Competition Law in Asia Pacific...ix Competition Law in Asia Pacific JAPAN Yusuke Nakano is a partner at Anderson Mori & Tomotsune, with broad expe- rience in the areas of antitrust,

Competition Law in Asia Pacific

A Practical Guide

Edited by

Katrina Groshinski Caitlin Davies

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About the Authors

AUSTRALIA

Katrina Groshinski is a competition and regulatory Partner at Minter El-lison whose expertise includes anti-competitive conduct, merger clearances, price regulation, privatisation of government assets and competition related litigation. She has particular experience in heavily regulated industries such as financial services, energy, transport and broadcasting acting for industry par-ticipants, government and independent statutory regulators. Katrina’s broad experience means she is able to provide strategic advice in relation to potential disputes and litigation which have a high degree of technical and economic complexity.

Katrina is named as a leading lawyer for Competition/Antitrust (Aus-tralia) Chambers Asia Pacific 2015. She holds an LLM from the University of Victoria, New Zealand and is a member of the Competition & Consumer Committee of the Law Council of Australia.

Caitlin Davies is an Associate at Minter Ellison with experience in restrictive trade practices, mergers, consumer, regulatory, and administrative law issues. Caitlin provides advice on competition and regulatory aspects of major public and private sector transactions as well as advising clients engaging with the ACCC during investigations relating to cartel conduct and other restrictive trade practices issues. Caitlin has advised governments in the design and implementation of new regulatory frameworks and participants in regulated industries including electricity, gas, ports and broadcasting.

Caitlin has a particular interest in international and comparative law and has spent time studying with the Paris Bar.

The authors would like to especially acknowledge the contribution of Kristel Harlow, former Senior Associate, and Eric White and Prayas Pradhan, law-yers in the Sydney competition law practice at Minter Ellison.

About the Authors

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CHINA

Andrew Foster is Asia-Pacific Counsel at Skadden Arps. Mr Foster has worked on antitrust and competition matters in the New York, Brussels, Bei-jing and Hong Kong offices of Skadden. He has extensive experience in U.S., European, Chinese and other international antitrust regimes, with a focus on China’s Anti-Monopoly Law and other Asia-Pacific jurisdictions. Mr Foster has been selected for inclusion as a notable practitioner for competition and antitrust work in China and Hong Kong by Chambers Global 2013 and 2014 as well as in Chambers Asia Pacific 2013. Mr Foster has counselled multi-national corporations on competition issues worldwide, and has published widely on international competition issues.

HONG KONG

Geraldine Johns-Putra is a Partner in the Hong Kong office of Minter El-lison. As a corporate and commercial lawyer, Geraldine has advised on many cross-border merger and acquisition deals in Greater China. Geraldine also specialises in intellectual property and technology matters in Greater China and advises on outsourcing, technology transfers, competition, data privacy and data protection issues. Trained in Australia, she has worked as a lawyer in Australia, the United Kingdom, China and Hong Kong.

Miranda Noble is a Senior Associate in the Melbourne office of Minter El-lison and is a specialist competition lawyer. She has worked in competition law in Australia and Hong Kong.

The contribution of Hayden Lau, associate of Minter Ellison Hong Kong, to this chapter is gratefully acknowledged.

INDIA

Mr. Cyril Shroff is a Managing Partner of Amarchand & Mangaldas & Suresh A. Shroff & Co. (“Amarchand Mangaldas”), India’s largest and foremost law firm with approximately 700 lawyers and seven offices across India. Mr. Shroff was admitted to the Bar in 1982 after receiving his B.A., LLB degree from the Government Law College in Mumbai. He is a Solicitor, High Court of Bombay, since 1983. Mr. Shroff is consistently acknowledged as the doyen of corporate law in India and brings a multi-disciplinary approach, in domes-tic and cross-border M&A, takeover, banking, capital markets, competition

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law and project finance in India. With over 31 years of experience in a range of areas, Mr. Shroff is regarded and has been consistently rated as India’s top corporate, banking and project finance lawyer by several international sur-veys including those conducted by International Financial Law Review, Eur-omoney, Chambers Global, Asia Legal 500, Asia Law and others. He has won numerous awards from legal publications. Mr. Shroff has been recognized as a “legendary figure in the Indian legal community” and is consistently ranked as a “star practitioner” in India by the Chambers Global.

He has been at the forefront of every major legal development in India and authored several publications on legal topics ranging from corporate law, capital markets, project finance to competition law. He is a member of the Advisory Board of the Centre for Study of the Legal Profession established by the Harvard Law School, a member of the Advisory Board of the National Institute of Securities Markets and on Board of IIM, Trichy. He is advisory member of the Finance Planning Standard Board of India and Macquarie. He is also a member of the Media Legal Defence Initiative International Advisory Board. Mr. Shroff is part of various committees of the Confederation of Indian Industry – the National Council on Corporate Governance, the National Com-mittee on Capital Markets, Private Equity & Venture Capital, Commodities Markets, Financial Investors and Regulatory Affairs.

Nisha Kaur Uberoi is a Partner of Amarchand Mangaldas and Head of the Competition Law Practice (Mumbai Region) of the Firm. Nisha currently leads one of the largest competition law teams in India exclusively doing competition law and handles complex competition law matters involving innovative solution oriented structuring, interaction with the regulator and economists and a multidisciplinary approach and advises on the full range of competition matters, including cartel enforcement, abuse of dominance, merger control and competition audit and compliance. Nisha graduated from the National Law School of India University, Bangalore in 2002 and obtained her LL.M. from the National University in Singapore with a focus on Com-parative Competition Law and Law and Economics in 2005. Prior to joining the Firm, Nisha worked in a leading UK firm based in Singapore and advised on competition law and mergers and acquisitions. Nisha has been recognised as a competition law expert by Chambers & Partners in 2014, AsiaLaw Lead-ing Lawyers 2013 and 2014, Competition & Antitrust Expert Guides – India 2014, Euromoney B.R.I.C. 2013 – Expert on Competition Law and the 2013 RSG India Report as “one of the most excellent Competition lawyers in India” for her work in competition law. Nisha has obtained a very significant number of merger control clearances in India – over 55 of the 160 odd merger notifica-tions (Form I) as well as all three valid long form merger notifications (Form II) (GDNL/Gujarat Gas; United Spirits Limited/Diageo and Ultratech Cement

About the Authors

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Limited/Jaypee Cement Corporation Limited) filed to date. Nisha is also involved in developing strategies to defend clients before the Office of the Director General, the Competition Commission of India and the Competition Appellate Tribunal in relation to enforcement actions, including representing the Board of Control for Cricket in India, Adani Gas Limited, Gujarat Gas Company Limited and International Air Transport Association.

Nisha contributes to evolving competition law jurisprudence in India, by way of various articles and chapters in books on Indian competition law. Her articles were also shortlisted for the 2013 and 2014 Antitrust Writing Award. She is a member of the Permanent Working Group on Non-Cartel Behavioural Issues of the IBA Antitrust Committee and a member of the Ad Hoc Working Group on Merger Control of the IBA Antitrust Committee.

The authors would like to acknowledge the contribution of Bharat Budholia and Soumya Hariharan, Senior Associates and Piya Sawhney and Kaustav Kundu, Associates in the Mumbai competition law practice at Amarchand Mangaldas.

INDONESIA

Mochamad Fachri is a partner of Hadiputranto, Hadinoto & Partners, the Ja-karta member of Baker & McKenzie. His primary practice is competition law in Indonesia. Mr Fachri has represented major companies, both domestic and joint ventures with foreign partners, before the Indonesian Business Competi-tion Supervisory Commission (KPPU) and on the appeal stage against deci-sions of the KPPU. Cases include unfair trading terms and abuse of dominance (Carrefour), cartel, vertical restraints (Semen Gresik), discriminatory practice (Limas Stokhomindo), tender fixing (Deloitte Touche). He has also represented clients in filing for merger clearance to the KPPU. Clients include companies in banking (Bank Permata), mining (Freeport, Vale) and technology (Microsoft).

Farid Nasution is a senior associate of Hadiputranto, Hadinoto & Partners (“HHP”), the Jakarta member of Baker & McKenzie. Previous to working with HHP, he has had more than seven years’ experience, first as an Inves-tigator of the Business Competition Supervisory Commission (KPPU); the Indonesian competition Commission. His last position with KPPU was the Head of Substantive Review, the Directorate of Merger. Since, joining HHP, Farid has given advice on all types of anti-monopoly issues for many major multinational and national companies, including distribution agreements, horisontal agreements, abuse of dominant position, private and public tender and transactions. He has been involved in many high-profile anti-monopoly cases and numbers of merger and acquisition reviews.

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JAPAN

Yusuke Nakano is a partner at Anderson Mori & Tomotsune, with broad expe-rience in the areas of antitrust, business dispute resolution, mergers and acquisi-tions, and intellectual property. In the antitrust area, he has particularly broad experience in cartel investigation and merger control, including international ones. Further, Mr. Nakano has assisted many Japanese companies and individu-als involved in antitrust cases in foreign jurisdictions, in close cooperation with co-counsel in those jurisdictions. He has also represented various companies in administrative, civil and criminal litigation, mass and complex litigation, in-novative mergers and acquisitions, joint ventures, and licensing arrangements.

In addition to his professional experience at Anderson Mori & Tomot-sune, Mr. Nakano worked for the New York law firm of Skadden, Arps, Slate, Meagher & Flom LLP, as a foreign intern (2001 to 2002).

Taku Matsumoto is an Associate at Anderson Mori & Tomotsune, advising primarily on antitrust and competition regulation, Asian matters and mergers and acquisitions for Japanese and foreign clients. In the antitrust area, Taku has advised and worked with outside legal advisors on the review by the Japan Fair Trade Commission and other competition authorities of more than 5 busi-ness combinations, including hard-disk drive manufacturers. Taku has also assisted more than 5 companies, including a car parts manufacturer, in relation to cartel investigations by worldwide authorities.

