calculated uniformly and impartially’, the JFTC cannot properly calculate or impose an appropriate amount of surcharge in the light of cooperation structures and business activities that are more globalised, varied and complicated;5 and
  • b the current system does not contain sufficient incentives for enterprises to cooperate in investigations by the authority, or disincentives to obstruct such investigations.6

To resolve such problems, the report makes several proposals for reform, including (1) revisions of the method of calculating surcharges, (2) amendments to the leniency policy to increase incentives to cooperate in investigations and (3) the introduction of attorney–client privilege.

With respect to (1), the report suggests that:

  1. the system should be revised ‘so that the whole amount of sales of products subject to infringements ... shall be established as a new basis for calculation of surcharges’;7
  2. a new provision should be stipulated by law to clarify the method of calculating surcharges when there is no domestic turnover in Japan subject to infringements; and
  3. the upper limit of the calculation period and basic calculation rate of surcharges should be amended.

Concerning (2), proposals include the abolition of the current limit on applicable companies in the leniency programme, the extension of the application term and a requirement for applicants to cooperate in an investigation.

As for (3), the report states that ‘it is appropriate for the JFTC to take care in the operation of the only communications between attorneys and their clients (enterprises) related to the use of the new leniency programme’ since ‘the need to consult with attorneys is expected to grow in order to apply for the programme’ if the leniency system is amended as mentioned above.8

After a public consultation on the issues raised in the report from April to June 2017, the JFTC was preparing to submit a Bill to amend the AMA to the Diet of Japan in 2018. However, the governing political party (the Liberal Democratic Party) pointed out the necessity of having discussions on the legalisation of attorney–client confidentiality, and the JFTC has therefore decided to postpone the submission of the Bill. The future schedule for tabling the Bill is unclear.

Ongoing investigations

In December 2017, the JFTC conducted inspections of four construction companies in cooperation with Japanese prosecutors over alleged bid rigging related to a magnetic-levitation train project. These four contractors are suspected of having coordinated bids, and two of them have already applied for leniency. The JFTC filed a criminal accusation against four companies and two individuals in March 2018.


The JFTC has also conducted investigations and enforced the law proactively against unfair trade practices in non-cartel cases, especially in the IT and digital-related sectors, the agricultural sector, and the electricity and gas industry sectors. It has set up a contact hotline to gather information on conduct in such sectors that may raise competition law issues. In 2017, the JFTC issued cease and desist orders in two unfair trade practice cases (resale price restrictions and trading on restrictive terms), including in a case involving the agricultural sector. The JFTC also conducted investigations and issued warnings in several cases regarding abuse of superior bargaining position and unfairly low sales prices that were considered detrimental to small and medium-sized companies.

i Significant cases
Amazon case

The JFTC had decided in June 2017 to close an investigation against Amazon Japan, which it had been conducting since 2016.9

Amazon Japan was suspected to have restricted the business activities of sellers on Amazon Marketplace by enforcing price parity clauses and selection parity clauses (‘most favoured nation’ (MFN) clauses) in contracts, contrary to the unfair trade practice rules in the AMA. The price parity clauses and the selection parity clauses require sellers to sell their products at the lowest prices among other platforms and to provide at Amazon Marketplace all variations of all products that are sold through other marketing channels.

During the JFTC’s investigation, Amazon Japan made a commitment to take prompt voluntary measures, including deleting the above parity and MFN clauses from the contracts, and not to introduce the parity clauses in new contracts. The JFTC recognised that these measures would eliminate the suspected violation mentioned above and decided to close its investigation in this case.

This is the first case where the JFTC has investigated conduct concerning such parity clauses and MFN clauses. Like the competition authorities in some other jurisdictions, the JFTC has strong concerns about competition in the e-commerce, IT and digital-related sectors.

As a new investigation, the JFTC raided Amazon Japan in March 2018 on suspicions that it is abusing its superior bargaining position over its suppliers by charging the cost of discounting products sold by Amazon to them.

