This article outlines the Japanese Competition Law, officially titled the Act on Prohibition of Private Monopolization and Maintenance of Fair Trade (“Antimonopoly Act”). The regulatory authority for this act is the Japan Fair Trade Commission (“JFTC”). The purpose of the Antimonopoly Act is to promote fair and free competition.

Unreasonable Trade Restraints

• Unreasonable trade restraints occur when businesses collaboratively engage in activities such as price fixing or agree on production and sales quantities, thereby substantially restricting competition in a specific market sector (Antimonopoly Act, Article 2, Paragraph 6).
• This includes cartels and bid rigging, where multiple businesses artificially set prices that should be determined by the market, and typically, this is aimed at restricting competition, which can have a significant impact on the market.
• Therefore, such agreements are generally considered illegal. Cartel regulation is a top priority for competition authorities around the world.

Private Monopolization

• Private monopolization occurs when a business, either alone or in conspiracy with others, excludes or dominates the business activities of other businesses, regardless of the method used, thereby substantially restricting competition in a specific market sector (Antimonopoly Act, Article 2, Paragraph 5).
• While substantially restricting competition in a specific transaction field (market sector) shares similarities with unreasonable trade restraints, private monopolization differs as it involves acts of suppressing competition by excluding or dominating other competitors.
• When businesses, either alone or in conspiracy with others, use tactics such as unfair low pricing and exclusive trading conditions to exclude competitors from the market or hinder new entrants, it is referred to as “exclusionary private monopolization.” Powerful businesses attempting to control the market by imposing constraints on other businesses’ activities through means such as acquiring shares or dispatching board members are known as “dominant private monopolization.”

Unfair Trade Practices

• Unfair trade practices include predatory pricing (Antimonopoly Act, Article 2, Paragraph 9, Item 3), resale price restriction (Item 4), and abuse of a dominant bargaining position (Item 5).
• Additionally, the General Designation outlines other unfair trade practices such as deceptive customer inducement (Item 8), tie-in sales (Item 10), exclusive trading conditions (Item 11), and restrictive trading conditions (Item 12).

Subcontract Act

• Related to the abuse of a dominant bargaining position, the Subcontract Act serves as supplementary legislation to the Antimonopoly Act. It regulates transactions related to manufacturing, repair, creation of information products, and service provision, defining parent companies based on capital or investment amount (Subcontract Act, Article 2).
• This act imposes various obligations on parent companies, such as issuing written orders (Article 3), and record-keeping (Article 5), and prohibits actions like reducing subcontracting fees, delaying payments, and unjustly returning goods (Article 4).
• If parent companies violate the Subcontract Act, the JFTC can demand cessation of the violation, restoration to the original state (for example, returning the reduced amount to the subcontractor), and implementation of measures to prevent recurrence (Article 7).

Measures Against Violations of the Antimonopoly Act

• If the JFTC finds any violation of the Antimonopoly Act, it may issue a cease-and-desist order (Antimonopoly Act, Articles 7, 8-2, 20). Such orders require the immediate cessation of the violating activities. For instance, in the case of a price cartel, the JFTC might order the dissolution of price-fixing agreements, notification of such dissolution to trading partners, and measures to prevent future violations.
• Additionally, the JFTC can issue an administrative monetary penalty payment order based on formulas specified in the Antimonopoly Act (Articles 7-2, 7-9, 20-2 to 20-6).
• If a business involved in unreasonable trade restraints (cartels or bid rigging), which are subject to an administrative penalty order, voluntarily reports the details of the violation to the JFTC, the amount of the monetary penalty may be reduced (leniency program, Article 7-4). The key point is that the leniency program under the Japanese Antimonopoly Act targets only unreasonable trade restraints such as cartels and bid rigging.

Regulation of Business Combinations

• Business combination regulations prohibit share acquisitions, mergers, company splits, joint share transfers, and business transfers that substantially restrict competition in a specific market sector (Articles 10, 13 to 18).
• Similar to other countries, these regulations require prior notification. Whether a business combination requires notification and whether it poses problems under the Antimonopoly Act is determined based on the “Guidelines to Application of the Antimonopoly Act Concerning Review of Business Combination (Japan Fair Trade Commission, May 31, 2004)” (Business Combination Guidelines).

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• Japanese Corporate Law 1 (Differences between Stock Companies and Limited Liability Companies)
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• Japanese Corporate Law 3 (Corporate Governance)
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• Japanese Labor and Employment Law 1 (Dismissal Regulations)
• Japanese Real Estate Law 1 (General Overview)
• Japanese Data Privacy Law 1 (the APPI regulations for Foreign Companies)
• Japanese Intellectual Property Law 1 (General Overview)
• Japanese Competition Law 1 (General Overview)
• M&A Laws in Japan 1 (Significance and Characteristics of M&A Laws in Japan)
• Joint Ventures in Japan 1 (General Overview)
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• Renewable Energy Project Finance in Japan 2 (Amendment on the Act on Special Measures Concerning Renewable Energy Requiring Resident Briefings Effective April 1, 2024)