In addition to his professional experience at Anderson Mori & Tomotsune, Mr. Matsumoto worked for the Indonesian law firm of Soewito Suhardiman Eddymurthy Kardono as a foreign intern in 2012.

MALAYSIA

Lim Koon Huan graduated from the University of Melbourne with the de-grees in Commerce and LLB (Hons). She was admitted to the Malaysian Bar in 1995 and commenced her legal practice with Skrine.

She has a broad commercial practice having experience in a wide variety of commercial and corporate disputes and litigation including arbitrations and has worked closely, amongst others, with clients from Australia, Europe and the USA in managing their cross-border disputes. Koon Huan primarily acts as Counsel having appeared at all tiers of the Malaysian Courts and her portfolio of litigation work has a particular focus towards corporate and civil litigation including acting for various local and foreign banks and financial institutions, securities firms, oil & gas multinationals and construction and property development companies.

About the Authors

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She co-heads the Competition and Compliance Practice Groups and leads the Trade Remedies Practice Group in Skrine.

Koon Huan is listed in The International Who’s Who of Trade & Customs Lawyers as a leading practitioner in Malaysia.

Jason Teoh Choon Hui is a graduate of the University of West of England, Bristol. He commenced his pupillage in Skrine and was admitted to practice as an Advocate and Solicitor of the High Court of Malaya in 2008.

Jason’s areas of practice include Arbitration & Alternative Dispute Resolution, Banking & Finance, Bankruptcy/Insolvency, Competition Law, Contracts, Corporate & Commercial Disputes, Directors & Officers Liability, Land Acquisition, Landlord & Tenant, Partnerships, Real Estate Disputes, Tort, Trade & Customs and Trusts.

Apart from his work in international trade law, Jason is a litigator and has conducted full trials and hearings in the Malaysian Sessions Court and High Court. He also regularly appears as junior counsel in the Malaysian Court of Appeal and Federal Court.

Jason is listed in The International Who’s Who of Trade & Customs Law-yers 2012.

The authors wish to thank Nicholas Lai for his valuable assistance in complet-ing this chapter

NEW ZEALAND

Ross Patterson heads Minter Ellison Rudd Watts’ competition and economic regulation practice. He has twenty-five years of specialist experience in com-petition law and economic regulation. Between 2007 and 2012 he was New Zealand’s telecommunications regulator, and a member of the Commerce Commission. He is also Chairman of Akhet Consulting FZ LLE, a telecom-munications consultancy based in the Dubai with a specific focus on national broadband network regulatory design and implementation.

He was a partner at Rudd Watts and Stone (now Minter Ellison Rudd Watts) between 1989 and 1998, and in Minter Ellison (Sydney) from 1998 to 2007, where he headed Minter Ellison’s Competition & Regulation prac-tice. During his term of office as Telecommunications Commissioner he had responsibility for the implementation of the telecommunications reforms of 2006 and 2011, including the functional separation of the incumbent, Telecom New Zealand, in 2008, followed by structural separation in 2011. He also oversaw the introduction of local loop & bitstream access regulation, account-ing separation, and mobile termination, roaming and co-location regulation.

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Ross has a PhD in competition law, and has published many articles on competition and telecommunications issues.

Nicko Waymouth is a senior solicitor in Minter Ellison Rudd Watts’ New Zealand competition and regulatory law team. He specialises in all compe-tition issues, including mergers, cartels (including leniency applications), and unilateral conduct issues. Nicko is experienced in dealing with the New Zealand regulator, the Commerce Commission, and has worked on matters involving a wide range of industries (including aviation, health, and building supplies).

The authors would like to thank Alannah Manson, law clerk in the Auckland office of Minter Ellison Rudd Watts, for her contributions to the chapter.

PAKISTAN

Bilal Shaukat, an alumnus of the University of Hull, the London School of Economics and Political Science and a Barrister of Lincoln’s Inn, has been enrolled as an advocate since 2002. In a short span of time he has managed to develop a stellar reputation as lawyer which is based on finding creative solu-tions to complex legal problems. A substantial portion of his acclaim stems from his work in the areas of Project Finance, Mergers and Acquisitions and Swaps & Derivatives. He regularly advises companies (including the KSE 100, multinational companies, financial institutions and insurance companies) on matters pertaining to company law, competition law, banking and finance, income tax, construction and franchise/licensing.

Shahbakht Pirzada, a graduate of the London School of Economics and a Barrister of Lincoln’s Inn, has been enrolled as an advocate since 2012. Since then Mr. Pirzada has been busy developing an expertise in legal matters pertaining to competition, mergers & acquisitions, tax, company, telecom-munication and labour.

SINGAPORE

Daren Shiau is Head of Competition & Antitrust at Allen & Gledhill LLP. His practice covers antitrust litigation, international cartels, merger control and sectoral competition regimes. Daren is a commissioned trainer of the high-level ASEAN Experts Group on Competition and has unparalleled experience in competition law and policy in South-east Asia. He presently sits on the

About the Authors

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Competition Roundtable of the Competition Commission of Singapore and has been appointed Singapore’s first non-governmental adviser at the Inter-national Competition Network.

In 2012, Daren was named by Global Competition Review as one of the world’s most talented competition lawyers under the age of forty in its 40 Under Forty survey, and is the only South-east Asian lawyer recognised in the history of the list. Who’s Who Legal (2013) cites Daren as being “very skilled”, and “one of the finest lawyers in the region”, and Chambers Asia-Pacific (2014), ranks him in Tier 1 as a “star performer”.

SOUTH KOREA

Mr Cecil Saehoon Chung is Senior Foreign Counsel at Yulchon. As Vice-Chair of Antitrust Practice and Head of International Antitrust, he handles all aspects of antitrust and trade regulation matters, with a particular emphasis on international antitrust. Previously, he was with the U.S. Federal Trade Com-mission, and an antitrust partner at both Pillsbury Winthrop and Greenberg Traurig in Washington, DC. He is recognized as a leading competition lawyer by numerous publications including Who’s Who Legal, Chambers Asia and Global, and Expert Guides.

Ms Kyoung Yeon Kim is a partner at Yulchon who practises primarily in the areas of antitrust, mergers and acquisitions, corporate general, and data privacy and security compliance matters. Ms Kim also worked on secondment at Cleary Gottlieb Steen & Hamilton’s Hong Kong office from 2007 to 2008.

The authors wish to thank Mr Sung Bom Park, antitrust partner at Yulchon, and Mr Tae Yong Kim, foreign attorney at Yulchon, for valuable comments and assistance.

THAILAND

Dr R. Ian McEwin (LLB (Hons 1) PhD (Economics) ANU) specialises in ASEAN competition law. He has had extensive experience teaching competi-tion law and economics in Australia and Singapore and has been an expert witness in many major cases in Australia and New Zealand. He is currently Khazanah Nasional Chair of Regulatory Studies at the University of Ma-laya’s Malaysian Centre of Regulatory Studies (UMCoRS) and a Visiting Professor in the Law Faculty, Chulalongkorn University, Bangkok. In 2002, he was recruited by the Singapore Ministry of Trade and Industry to help

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draft Singapore’s Competition Law and subsequently became the Singapore Competition Commission’s first Chief Economist. He then became Visiting Professor of Law at the National University of Singapore and a Member of the Singapore Copyright Tribunal. He is a member of the Advisory Board of the Global Antitrust Institute at George Mason Law School in Washington.

Ian McEwin is also the author of the Cambodia/Laos chapter.

Dr. Sakda Thanitcul (LL.B. Chulalongkorn University) (LL.M., Ph.D.(Law) University of Washington)(LL.M., LL.D. Kyoto University) specializes in competition law and international economic law. He has written a textbook on Thai competition law and has been teaching competition law since 2000. He has already served three terms as a distinguished member of the Thai Competition Committee and is presently a member of a Sub-Committee on Competition Law Reform.

VIETNAM

Dr. LUU Huong Ly graduated as the First Laureate from Hanoi Law Uni-versity (Class 2004) and has an LL.M (2009) and Ph.D. in Competition Law (2013) from the National University of Singapore. She is currently the Deputy Head of General Affairs Division, Civil and Economic Law Department of the Ministry of Justice (MOJ) of Vietnam. Before joining the MOJ, she had worked as an Associate Professor at Hanoi Law University and a Senior Advi-sor for ANVLaw Lawyers & Consultants. Her research interests are principally in commercial law, competition law, WTO law and dispute resolution. She has published several articles in this area including “Regional Harmonization of Competition Law and Policy: An ASEAN Approach”, (2012) 2:2 Asian Journal of International Law, 291-321 and has co-authored the Textbook on Vietnam’s Competition Law for Hanoi Law University published in 2012 (in Vietnamese) – this is the first-ever competition law textbook of Hanoi Law University and a highly regarded textbook in Vietnam. She has also given presentations in both English and Vietnamese in various workshops and con-ferences in this area.