Airbnb case

In October 2017, the JFTC raided Airbnb Japan, the Japanese branch of the US-based home-sharing platform, as it is suspected of having restricted home management companies that provide home lenders with services such as communications with renters or room cleaning from doing business with Airbnb’s competitors. This investigation is ongoing.

ii Trends, developments and strategies
Revision of the distribution guidelines

In June 2017, the JFTC issued revised Guidelines Concerning Distribution Systems and Business Practices under the Antimonopoly Act (Guidelines). The Guidelines aim:

to contribute to prevention of enterprises and trade associations from violating the Antimonopoly Act and helping in the pursuit of their appropriate activities, by specifically describing, with respect to

Japanese distribution systems and business practices, what types of conduct may impede fair and free competition and violate the Antimonopoly Act.10

As it has been about 25 years since the original Guidelines were published, and distribution systems and business practices in Japan have dramatically changed with the development and expansion of e-commerce and changes in relationships between manufacturers and distributors, it was considered necessary to revise the Guidelines to reflect current circumstances. The revised Guidelines are based on the report of the Study Group on Distribution Systems and Business Practices and Competition Policy, which was established to review the Guidelines, as well as comments from the public.

In addition to structural changes, the revised Guidelines set out further criteria for assessing the legality or illegality of vertical restraints and practical tips that were not specified in the previous Guidelines in order to make the Guidelines more easy to understand and more useful. The JFTC maintains its position regarding vertical issues, and it is thought that the revision will have little influence on practices.

With regard to e-commerce, due to the lack of existing cases involving online business in Japan, the JFTC only offers the general comment that the AMA applies equally to online business and traditional ‘brick-and-mortar’ business, and the basic framework in the Guidelines therefore applies equally to both. Any particular issues for online business such as MFN clauses are not mentioned in the revised Guidelines.

iii Outlook
Digital economy: Report on Data and Competition Policy

The JFTC established a Study Group on Data and Competition Policy (Study Group on Data) in the CPRC, a research centre for the JFTC aiming to enhance the theoretical basis on which the JFTC operates the AMA, and plans, proposes and evaluates competition policy to consider competition policy issues on the accumulation and utilisation of data, which are becoming increasingly important in practice.

The Report on Data and Competition Policy announced by the Study Group on Data in June 2017 states that ‘Accumulation and utilization of data, in itself, promotes competition and creates innovation’ and ‘at the same time, such issues as business combinations that could lead to restriction of competition including monopoly, unjust collecting (or exploitation) of data from consumers or small and medium-sized enterprises and unjust data “hoarding” should be addressed under the Antimonopoly Act’.11 In addition, it addressees issues concerning ‘digital cartels’ such as sharing pricing algorithms or using profit-maximising AI that leads to collusive pricing among companies, and ‘the monopolization and oligopolization of digital platforms’.12

In the report, it is confirmed that most competition concerns related to the accumulation and utilisation of data can be dealt with under the current framework of the AMA. The JFTC intends to conduct its competition policy concerning data and enforce the laws in accordance with the Report.


i Mobile phone market

The JFTC conducted a research study on competition law issues in the mobile phone market by interviewing the relevant parties such as mobile network operators, mobile virtual network operators (MVNOs), agencies, and mobile phone device manufacturers, mainly from the perspective of promoting the entry of new MVNOs.

In August 2016, the JFTC published the results of the research13 which indicate its views on issues regarding competition policy in the markets for mobile phone devices, communication services market and mobile apps. These issues include both ones that may raise competition concerns depending on specific types of conduct and their effect, and ones that related parties are expected to review over the medium term.

As regards enforcement in the mobile phone market, the JFTC has been conducting an investigation since 2016 against Apple on suspicion of violation of the AMA and unfair trade practices in transactions with its suppliers. The JFTC has issued an order to provide information under the AMA to hundreds of suppliers, in addition to conducting voluntary hearings with the relevant parties. An order to provide information or to submit reports is one measure available during an administrative investigation by the JFTC, and if a company refuses such order, it may be punished under the AMA.

ii Survey on LNG trading

The JFTC launched a survey on competition law issues in the LNG market and issued a Report on the Survey on LNG Trading14 in June 2017. The Report identified competition concerns about situations where domestic LNG importers would be restricted in the resale of LNG due to destination restrictions in LNG transactions. In this survey, an order under Article 40 of the AMA was issued for the first time in more than 40 years to gather information protected by non-disclosure agreements on LNG transactions.