Summary of Contents

About the Authors v

Preface xlv

Chapter 1 – Australia 1Katrina Groshinski and Caitlin Davies

Chapter 2 – China 93Andrew Foster

Chapter 3 – Hong Kong 167Geraldine Johns-Putra and Miranda Noble

Chapter 4 – India 235Cyril Shroff and Nisha Kaur Uberoi

Chapter 5 – Indonesia 299Mochamad Fachri and Farid Nasution

Chapter 6 – Japan 351Yusuke Nakano and Taku Matsumoto

Chapter 7 – Malaysia 405Lim Koon Huan and Jason Teoh Choon Hui

Chapter 8 – New Zealand 443Dr Ross Patterson

Chapter 9 – Pakistan 523Bilal Shaukat and Shahbakht Pirzada

Chapter 10 – Singapore 573Daren Shiau

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Summary of Contents

Chapter 11 – South Korea 635Cecil Saehoon Chung and Kyoung Yeon Kim

Chapter 12 – Thailand 691Professor Ian McEwin and Dr. Sakda Thanitcul

Chapter 13 – Vietnam 715Dr. LUU Huong Ly

Chapter 14 – Cambodia and Laos 767R. Ian McEwin

Index 771

Table of Contents

About the Authors v

Preface xlv

Chapter 1 – Australia 1Katrina Groshinski and Caitlin DaviesPart 1: Overview – legislation and regulatory authorities 1

1.1 Australian competition law regime 11.2 Scope of application – entities 21.3 Scope of application – extraterritoriality 31.4 Regulatory authorities 41.5 Key reference table of anti-competitive conduct

prohibitions 5Part 2: Overview of fundamental concepts 5

2.1 Introduction 52.2 ‘Market’ 162.3 ‘Competitors/in competition’ 172.4 ‘Substantial’ (lessening of competition) 182.5 ‘Purpose’ 192.6 ‘Likely effect’ 202.7 ‘Contract, arrangement or understanding’ 21

Part 3: Cartels (agreements between competitors) 223.1 Overview 223.2 Prohibitions: cartel conduct 233.3 Prohibition: exclusionary provisions 253.4 Elements of the prohibitions 253.5 Remedies and sanctions 273.6 Leniency/immunity programs 283.7 Extraterritorial application 303.8 Application to state/government entities 303.9 Treatment of related bodies corporate 303.10 Treatment of joint ventures 313.11 Other exceptions 323.12 Sector/industry-specific regulation/exceptions 34

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3.13 Enforcement action 343.14 Key recent developments and proposals for reform 363.15 Prohibition: price signalling 36

Part 4: Restraints in vertical agreements 404.1 Overview 404.2 Prohibitions 414.3 Elements of the prohibitions 424.4 Remedies and sanctions 444.5 Leniency/immunity programs 454.6 Extraterritorial application 454.7 Application to state/government entities 454.8 Treatment of related bodies corporate 454.9 Treatment of joint ventures 454.10 Other exceptions 454.11 Sector/industry-specific regulation/exceptions 474.12 Enforcement action 484.13 Key recent developments and proposals for reform 49

Part 5: Other anti-competitive agreements 505.1 Overview 505.2 Elements of the prohibition 505.3 Remedies and sanctions 525.4 Leniency/immunity programs 535.5 Extraterritorial application 535.6 Application to state/government entities 535.7 Treatment of related bodies corporate 535.8 Treatment of joint ventures 535.9 Other exceptions 545.10 Sector/industry-specific regulation/exceptions 565.11 Prohibition: secondary boycotts 565.12 Enforcement action 575.13 Key recent developments and proposals for reform 57

Part 6: Abuse of dominance/market power 586.1 Overview 586.2 Elements of the prohibition 596.3 Specific prohibition: predatory pricing 626.4 Remedies and sanctions 626.5 Collective dominance 636.6 Price discrimination 636.7 Misuse of market power and access to natural

monopoly infrastructure/facilities 636.8 Misuse of market power and intellectual property rights 63

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6.9 Sector/industry-specific regulation/exceptions 646.10 Other exceptions 646.11 Enforcement action 646.12 Key recent developments and proposals for reform 66

Part 7: Other prohibitions on unilateral conduct 667.1 Overview 667.2 Prohibitions 667.3 Elements of the prohibition 677.4 Remedies and sanctions 687.5 Leniency/immunity programs 687.6 Extraterritorial application 687.7 Application to state/government entities 697.8 Treatment of related bodies corporate 697.9 Treatment of joint ventures 697.10 Other exceptions 697.11 Sector/industry-specific regulation/exceptions 707.12 Enforcement action 707.13 Key recent developments and proposals for reform 71

Part 8: Mergers 728.1 Overview 728.2 Application to offshore acquisitions 728.3 Competition assessment 728.4 Filing requirements and thresholds 758.5 Clearance/approval procedures, stages and timetables 768.6 Remedies 788.7 Appeals 788.8 Use of expert economists 798.9 Enforcement action 79Procedures for assessing proposed mergers 808.10 Key recent developments and proposals for reform 83

Part 9: Enforcement 849.1 Regulator’s enforcement powers and tools 849.2 Remedies 879.3 Relevant courts/tribunals 899.4 Litigation – matters of procedure 90

Chapter 2 – China 93Andrew FosterPart 1: Overview – legislation and regulatory authorities 93

1.1 Chinese competition law regime 931.2 Scope of application – entities 94

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1.3 Scope of application – extraterritoriality 941.4 Regulatory authorities 951.5 Key reference table of anti-competitive conduct


2.1 Introduction 962.2 ‘Monopolistic conduct’ 972.3 ‘Monopoly agreements’ 972.4 ‘Dominant market position’ 1042.5 ‘Undertaking’ 1052.6 ‘Relevant market’ 1052.7 ‘Competing undertakings’ 1072.8 ‘Eliminating or restricting competition’ 107

Part 3: Cartels (agreements between competitors) 1083.1 Overview 1083.2 Prohibition: monopoly agreements 1083.3 Elements of the prohibition 1093.4 Remedies and sanctions 1103.5 Prohibition: bid rigging 1113.6 Leniency/immunity programs 1123.7 Extraterritorial application 1163.8 Application to state/government entities 1163.9 Treatment of related bodies corporate 1183.10 Treatment of joint ventures 1193.11 Other exceptions 1193.12 Sector/industry-specific regulation/exceptions 1203.13 Enforcement action 120

Part 4: Restraints in vertical agreements 1234.1 Overview 1234.2 Prohibitions 1244.3 Remedies and sanctions 1254.4 Leniency/immunity programs 1264.5 Extraterritorial application 1274.6 Application to state/government entities 1274.7 Treatment of related bodies corporate 1274.8 Treatment of joint ventures 1284.9 Other exceptions 1284.10 Sector/industry-specific regulation/exceptions 1284.11 Enforcement action 129

Part 5: Other anti-competitive agreements 132

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Part 6: Abuse of dominance/market power 1326.1 Overview 1326.2 Elements of the prohibition 1346.3 Remedies and sanctions 1416.4 Collective dominance 1426.5 Price discrimination 1426.6 Misuse of market power and intellectual property rights 1426.7 Sector/industry-specific regulation/exceptions 1436.8 Other exceptions 1456.9 Enforcement action 145

Part 7: Other prohibitions on unilateral conduct (e.g. resale price maintenance) 147

Part 8: Mergers 1478.1 Overview 1478.2 Application to offshore acquisitions 1488.3 Competition assessment 1488.4 Filing requirements and thresholds 1498.5 Clearance/approval procedures, stages and timetables 1518.6 Remedies 1538.7 Appeals 1548.8 Use of expert economists 1548.9 Sector/industry-specific regulation/exceptions 1548.10 Key recent developments and proposals for reform 1558.11 Enforcement action 157

Part 9: Enforcement 1629.1 Regulator’s enforcement powers and tools 1629.2 Remedies 1649.3 Relevant court/tribunals 1649.4 Litigation – matters of procedure 164

Chapter 3 – Hong Kong 167Geraldine Johns-Putra and Miranda NoblePart 1: Overview – legislation and regulatory authorities 167

1.1 Hong Kong’s competition law regime 1671.2 Scope of application – entities 1701.3 Scope of application – extraterritoriality 1731.4 Regulatory authorities 1741.5 Key reference table of anti-competitive conduct

prohibitions 1761.6 Guidelines from the Commission 176

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Part 2: Overview of fundamental concepts 1862.1 Introduction 1862.2 ‘Market’ 1862.3 ‘Competition’ 1872.4 ‘Competitors’ 187

Part 3: Cartels (agreements between competitors) 1873.1 Overview 1873.2 Prohibition: the First Conduct Rule 1883.3 Elements of the prohibition 1883.4 Decisions by associations of undertakings 1923.5 Implications of the First Conduct Rule on existing

practices in Hong Kong 1933.6 Serious anti-competitive conduct vs other anti-

competitive conduct 1933.7 Risk areas 1953.8 Remedies and sanctions 1963.9 Leniency/immunity programs 1963.10 Extraterritorial application 1963.11 Application to state/government entities 1963.12 Treatment of related bodies corporate 1963.13 Treatment of joint ventures 1973.14 Other exceptions 1973.15 Sector/industry-specific regulation/exceptions 2023.16 Enforcement action 202

Part 4: Restraints in vertical agreements 2034.1 Overview 2034.2 Prohibitions 2034.3 Elements of the prohibitions 2044.4 Remedies and sanctions 2044.5 Leniency/immunity programs 2044.6 Extraterritorial application 2044.7 Application to state/government entities 2044.8 Treatment of related bodies corporate 2044.9 Treatment of joint ventures 2044.10 Other exceptions 2044.11 Enforcement action 206

Part 5: Other anti-competitive agreements 206Part 6: Abuse of dominance/market power 206

6.1 Overview 2066.2 Elements of the prohibition 2076.3 Remedies and sanctions 211

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6.4 Collective dominance 2116.5 Price discrimination 2116.6 Misuse of market power and access to natural

monopoly infrastructure/facilities 2116.7 Misuse of market power and intellectual property rights 2116.8 Sector/industry specific regulation/exceptions 2116.9 Other exemptions 2116.10 Enforcement action 213

Part 7: Other prohibitions on unilateral conduct 214Part 8: Mergers 214

8.1 Overview 2148.2 Application to offshore acquisitions 2158.3 Competition assessment 2168.4 Filing requirements and thresholds 2178.5 Clearance/approval procedures stages and timetables 2178.6 Remedies 2178.7 Appeals 2188.8 Use of expert economists 2188.9 Other exceptions 2188.10 Enforcement action 218

Part 9: Enforcement 2199.1 Regulator’s enforcement powers and tools 2199.2 Remedies 2229.3 Relevant court/tribunals 2309.4 Litigation – matters of procedure 231

Chapter 4 – India 235Cyril Shroff and Nisha Kaur Uberoi

Part 1: Overview – legislation and regulatory authorities 2351.1 Indian competition law regime 2351.2 Scope of application – entities 2361.3 Scope of application – extraterritoriality 2371.4 Regulatory authorities 2381.5 Key reference table of anti-competitive conduct


2.1 Introduction 2392.2 ‘Market’ 2392.3 ‘Appreciable adverse effect on competition’ 248

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Part 3: Cartels (agreements between competitors) 2493.1 Overview 2493.2 Prohibition: cartel conduct 2493.3 Remedies and sanctions 2513.4 Leniency/immunity programs 2523.5 Extraterritorial application 2533.6 Application to state/government entities 2533.7 Treatment of related bodies corporate 2533.8 Treatment of joint ventures 2543.9 Other exceptions 2553.10 Sector/industry-specific regulation/exceptions 2553.11 Enforcement action 2553.12 Key recent developments and proposals for reform 256

Part 4: Restraints in vertical agreements 2564.1 Overview 2564.2 Prohibitions 2574.3 Leniency/immunity programs 2584.4 Extraterritorial application 2584.5 Application to state/government entities 2584.6 Treatment of related bodies corporate 2584.7 Treatment of joint ventures 2594.8 Other exceptions 2594.9 Sector/industry-specific regulation/exceptions 2594.10 Enforcement action 2594.11 Key recent developments and proposals for reform 261


6.1 Overview 2616.2 Elements of the prohibition 2626.3 Remedies and sanctions 2646.4 Collective dominance 2656.5 Price discrimination 2656.6 Misuse of market power and natural monopoly

infrastructure/facilities 2656.7 Misuse of market power and intellectual property rights 2666.8 Sector/industry-specific regulation/exceptions 2676.9 Other exceptions 2676.10 Enforcement action 2676.11 Key recent developments and proposals for reform 270

Part 7: Other prohibitions on unilateral conduct 271

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Part 8: Mergers 2718.1 Overview 2718.2 Application to offshore acquisitions 2718.3 Competition assessment 2738.4 Filing requirements and thresholds 2748.5 Clearance/approval procedures, stages and timetables 2798.6 Sector/industry-specific regulation/exceptions 2838.7 Other exceptions 2838.8 Remedies 2858.9 Appeals 2868.10 Use of expert economists 2868.11 Enforcement action 2878.12 Key recent developments and proposals for reform 289


Chapter 5 – Indonesia 299Mochamad Fachri and Farid NasutionPart 1: Overview – legislation and regulatory authorities 299

1.1 Indonesian competition law regime 2991.2 Scope of application – entities 3001.3 Scope of application – extraterritoriality 3011.4 Regulatory authorities 3021.5 Key reference table of anti-competitive conduct


2.1 Introduction 3032.2 ‘Relevant market’ and ‘market share’ 3032.3 ‘Monopolistic practices’ 3132.4 ‘Unfair business competition’ 3142.5 ‘Dominant position’ 314

Part 3: Cartels (agreements between competitors) 3153.1 Overview 3153.2 Prohibitions 3153.3 Remedies and sanctions 3173.4 Leniency/ immunity programs 3183.5 Extraterritorial application 3183.6 Application to state/government entities 318

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3.7 Treatment of related bodies corporate 3183.8 Treatment of joint ventures 3183.9 Other exceptions 3193.10 Sector/industry-specific regulation/exceptions 3193.11 Enforcement action 320

Part 4: Restraints in vertical agreements 3214.1 Overview 3214.2 Prohibitions 3224.3 Remedies and sanctions 3234.4 Leniency/immunity programs 3244.5 Extraterritorial application 3244.6 Application to state/government entities 3244.7 Treatment of related bodies corporate 3244.8 Treatment of joint ventures 3244.9 Other exceptions 3244.10 Sector/industry-specific regulation/exceptions 3244.11 Enforcement action 325

Part 5: Other anti-competitive agreements 3255.1 Overview 3255.2 Prohibitions 3255.3 Remedies and sanctions 3265.4 Leniency/immunity programs 3265.5 Extraterritorial application 3265.6 Application to state/government entities 3265.7 Treatment of related bodies corporate 3265.8 Treatment of joint ventures 3265.9 Other exceptions 3275.10 Sector/industry-specific regulation/exceptions 3275.11 Enforcement action 327

Part 6: Abuse of dominance/market power 3276.1 Overview 3276.2 Elements of the prohibition 3286.3 Remedies and sanctions 3306.4 Collective dominance 3316.5 Price discrimination 3316.6 Dominance and access to natural monopoly

infrastructure/facilities 3316.7 Dominance and intellectual property rights 3316.8 Sector/industry-specific regulation/exception 3326.9 Other exceptions 3326.10 Enforcement action 332

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Part 7: Other prohibitions on unilateral conduct 3337.1 Overview 3337.2 Prohibitions 3347.3 Remedies and sanctions 3347.4 Leniency/immunity programs 3347.5 Extraterritorial application 3347.6 Application to state/government entities 3347.7 Treatment of related bodies corporate 3357.8 Treatment of joint ventures 3357.9 Other exceptions 3357.10 Sector/industry-specific regulation/exceptions 3357.11 Enforcement action 335

Part 8: Mergers 3368.1 Overview 3368.2 Application to offshore acquisitions 3368.3 Competition assessment 3368.4 Filing requirements and thresholds 3388.5 Clearance/approval procedures, stages and timetable 3418.6 Remedies 3428.7 Appeals 3438.8 Use of expert economists 3438.9 Enforcement action 3438.10 Key recent development and proposals for reform 344

Part 9: Enforcement 3459.1 Regulator’s enforcement powers and tools 3459.2 Sanctions and remedies 3479.3 Relevant courts/tribunals 3489.4 Litigation – matters of procedure 348

Chapter 6 – Japan 351Yusuke Nakano and Taku MatsumotoPart 1: Overview – legislation and regulatory authorities 351

1.1 Japanese competition law regime 3511.2 Scope of application – entities 3521.3 Scope of application – extraterritoriality 3531.4 Regulatory authorities 3541.5 Key reference table of anti-competitive conduct

prohibitions 355Part 2: Overview of Fundamental Concepts 355

2.1 Introduction 3552.2 ‘Market’ 355

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2.3 ‘Competitors’/ in ‘competition’ 3622.4 ‘Substantial restraint of competition’ and ‘tendency to

impede fair competition’ 362Part 3: Cartels (agreements between competitors) 363

3.1 Overview 3633.2 Prohibitions 3633.3 Elements of the prohibition 3643.4 Remedies and sanctions 3663.5 Leniency/immunity programs 3733.6 Extraterritorial application 3753.7 Application to state/government entities 3753.8 Treatment of related bodies corporate 3753.9 Treatment of joint ventures 3763.10 Other exceptions 3763.11 Sector/ industry-specific regulation/ exceptions 3773.12 Enforcement action 3773.13 Key recent developments and proposals for reform 378

Part 4: Restraints in vertical agreements 3784.1 Overview 3784.2 Prohibitions 3784.3 Elements of the prohibitions 3814.4 Remedies and sanctions 3824.5 Leniency/immunity programs 3824.6 Extraterritorial application 3824.7 Application to state/government entities 3824.8 Treatment of related bodies corporate 3834.9 Treatment of joint ventures 3834.10 Other exceptions 3844.11 Sector/industry-specific regulation/exceptions 3844.12 Enforcement action 384

Part 5: Other anti-competitive agreements 3855.1 Overview 3855.2 Prohibition: concerted refusal to trade 3855.3 Remedies and sanctions 3855.4 Leniency/immunity programs 3855.5 Extraterritorial application 3855.6 Application to state/government entities 3865.7 Treatment of related bodies corporate 3865.8 Treatment of joint ventures 3865.9 Sector/industry-specific regulation/exceptions 3865.10 Enforcement action 386

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Part 6: Abuse of dominance/market power 3866.1 Overview 3866.2 Prohibition: unfair trade practices – abuse of superior

bargaining position 3876.3 Prohibition: private monopolisation 3896.4 Remedies and sanctions 3906.5 Collective dominance 3916.6 Price discrimination 3916.7 Private monopolization and access to natural

monopoly infrastructure/facilities 3916.8 Unfair trade practices and intellectual property rights 3926.9 Other relevant legislation 3926.10 Industry-specific or other exceptions 3936.11 Enforcement action 393

Part 7: Other prohibitions on unilateral conduct 3947.1 Overview 3947.2 Prohibition: unfair trade practices – resale price restriction 3947.3 Remedies and sanctions 3947.4 Leniency/immunity programs 3947.5 Extraterritorial application 3947.6 Application to state/government entities 3947.7 Treatment of related bodies corporate 3947.8 Treatment of joint ventures 3957.9 Other exceptions 3957.10 Sector/industry-specific regulation/exceptions 3957.11 Enforcement action 395

Part 8: Mergers 3958.1 Overview 3958.2 Application to offshore acquisitions 3968.3 Competition assessment 3968.4 Filing requirements and thresholds 3978.5 Remedies 3988.6 Appeals 3998.7 Use of expert economic evidence 3998.8 Enforcement action 3998.9 Key recent developments and proposals for reform 400

Part 9: Enforcement 4009.1 Regulator’s enforcement powers and tools 4009.2 Remedies and sanctions 4019.3 Relevant courts/tribunals 4019.4 Litigation – matters of procedure 402

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Chapter 7 – Malaysia 405Lim Koon Huan and Jason Teoh Choon Hui Part 1: Overview – legislation and regulatory authorities 405

1.1 Malaysian competition law regime 4051.2 Scope of application – entities 4051.3 Scope of application – extraterritoriality 4061.4 Regulatory authority 4061.5 Key reference table of anti-competitive conduct