As well as concerns about destination restrictions, the Report identified competition concerns about profit-sharing clauses and take-or-pay clauses in LNG transactions in light of the actual conditions in the LNG transactions, market circumstances and characteristics of LNG projects. Based on the Report, the JFTC has requested that anticompetitive provisions and business practices that may cause restrictions on the resale of LNG should not be included in any new or revised contract, and that parties to existing contracts including such provisions should review any anticompetitive business practices that cause restrictions on the resale of LNG. In addition, the JFTC has expressed its intention to continue its monitoring of the LNG market and to deal strictly with any violations of the AMA.

iii Study Group on Human Resources and Competition Policy

Given that people increasingly do freelance work or have a second job as well as working as a permanent employee, and that types of employment agreements and work arrangements are varied, the JFTC and the CPRC established a Study Group on Human Resources and Competition Policy (Study Group on Human Resources) in 2017 to consider whether it is necessary and reasonable to deal with competition in the labour markets under the AMA.

Issues that are likely to raise competition concerns are being discussed at meetings of the Study Group on Human Resources, which have been held several times since August 2017, include prevention of headhunting by single company or among several employers (anti-poaching conduct), agreements on wage restraint (wage caps), and restrictions on employment transfers or changing jobs. The JFTC issued in February 2018 a report of the Study Group on Human Resources based on discussions considering practices and precedents in Japan and overseas, laws and regulations related to employment, and the unique features of competition in the labour markets.


The number of merger filings with the JFTC has slightly increased. From April 2016 to March 2017 (FY 2017), the JFTC accepted 319 notifications, of which 308 were cleared in Phase I, three were brought into Phase II and eight were voluntarily withdrawn by the parties.15

One likely reason for the high rate of Phase I clearances is that parties generally engage in a pre-notification consultation with the JFTC, where the informal discussion extends to substantive competition issues, and even remedies may sometimes be agreed at Phase I. The JFTC only publishes a limited number of its decisions. It published two Phase I conditional clearance decisions in FY 2017.

i Significant cases
Idemitsu /Showa Shell and JX Holdings /Tonen General

Two mergers between Japanese major oil refiners are being simultaneously reviewed by the JFTC without taking a ‘first come, first served’ approach. The parties had horizontal or vertical overlaps in about 45 products or services, and the JFTC is focusing on their horizontal overlaps in the wholesale markets for propane, butane, petroleum, kerosene, light gas oil and bunker fuel.

While the JFTC scrutinised both the unilateral and coordinated effects in the said markets, it particularly raised concerns from the standpoint of coordinated effects. The likely background to different conclusions regarding unilateral and coordinated effects is that the proposed two mergers will make two ‘giants’ in the respective markets, with the remaining players having limited excess capacity; and the JFTC considering that while competitive pressure from customers would work against the unilateral effects, it would not work effectively against the coordinated effects.

Abbott Laboratories/St Jude Medical

Abbott Laboratories (Abbott) and St Jude Medical (SJM) horizontally overlap in small vessel closure devices (small VCDs) for cardiovascular operations. Like some other competition authorities, the JFTC considered that the transaction would substantially lessen competition in the said market given the high combined market share of the parties, and limited competitive pressure from customers, importers and potential new entrants. As the parties decided to globally divest SJM’s small VCD business to Terumo Medical Corporation, the JFTC considered the said divestiture as a condition of the transaction rather than a remedy, and issued an unconditional clearance.

Lam Research /KLA-Tencor

The JFTC scrutinised the vertical relationship between Lam Research’s semiconductor manufacturing equipment and KLA-Tencor’s testing equipment, and considered that the transaction would substantially lessen competition in the said markets on the basis that:

  1. market foreclosure could be expected if KLA-Tencor refused or deliberately delayed the supply of its testing equipment;
  2. Lam Research may have access to competitors’ and suppliers’ confidential information that KLA-Tencor has obtained in joint R&D with such companies, and may unreasonably benefit from such information to develop its manufacturing equipment; and
  3. in consequence, Lam Research’s competitors and suppliers would be less motivated to engage in joint R&D activities with KLA-Tencor.