2.1 Introduction 4082.2 ‘Market’ 4082.3 Product market 4092.4 Geographic market 4122.5 Other considerations 412

Part 3: Cartels (agreements between competitors) 4133.1 Overview 4133.2 Prohibition 4133.3 Elements of the prohibition 4163.4 Remedies and sanctions 4183.5 Leniency/immunity programs 4183.6 Extraterritorial application 4193.7 Application to state/government entities 4193.8 Treatment of related bodies corporate 4193.9 Treatment of joint ventures 4193.10 Other exceptions 4193.11 Sector/industry specific regulation/exceptions 4233.12 Enforcement action 423

Part 4: Restraints in vertical agreements 4244.1 Overview 4244.2 Prohibition: vertical agreements 4244.3 Elements of the prohibition 4264.4 Remedies and sanctions 4264.5 Leniency/immunity programs 4264.6 Extraterritorial application 4264.7 Application to state/government entities 4264.8 Treatment of related bodies corporate 4264.9 Treatment of joint ventures 4264.10 Other exceptions 4264.11 Sector/industry-specific regulation/exceptions 4274.12 Enforcement action 427

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6.1 Overview 4276.2 Elements of the prohibition 4276.3 Remedies and sanctions 4326.4 Collective dominance 4326.5 Price discrimination 4326.6 Misuse of market power and access to natural

monopoly infrastructure/facilities 4326.7 Misuse of market power and intellectual property

rights 4326.8 Sector/industry specific regulation/exceptions 4336.9 Other exceptions 4336.10 Enforcement action 433


Part 8: Mergers 434Part 9: Enforcement 434

9.1 Regulator’s enforcement power and tools 4349.2 Remedies 4399.3 Relevant courts/tribunals 4419.4 Litigation – matters of procedure 442

Chapter 8 – New Zealand 443Dr Ross Patterson Part 1: Overview – legislation and regulatory authorities 443

1.1 New Zealand competition law regime 4431.2 Scope of application – entities 4431.3 Scope of application – extraterritoriality 4441.4 Regulatory authorities 4461.5 Key reference table of anti-competitive conduct


2.1 Introduction 4472.2 Market definition 4472.3 Competition 4562.4 ‘Substantial’ (lessening of competition) 4582.5 ‘Purpose’ 4582.6 ‘Likely effect’ 4602.7 ‘Contract, arrangement or understanding’ 461

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Part 3: Cartels (agreements between competitors) 4633.1 Overview 4633.2 Prohibition: cartel conduct 4633.3 Prohibition: exclusionary provisions 4643.4 Elements of the prohibitions 4653.5 Remedies and sanctions 4653.6 Leniency/immunity programs 4663.7 Extraterritorial application 4683.8 Application to state/government entities 4683.9 Treatment of related bodies corporate 4683.10 Treatment of joint ventures 4693.11 Other exceptions 4713.12 Sector/industry-specific regulation/exceptions 4713.13 Key recent developments and proposals for reform 476

Part 4: Restraints in vertical agreements 4804.1 Overview 4804.2 Treatment of exclusive dealing 4804.3 Remedies and sanctions 4824.4 Leniency/immunity programs 4824.5 Extraterritorial application 4824.6 Application to state/government entities 4834.7 Treatment of related bodies corporate 4834.8 Treatment of joint ventures 4834.9 Other exceptions 4834.10 Sector/industry-specific regulation/exceptions 4834.11 Enforcement action 4834.12 Key recent developments and proposals for reform 483

Part 5: Other anti-competitive agreements 4845.1 Overview 4845.2 Elements of the prohibition 4845.3 Remedies and sanctions 4865.4 Leniency/immunity programs 4865.5 Extraterritorial application 4865.6 Application to state/government entities 4865.7 Treatment of related bodies corporate 4875.8 Treatment of joint ventures 4875.9 Other exceptions 4875.10 Sector/industry-specific regulation/exceptions 4875.11 Enforcement action 487

Part 6: Abuse of dominance/market power 4886.1 Overview 488

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6.2 Elements of the prohibition 4886.3 Specific prohibition: predatory pricing 4916.4 Remedies and sanctions 4936.5 Collective dominance 4936.6 Price discrimination 4936.7 Misuse of market power and access to monopoly


Part 7: Other prohibitions on unilateral conduct 4977.1 Overview 4977.2 Prohibition 4977.3 Elements of the prohibition 4977.4 Remedies and sanctions 4987.5 Leniency/immunity programs 4987.6 Extraterritorial application 4987.7 Application to state/government entities 4987.8 Treatment of related bodies corporate 4997.9 Treatment of joint ventures 4997.10 Other exceptions 4997.11 Sector/industry-specific regulation/exceptions 5007.12 Enforcement action 501

Part 8: Mergers 5018.1 Overview 5018.2 Application to offshore acquisitions 5028.3 Competition assessment 5028.4 Filing requirements and thresholds 5068.5 Clearance/approval procedures, stages and timetables 5078.6 Remedies 5108.7 Appeals 5128.8 Use of expert economists 5128.9 Enforcement action 5128.10 Key recent developments and proposals for reform 513


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Chapter 9 – Pakistan 523Bilal Shaukat and Shahbakht PirzadaPart 1: Overview – legislation and regulatory authorities 523

1.1 Pakistan competition law regime 5231.2 Scope of application – entities 5241.3 Scope of application – extraterritoriality 5241.4 Regulatory authorities 5241.5 Key reference table of anti-competitive conduct


2.1 Introduction 5252.2 ‘Relevant market’ 5252.3 ‘Substantial’ (lessening of competition) 5362.4 ‘Object’ 5372.5 ‘Effect’ 5372.6 ‘Undertaking’ 5382.7 ‘Contract, arrangement or understanding’ 538

Part 3: Cartels (agreements between competitors) 5383.1 Overview 5383.2 Prohibitions 5393.3 Remedies and sanctions 5403.4 Leniency/immunity programs 5403.5 Extraterritorial application 5423.6 Application to state/government entities 5423.7 Treatment of related bodies corporate 5423.8 Treatment of joint ventures 5423.9 Other exceptions 5423.10 Sector/industry-specific regulation/exceptions 5443.11 Enforcement action 544

Part 4: Restraints in Vertical Agreements 5484.1 Overview 5484.2 Prohibitions 5494.3 Remedies and sanctions 5494.4 Leniency/immunity programs 5494.5 Extraterritorial application 5494.6 Application to state/government entities 5494.7 Treatment of related bodies corporate 5494.8 Treatment of joint ventures 5504.9 Other exceptions 5504.10 Sector/industry-specific regulation/exceptions 5504.11 Enforcement action 550

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6.1 Overview 5516.2 Elements of the prohibition 5526.3 Specific prohibition: predatory pricing 5546.4 Remedies and sanctions 5546.5 Collective dominance 5546.6 Price discrimination 5556.7 Misuse of market power and access to natural

monopoly infrastructure/facilities 5556.8 Misuse of market power and intellectual property rights 5556.9 Sector/industry-specific regulation/exceptions 5566.10 Other exceptions 5566.11 Enforcement action 557


Part 8: Mergers 5598.1 Overview 5598.2 Application to offshore acquisitions 5608.3 Competition assessment 5608.4 Filing requirements and thresholds 5618.5 Clearance/approval procedures, stages and timetables 5638.6 Remedies 5648.7 Appeals 5648.8 Use of expert economists 5658.9 Enforcement action 5658.10 Key recent developments and proposals for reform 565


Chapter 10 – Singapore 573Daren ShiauPart 1: Overview – legislation and regulatory authorities 573

1.1 Singapore competition law regime 5731.2 The Competition Act 5741.2 Scope of application – entities 5761.3 Scope of application – extraterritoriality 577

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1.4 Regulatory authorities 5771.5 Key reference table of anti-competitive conduct


2.1 Introduction 5802.2 ‘Relevant market’ 580

Part 3: Cartels (agreements between competitors) 5883.1 Overview 5883.2 Prohibitions 5883.3 Remedies and sanctions 5913.4 Leniency/immunity programs 5933.5 Extraterritorial application 5953.6 Application to state/government entities 5953.7 Treatment of related bodies corporate 5963.8 Treatment of joint ventures 5963.9 Other exceptions 5963.10 Sector/industry-specific regulation/exceptions 6003.11 Enforcement action 601

Part 4: Restraints in vertical agreements 604Part 5: Other anti-competitive agreements 604Part 6: Abuse of dominance/market power 604

6.1 Overview 6046.2 Elements of the prohibition 6056.3 Specific prohibitions 6066.4 Remedies and sanctions 6096.5 Collective dominance 6106.6 Price discrimination 6106.7 Misuse of market power and access to natural

monopoly infrastructure/facilities 6106.8 Misuse of market power and intellectual property rights 6106.9 Sector/industry-specific regulation/exceptions 6106.10 Other exceptions 6116.11 Enforcement action 611

Part 7: Other prohibitions on unilateral conduct 6127.1 Overview 6127.2 Prohibitions 6127.3 Remedies and sanctions 6147.4 Leniency/immunity programs 6147.5 Extraterritorial application 6147.6 Application to state/government entities 614

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7.7 Treatment of related bodies corporate 6147.8 Treatment of joint ventures 6147.9 Other exceptions 6157.10 Sector/industry-specific regulation/exceptions 6157.11 Enforcement action 6157.12 Key recent developments and proposals for reform 615

Part 8: Mergers 6158.1 Overview 6158.2 Application to offshore acquisitions 6158.3 Competition assessment 6158.4 Filing requirements and thresholds 6178.5 Clearance/approval procedures, stages and timetables 6218.6 Remedies 6248.7 Appeals 6268.8 Use of expert economists 6268.9 Key recent developments and proposals for reform 6268.10 Enforcement action 627

Part 9: Enforcement 6279.1 Regulator’s enforcement powers and tools 6279.2 Remedies 6319.3 Relevant courts and tribunals 6329.4 Litigation – matters of procedure 632

Chapter 11 – South Korea 635Cecil Saehoon Chung and Kyoung Yeon KimPart 1: Overview – legislation and regulatory authorities 635

1.1 Korean competition law regime 6351.2 Scope of application – entities 6361.3 Regulatory authorities 6361.4 Key reference table of anti-competitive conduct


2.1 ‘Market’ 6372.2 ‘Competitor’/‘enterprise in competition’ 6462.3 ‘Substantial’ (lessening of competition) 6462.4 ‘Purpose’ 6462.5 ‘Likely effect’ 6462.6 ‘Effect’ 6472.7 ‘Contract, arrangement or understanding’ 647

Part 3: Cartels (agreements between competitors) 6473.1 Overview 647

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3.2 Prohibition: collusion 6473.3 Elements of the prohibition 6493.4 Remedies and sanctions 6513.5 Leading cases 6523.6 Leniency/immunity programs 6533.7 Extraterritorial application 6563.8 Application to state/government entities 6583.9 Treatment of related bodies corporate 6583.10 Treatment of joint ventures 6593.11 Other exceptions 6593.12 Sector/industry-specific regulation/exceptions 6603.13 Recent enforcement action and significant penalties 6603.14 Price signalling 6603.15 Key recent developments and proposals for reform 661

Part 4: Restraints in vertical agreements 6624.1 Overview 662

Part 5: Other anti-competitive agreements 6625.1 Overview 6625.2 Elements of the prohibition 6635.3 Remedies/sanctions 6635.4 Extraterritorial application 6645.5 Application to state/government entities 6645.6 Treatment of related bodies corporate 6645.7 Treatment of joint ventures 6645.8 Other exceptions 6645.9 Sector/industry-specific regulation/exceptions 6645.10 Enforcement 6645.11 Key recent developments and proposals for reform 665

Part 6: Abuse of dominance/market power 6666.1 Overview 6666.2 Elements of the prohibition 6676.3 Remedies/sanctions 6676.4 Specific prohibition: predatory pricing 6686.5 Abuse of market power and access to natural

monopoly infrastructure/facilities 6686.6 Abuse of dominance and intellectual property rights 6696.7 Exceptions and defences 6706.8 Recent enforcement action and significant penalties 671

Part 7: Other prohibitions on unilateral conduct 6727.1 Overview 6727.2 Prohibition 673

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7.3 Remedies and sanctions 6737.4 Leading cases 6737.5 Leniency/immunity programs 6747.6 Extraterritorial application 6747.7 Application to state/government entities 6747.8 Treatment of related bodies corporate 6747.9 Treatment of joint ventures 6747.10 Other exceptions 6747.11 Sector/industry-specific regulation/exceptions 6757.12 Key recent developments and proposals for reform 6757.13 Recent enforcement action and significant penalties 675

Part 8: Mergers 6768.1 Overview of prohibition and substantive test 6768.2 Application to offshore acquisitions 6768.3 Competition assessment 6778.4 Filing requirements and thresholds 6828.5 Clearance/approval procedures, stages and timetables 6858.6 Remedies 6868.7 Appeals 687

Part 9: Enforcement 6879.1 KFTC’s enforcement powers and tools 6879.2 Remedies 6889.3 Appeals 6889.4 Litigation – matters of procedure 689

Chapter 12 – Thailand 691Professor Ian McEwin and Dr. Sakda ThanitculPart 1: Overview – legislation and regulatory authorities 691

1.1 Thai competition law regime 6911.2 Scope of application – entities 6911.3 Scope of application – extraterritoriality 6921.4 Regulatory authorities 6921.5 Key reference table of anti-competitive conduct

provisions 6931.6 Regulations and notifications 693

Part 2: Overview of fundamental concepts 6982.1 Introduction 6982.2 ‘Market’ 6982.3 ‘Business operator’ 6982.4 ‘Market domination’ 698

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Part 3: Cartels (agreements between competitors) 6993.1 Overview 6993.2 Prohibitions 6993.3 Elements of the prohibition 7003.4 Remedies and sanctions 7003.5 Leniency/immunity programs 7003.6 Extraterritorial application 7003.7 Application to state/government entities 7003.8 Treatment of related bodies corporate 7013.9 Treatment of joint ventures 7013.10 Other exceptions 7013.11 Sector/industry-specific regulation/exceptions 7013.12 Enforcement action 701


6.1 Overview 7026.2 Prohibition 7026.3 Elements of the prohibition 7036.4 Remedies and sanctions 7036.5 Collective dominance 7036.6 Price discrimination 7046.7 Misuse of market power and access to natural

monopoly infrastructure/facilities 7046.8 Misuse of market power and intellectual property rights 7046.9 Sector/industry-specific regulation/exceptions 7046.10 Enforcement action 704

Part 7: Other prohibitions on unilateral conduct 7057.1 Overview 7057.2 Prohibitions 7057.3 Elements of the prohibition 7057.4 Remedies and sanctions 7067.5 Extraterritorial application 7067.6 Application to state/government entities 7067.7 Enforcement action 7067.8 Key recent developments and proposals for reform 707

Part 8: Mergers 7088.1 Overview 7088.2 Application to offshore acquisitions 7088.3 Competition assessment 708

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8.4 Filing requirements and thresholds 7088.5 Clearance/approval procedures, stages and timetables 7098.6 Remedies 7098.7 Appeals 7098.8 Use of expert economists 7098.9 Enforcement action 710


Chapter 13 – Vietnam 715Dr. LUU Huong LyPart 1: Overview – legislation and regulatory authorities 715

1.1 Vietnamese competition law regime 7151.2 Scope of application – entities 7161.3 Scope of application – extraterritoriality 7171.4 Regulatory authorities 7181.5 Key reference table of anti-competitive conduct


2.1 Introduction 7192.2 ‘Market’ 719

Part 3: Cartels (agreements between competitors) 7273.1 Overview 7273.2 Remedies and sanctions 7313.3 Leniency/immunity programs 7313.4 Extraterritorial application 7343.5 Application to state/government entities 7343.6 Treatment of related bodies corporate 7343.7 Treatment of joint ventures 7353.8 Other exceptions 7353.9 Sector/industry-specific regulation/exceptions 7353.10 Enforcement action 7353.11 Key recent developments and proposals for reform 736


6.1 Overview 737

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6.2 Elements of the prohibition 7376.3 Specific prohibition: predatory pricing 7396.4 Remedies and sanctions 7396.5 Collective dominance 7396.6 Price discrimination 7406.7 Misuse of market power and access natural monopoly


Part 7: Other prohibitions on unilateral conduct 7457.1 Overview 7457.2 Prohibitions 7457.3 Elements of the prohibitions 7467.4 Remedies and sanctions 7487.5 Leniency/immunity programs 7497.6 Extraterritorial application 7497.7 Application to state/government entities 7497.8 Treatment of related bodies corporate 7497.9 Treatment of joint ventures 7497.10 Other exceptions 7497.11 Sector/industry-specific regulation/exceptions 7497.12 Enforcement action 7507.13 Key recent developments and proposals for reform 750

Part 8: Mergers 7508.1 Overview 7508.2 Concept of ‘economic concentration’ 7508.3 Application to offshore acquisitions 7518.4 Filing requirements and thresholds 7528.5 Exceptions 7538.6 Clearance/approval procedures, stages and timetables 7558.7 Remedies 7568.8 Appeals 7578.9 Use of expert economists 7578.10 Sector/industry-specific regulation/exceptions 7588.11 Enforcement action 7598.12 Key recent developments and proposals for reform 759

Part 9: Enforcement 7609.1 Regulator’s enforcement powers and tools 760

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9.2 Remedies 7619.3 Relevant courts/tribunals 7639.4 Litigation – matters of procedure 764

Chapter 14 – Cambodia and Laos 767R. Ian McEwinPart 1: Cambodia 767

1.1 Cambodia’s legal system 7671.2 Cambodia’s competition law regime 767

Part 2: Lao People’s Democratic Republic 7692.1 Lao PDR’s legal system 7692.2 Lao PDR’s competition law regime 769

Index 771

Chapter 6Japan

Yusuke Nakano and Taku Matsumoto Anderson Mori & Tomotsune

PART 1: OVERVIEW – LEGISLATION AND REGULATORY AUTHORITIES

1.1 Japanese competition law regime

The key competition law legislation in Japan is the Act on Prohibition of Private Monopolization and Maintenance of Fair Trade (Shiteki Dokusen no Kinshi oyobi Kosei Torihiki no Kakuho ni Kansuru Horitsu) (Act No. 54 of 1947; the ‘Antimonopoly Act’).

The Antimonopoly Act provides that its goals are, by prohibiting private monopolization, unreasonable restraint of trade and unfair trade practices, and by preventing excessive concentration of economic power, to promote fair and free competition, and thereby the democratic and sound development of the national economy, and to ensure the interest of general customers.

The Antimonopoly Act has an important part in competition policy, and establishes the Japan Fair Trade Commission (the ‘JFTC’), the main agency responsible for implementing the Antimonopoly Act.

The Antimonopoly Act is supplemented by the Act against Delay in Pay-ment of Subcontract Proceeds, Etc. to Subcontractors (Shitauke Daikin Shiharai Chien To Boshi Ho) (Act No. 120 of 1956; the ‘Subcontract Act’) and the Act against Unjustifiable Premiums and Misleading Representations (Futo Keihin Rui oyobi Futo Hyoji Boshi Ho) (Act No. 134 of 1962). Ad-ditionally, the JFTC periodically issues guidelines to clarify the interpretation of the Antimonopoly Act.

The Antimonopoly Act aims to achieve its goals by prohibiting:

(a) unreasonable restraint of trade; (b) private monopolization; (c) unfair trade practices; and

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(d) business combinations the effect of which may be substantially to restrain competition, and by requesting that entrepreneurs (jigyosha) give prior notification of any business combination over a certain scale.

The prohibitions in the Antimonopoly Act may be classified into ex-ante regu-lation and ex-post facto regulation:

(a) Ex-ante regulation (business combination) (b) Ex-post facto regulation – Concerted action

• Horizontal restrictions (unreasonable restraint of trade, in-cluding cartel, joint research and development, etc.)