The parties voluntarily withdrew the notification.

Daishi Bank /Hokuetsu Bank

The parties are both regional banks with primary operations in the Niigata prefecture. The JFTC scrutinised their horizontal overlap in the area of corporate loans. Despite the high combined market share of the parties, the JFTC issued an unconditional clearance given competitors’ excess capacity and the ease with which customers can switch to such competitors.

ii Trends, developments and strategies

In view of the expected decrease in the Japanese population and other economic circumstances, there has been an increased number of M&A between regional players for ‘survival’ purposes. Daishi Bank/Hokuetsu Bank is one example of this trend, and more transactions of a similar nature are expected in the coming years. As regional players tend to have relatively high market shares in specific regions, some transactions may face the careful review by the JFTC.

Another trend is the continued increase in the number of merger filings that involve foreign companies. In FY 2017, the JFTC accepted 12 notifications of Japanese–overseas transactions and 47 of foreign–foreign transactions. There was an increased number of strategic M&A between multinational conglomerates with significant Japanese sales within the group, and this trend is also expected to continue.

vi Outlook

Fukuoka Financial Group/Eighteenth Bank, which would be another merger between two regional banks with significant horizontal overlap in the Nagasaki prefecture, has been pending before the JFTC since June 2016 and is still under Phase II review. While progress in this case is not clear, the JFTC’s final decision is expected during the course of 2018: the authority’s December 2017 decision in Daishi Bank /Hokuetsu Bank (see above) might have an implication to some extent, and may possibly provide some signals on the JFTC’s likely approach to future mergers between regional players in banking and other sectors.


Under the continuous leadership of Commissioner Kazuyuki Sugimoto, whose term was renewed in March 2018 and will expire in September 2020, it is expected that the JFTC’s focus on cartel enforcement, merger control and various industry sectors will be maintained. It is also expected that important reports will continue to be issued regarding policy advocacy. Among other things, in relation to potential amendments to the AMA reflecting surcharge payment system reforms, which is an important challenge for the JFTC, attention should be paid to whether or how the draft amendments will incorporate enhanced defence rights including attorney–client privilege – a requirement of the controlling political party – and when the amendments to the AMA will be submitted to the Diet going forward.

1 Junya Ae is a partner, Michio Suzuki is a senior associate and Ryo Yamaguchi is an associate at Baker & McKenzie (Gaikokuho Joint Enterprise).

2 ‘The Fair Trade Commission’s Policy on Criminal Accusation and Compulsory Investigation of Criminal Cases Regarding Antimonopoly Violations’, the JFTC, revised 23 October 2009, p. 1.

3 Judgment of the Supreme Court of 12 December 2017 in case No. 2016 (Gyo-Hi) 233.

4 ‘Report of the Study Group on the Antimonopoly Act’, published on 25 April 2017.

5 Ibid. paragraph 1, Chapter 2.1.(1).

6 Ibid. paragraph 1, Chapter 2.1.(2).

7 Ibid. Paragraph 2 in Conclusions by the Study Group, Chapter 3.2.

8 Ibid. Paragraph 2 in Conclusions by the Study Group, Chapter 3.14 (3).

9 See www.jftc.go.jp/en/pressreleases/yearly-2017/June/170601.html.

10 ‘Guidelines Concerning Distribution Systems and Business Practices under the Antimonopoly Act’, the JFTC, revised on 16 June 2017, Paragraph 2, Introduction 1.

11 ‘Report of Study Group on Data and Competition Policy (Summary)’, published on 6 June 2017,
Section 2.

12 ‘Report of Study Group on Data and Competition Policy’, published on 6 June 2017, Conclusion.

13 See www.jftc.go.jp/en/pressreleases/yearly-2016/August/160802.html.

14 www.jftc.go.jp/en/pressreleases/yearly-2017/June/170628.files/170628-2.pdf.

15 See www.jftc.go.jp/houdou/pressrelease/h29/jun/170614_01.files/170614.pdf (Japanese only).