• Vertical restrictions (private monopolization, certain unfair trade practices, including resale price restriction, trading on restrictive terms, abuse of superior bargaining position, etc.)

– Unilateral action (private monopolization, certain unfair trade practices, including unjust low price sales)

There are also regulations related to trade associations (jigyosha dantai), which are not covered in this Japan chapter.

1.2 Scope of application – entities

Application to bodies corporate and non-corporate private entities

The Antimonopoly Act applies to ‘entrepreneurs’ and ‘trade associations’. An ‘entrepreneur’ is broadly defined as ‘a person who operates a commercial, industrial, financial or other business’ (Article 2, paragraph 1 of the Anti-monopoly Act). As such, any kind of business that involves commerciality, industrial or financial actions, irrespective of whether it is a corporate body, will be subject to the Antimonopoly Act. Therefore, qualified persons such as doctors, lawyers, accountants and notary publics, as well as individuals and national and local governments are within the meaning of entrepreneur as defined in the Antimonopoly Act.

Application to governments and their authorities

A national or local government can constitute an ‘entrepreneur’ and be subject to the Antimonopoly Act if it is engaged in business activities.

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1.3 Scope of application – extraterritoriality

Application to foreign corporations

The JFTC has a imposed sanction against a foreign company for ‘private monopolization’, (the MDS Nordion Case – JFTC recommendation decision, 3 September 1998). Therefore, foreign companies (particularly those occupy-ing a high market share) should be careful in this field.

‘Unfair trade practices’ is a unique regulation in Japan, and a foreign company conducting business which affects the Japanese market should suffi-ciently understand the details of these regulations. The JFTC has also imposed sanctions against foreign companies for ‘unfair trade practices’ (see paragraph 6.8).

With respect to ‘business combination’, it is important for a foreign com-pany to examine if the contemplated combination contains any substantial problems from competition perspectives, or if it meets notification thresholds, from the early stages of its planning, regardless of whether a Japanese affiliate is involved.

Applying the Antimonopoly Act to foreign companies becomes trouble-some if the foreign company has not established an entity in Japan. There are no court decisions or JFTC decisions that clearly support the ‘effects doc-trine’ (i.e., ‘the Antimonopoly Act has jurisdiction if there is influence over the Japanese market’). However, there have been JFTC decisions addressed to foreign companies, suggesting that the JFTC has also not yet adopted the principle of pure territoriality. In the Cathode Ray Tube Price Cartel Case (JFTC Cease and Desist Order and Payment Orders for Surcharge, 7 October 2009), turnover arising from sales from a foreign company to another foreign company was held to be the basis for the calculation of the surcharge. Though this issue is being challenged at the JFTC hearing, foreign companies should carefully consider the Antimonopoly Act on the assumption that the ‘effects doctrine’ may prevail.

Entrepreneurs conducting business in Japan should refer to Japanese laws, and judicial precedents, and also to the guidelines issued by the JFTC for further information on the application of the Antimonopoly Act. These guidelines are available on the JFTC’s web site (http://www.jftc.go.jp/en/legislation_gls/index.html), and many of them are translated into English. The JFTC also conducts prior consultations to provide advice to entrepreneurs.

The jurisdiction of the Antimonopoly Act often becomes an issue in the service of documents. The MDS Nordion Case was settled on the assump-tion that documents could be served to a Japanese agent appointed by MDS Nordion. The procedure for serving documents to foreign companies has been clarified by amendments to the Antimonopoly Act made in 2002. Recently,

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in the Marin Hose Case in 2008, a cease and desist order and payment order for surcharge were issued for the first time to a foreign company which did not have an agent in Japan, and the documents were served to the company outside of Japan. Since this case, there have been several others in which the JFTC’s orders were served to foreign companies by ‘service by publication’.

Amendments to the Antimonopoly Act in 2009 included provisions for exchanging information with foreign competition authorities, clearly stating that information can be provided to foreign authorities, and setting out the conditions for providing information. These amendments reflect the JFTC’s principle of actively promoting international cooperation.

There have been no criminal antitrust cases on the extradition of a fugi-tive from Japan, or demanding extradition from other countries.

Application to foreign governments/sovereigns

There are no specific provisions in the Antimonopoly Act or precedence in case law regarding application of the Antimonopoly Act to foreign govern-ments/sovereigns. However, if they fall under the definition of ‘entrepreneur’ and their conduct affects a Japanese market, we cannot exclude the possibility that the Antimonopoly Act may be applied to foreign governments/sovereigns.

1.4 Regulatory authorities

The JFTC is an independent administrative commission and is established under Chapter VIII of the Antimonopoly Act. The JFTC is the main agency responsible for administering and enforcing the Antimonopoly Act.

The JFTC investigates and may issue administrative orders to enforce the Antimonopoly Act, but does not bring enforcement actions by way of court proceedings.

Amendments to the Antimonopoly Act in 2005, and an increase in the number of JFTC personnel (number of members, officers for examination (shinsa senmonkan) and subcontracting transaction examiners (shitauke torihiki kensakan), etc.) have strengthened the JFTC’s ability to enforce the Antimonopoly Act.

Although the JFTC is not directly involved in civil court proceedings, the process is designed to involve the JFTC, such as by permitting the court to seek the JFTC’s opinions as to the amount of damages. Third parties that are affected by a violation of the Antimonopoly Act may seek damages and an injunction from the Court (injunctions are available only in unfair trade practices offences).

Similar to ordinary criminal litigation, criminal competition cases are instituted by the Public Prosecutors’ Office, and trials are heard by the Court.

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However, the Antimonopoly Act adopts the exclusive accusation system for major violations of the Antimonopoly Act. Accordingly, if no accusation is filed by the JFTC, the Public Prosecutors’ Office will not bring charges.

For details of administrative, criminal, and civil proceedings, please refer to the paragraphs describing the enforcement actions by type of violation (Paragraphs 3.4, 4.4, 5.3, 6.4, 7.3, 8.5 and Part 9).

1.5 Key reference table of anti-competitive conduct prohibitions

The table overleaf provides an overview of the primary anti-competitive con-duct prohibitions under the Antimonopoly Act, along with relevant penalties, exceptions and defences.

PART 2: OVERVIEW OF FUNDAMENTAL CONCEPTS

2.1 Introduction

This Part sets out how key concepts under the Antimonopoly Act are interpreted.

2.2 ‘Market’

Though the Antimonopoly Act uses the term ‘any particular field of trade’ rather than the term ‘market’, those two terms are exchangeable, and we use the term ‘market’ in this chapter.

The measure for ‘Market Definition’ is not specified in the Antimonopoly Act; however, the ‘Guidelines to Application of the Antimonopoly Act con-cerning Review of Business Combination’ (revised most recently on 14 June 2011; the ‘Business Combination Guidelines’) state that the JFTC’s fun-damental attitude concerning ‘Market Definition’ for business combinations is that ‘a particular field of trade denotes the scope for determining whether the effect of the business combination may be to restrain competition, and is determined, in principle, in terms of substitutability for users, such as the product range (including a service [omitted]) that is the subject of a particular trade and the range of trading areas’.

The Guidelines also state that ‘when necessary, substitutability for sup-pliers is also considered’ and that, when examining substitutability for users, the JFTC will suppose that a specific product is supplied by a monopolist in a specific region. Under this assumption, the JFTC considers the degree to which users can substitute an alternative product or region for the purchase of the product if a small but significant and non-transitory increase in price (e.g.,

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Prohibition summary & classificationPrimary section references (Antimonopoly Act) Criminal enforcement Administrative enforcement Primary exceptions/defences

Comp Law in the Asia-Pacific

Horizontal arrangements between competitors (non-merger)

Unreasonable restraint of trade (Quasi-per se/quasi-strict for conduct to which per se/strict applies in the United States). Any entrepreneur by contract, agreement or any other means, in concert with other entrepreneurs, mutually restrict or conduct their busi-ness activities in such a manner as to fix, maintain, or increase prices, or to limit production, technology, products, facilities, or counterparties contrary to the public interest causing a substantial restraint of competition in any particular field of trade.

Second half of Article 3 (prohibits unreasonable restraint of trade)

Article 2, paragraph 6 (defines unreasonable restraint of trade)

Yes

CorporationsA maximum criminal fine of YEN 500 million per violation

IndividualsMaximum imprisonment with work of 5 years and/or maximum criminal fine of YEN 5 million per violation

Yes – payment order for surcharge – generally 10% of volume of affected commerce (up to 3 years)

Cease and desist order

Leniency SystemRelated bodies corporateDomestic air carriers (Article 110, item 2, Civil Aeronautics Act)Shipping business operators (Article 28, Marine Transportation Act)

see Part 3

Vertical arrangements between suppliers and acquirers (non-merger)

Unfair trade practices – DISCRIMINATORY CONSIDERATION

Article 19 (prohibition)

Article 2, paragraph 9, item 2; and paragraph 3 of General Designations (definition)

No Yes Payment order for surcharge (where certain additional requirements are met)

Generally 3% of volume of affected commerce (up to 3 years)

Related bodies corporate (Distribution Guidelines)

Justifiable grounds

see paragraph 4.2

Unfair trade practices – DISCRIMINATORY TREATMENT ON TRADE TERMS


Paragraph 4 of General Designations (definition)

No Yes



Justifiable grounds

see paragraph 4.2

Unfair trade practices – DISCRIMINATORY TREATMENT IN A TRADE ASSOCIATION



No Yes


Justifiable grounds see paragraph 4.2

Unfair trade practices – UNJUST LOW PRICE SALES



No YesPayment order for surcharge (where certain additional requirements are met)



Justifiable grounds

see paragraph 4.2

Unfair trade practices – UNJUST HIGH PRICE PURCHASING



No Yes



Justifiable grounds

see paragraph 4.2

Unfair trade practices – TIE-IN SALES



No Yes



Justifiable grounds

see paragraph 4.2

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Horizontal arrangements between competitors (non-merger)

Unreasonable restraint of trade (Quasi-per se/quasi-strict for conduct to which per se/strict applies in the United States). Any entrepreneur by contract, agreement or any other means, in concert with other entrepreneurs, mutually restrict or conduct their busi-ness activities in such a manner as to fix, maintain, or increase prices, or to limit production, technology, products, facilities, or counterparties contrary to the public interest causing a substantial restraint of competition in any particular field of trade.

Second half of Article 3 (prohibits unreasonable restraint of trade)

Article 2, paragraph 6 (defines unreasonable restraint of trade)

Yes

CorporationsA maximum criminal fine of YEN 500 million per violation

IndividualsMaximum imprisonment with work of 5 years and/or maximum criminal fine of YEN 5 million per violation

Yes – payment order for surcharge – generally 10% of volume of affected commerce (up to 3 years)


Leniency SystemRelated bodies corporateDomestic air carriers (Article 110, item 2, Civil Aeronautics Act)Shipping business operators (Article 28, Marine Transportation Act)

see Part 3

Vertical arrangements between suppliers and acquirers (non-merger)

Unfair trade practices – DISCRIMINATORY CONSIDERATION






Justifiable grounds

see paragraph 4.2

Unfair trade practices – DISCRIMINATORY TREATMENT ON TRADE TERMS



No Yes



Justifiable grounds

see paragraph 4.2

Unfair trade practices – DISCRIMINATORY TREATMENT IN A TRADE ASSOCIATION



No Yes



Unfair trade practices – UNJUST LOW PRICE SALES






Justifiable grounds

see paragraph 4.2

Unfair trade practices – UNJUST HIGH PRICE PURCHASING



No Yes



Justifiable grounds

see paragraph 4.2

Unfair trade practices – TIE-IN SALES



No Yes



Justifiable grounds

see paragraph 4.2

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Unfair trade practices – TRADING ON EXCLUSIVE TERMS



No Yes



Justifiable grounds

see paragraph 4.2

Unfair trade practices –TRADING ON RESTRICTIVE TERMS

A transaction will be an illegal trading on restrictive terms if an entrepreneur conducts a transaction with another party on terms that unjustly restrict any trade between the said party and its other transacting party or other business activities of the said party, other than on exclusive terms or resale price restriction.



No Yes



Justifiable grounds

see paragraph 4.2

Unfair trade practices –RESALE PRICE MAINTENANCE

The illegal act of one party making another party who purchases goods from the first party maintain its resale price, or otherwise restricting its free decision to set its own resale price, and maintaining further resale prices.


Article 2, paragraph 9, item 4 (definition)

No Yes

Payment order for surcharge



Certain copyrighted works


Justifiable grounds

see Part 7

Anti-competitive arrangements

Unfair Trade Practices – CONCERTED REFUSAL TO TRADE

The act of refusing or restricting trade in concert with competitors, or causing other entrepreneurs to refuse or restrict their trade.




Generally 3% of volume of commerce arising from sales to unaffected competitors of the refused

Justifiable grounds see paragraph5.2

Misuse of market power

Unfair trade practices – ABUSE OF SUPERIOR BARGAINING POSITION

An entrepreneur must not impose terms and conditions disadvantageous to other entrepreneurs by using their superior bargaining position.




1% of volume of commerce arising from sales to/purchases from affected counterparties (up to 3 years)


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Unfair trade practices – TRADING ON EXCLUSIVE TERMS



No Yes



Justifiable grounds

see paragraph 4.2

Unfair trade practices –TRADING ON RESTRICTIVE TERMS

A transaction will be an illegal trading on restrictive terms if an entrepreneur conducts a transaction with another party on terms that unjustly restrict any trade between the said party and its other transacting party or other business activities of the said party, other than on exclusive terms or resale price restriction.



No Yes



Justifiable grounds

see paragraph 4.2

Unfair trade practices –RESALE PRICE MAINTENANCE

The illegal act of one party making another party who purchases goods from the first party maintain its resale price, or otherwise restricting its free decision to set its own resale price, and maintaining further resale prices.



No Yes

Payment order for surcharge



Certain copyrighted works


Justifiable grounds

see Part 7

Anti-competitive arrangements

Unfair Trade Practices – CONCERTED REFUSAL TO TRADE

The act of refusing or restricting trade in concert with competitors, or causing other entrepreneurs to refuse or restrict their trade.




Generally 3% of volume of commerce arising from sales to unaffected competitors of the refused

Justifiable grounds see paragraph5.2

Misuse of market power

Unfair trade practices – ABUSE OF SUPERIOR BARGAINING POSITION

An entrepreneur must not impose terms and conditions disadvantageous to other entrepreneurs by using their superior bargaining position.




1% of volume of commerce arising from sales to/purchases from affected counterparties (up to 3 years)


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PRIVATE MONOPOLISATION

Any entrepreneur, individually, by combination or conspiracy with other entrepreneurs, or otherwise by any other manner, excludes or controls the business activities of other entrepreneurs, thereby causing, contrary to the public interest, a substantial restraint of competition in any particular field of trade.

The first half of Article 3 (prohibition)

Article 2, paragraph 5 (definition)

Yes (theoretically)

CorporationsMaximum criminal fine of YEN 500 million per violation.

IndividualsMaximum imprisonment with work of 5 years and/or maximum criminal fine of YEN 5 million per violation.

Yes

Payment order for surcharge (where certain additional requirements are met)

Exclusionary type – Generally 6% of volume of affected commerce (up to 3 years)Control type – Generally 10% of volume of affected commerce (up to 3 years)



Justifiable grounds

see paragraph 6.3

Mergers/acquisitions

DOMESTIC AND INTERNATIONAL (conditional)The Antimonopoly Act forbids business combinations the effect of which may be substantially to restrain competition in any particular field of trade, or which is conducted through unfair trade practices.

Article 10, paragraph 1; Article 13, paragraph 1; Article 14; Article 15, paragraph 1; Article 15-2, paragraph 1; Article 15-3, paragraph 1; and Article 16, paragraph 1

No Yes


Pressure on importNew entriesCompetitive pressure from downstream/neighbouring marketsEfficiency (unlikely successful)Failing firm

see Part 8

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PRIVATE MONOPOLISATION

Any entrepreneur, individually, by combination or conspiracy with other entrepreneurs, or otherwise by any other manner, excludes or controls the business activities of other entrepreneurs, thereby causing, contrary to the public interest, a substantial restraint of competition in any particular field of trade.

The first half of Article 3 (prohibition)

Article 2, paragraph 5 (definition)

Yes (theoretically)

CorporationsMaximum criminal fine of YEN 500 million per violation.

IndividualsMaximum imprisonment with work of 5 years and/or maximum criminal fine of YEN 5 million per violation.

Yes

Payment order for surcharge (where certain additional requirements are met)

Exclusionary type – Generally 6% of volume of affected commerce (up to 3 years)Control type – Generally 10% of volume of affected commerce (up to 3 years)



Justifiable grounds

see paragraph 6.3

Mergers/acquisitions

DOMESTIC AND INTERNATIONAL (conditional)The Antimonopoly Act forbids business combinations the effect of which may be substantially to restrain competition in any particular field of trade, or which is conducted through unfair trade practices.

Article 10, paragraph 1; Article 13, paragraph 1; Article 14; Article 15, paragraph 1; Article 15-2, paragraph 1; Article 15-3, paragraph 1; and Article 16, paragraph 1

No Yes


Pressure on importNew entriesCompetitive pressure from downstream/neighbouring marketsEfficiency (unlikely successful)Failing firm

see Part 8

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between 5% and 10% for about a year) is implemented by the monopolist to maximize its profit (‘SSNIP Test’). When considering substitutability for suppliers, the JFTC considers the degree to which other suppliers can switch, within a relatively short period of time (generally, one year), without substan-tial cost or risk, from the manufacture and sale of a product or region to those of the product, if a small but significant and non-transitory increase in price is implemented for the product and region.

The JFTC regards the substitutability for users as a starting point of ‘Market Definition’ for business combinations, and as necessary, considers the substitutability for suppliers (however, the JFTC gives greater weight to the substitutability for suppliers compared with foreign countries).

Alternatively, in non-merger cases, the JFTC gives weight to the contents and scope of violations. For example, in a case involving rigging of public bids, the JFTC defines a segmentalized and specific market such as ‘product “x” for the purpose of procurement by city “y”’.

The court, similar to the JFTC, has held that as to ‘Market Definition’ for unreasonable restraint of trade, ‘it is suitable to define a market with defining extent, etc., that competitions are restricted in accordance with objectives, areas and situations, etc.’ (Sticker Bid-Rigging Case, Tokyo High Court judg-ment, 14 December 1993).

2.3 ‘Competitors’/ in ‘competition’

The Antimonopoly Act defines ‘competition’ as ‘a state in which two or more entrepreneurs, within the normal scope of their business activities and without making any material change to the facilities for, or kinds of, such business activ-ities, engage in, or are able to engage in, any act listed in the following items’.

Article 2, paragraph 4 of the Antimonopoly Act specifies that ‘listed in the following items’ means ‘supplying the same or similar goods or services to the same user’ and ‘receiving supplies of the same or similar goods or services from the same supplier’.

In summary, ‘competition’ is interpreted:

(a) to mean that seller and buyer competition exists; (a) to include existing and potential competition; and (a) to include competition between distributors of the same brand.

2.4 ‘Substantial restraint of competition’ and ‘tendency to impede fair competition’

Under the Antimonopoly Act, in order for there to be an unreasonable restraint of trade or private monopolization, substantial restraint of competition is

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required. In judicial precedents of unreasonable restraint of trade, substantial restraint of competition has been interpreted as the function of the relevant market is restrained, (the Tama Bid-Rigging (Arai-gumi) SurchargeCase) or due to a decrease of competition itself, it has emerged, or it is emerging that the specific entrepreneur or entrepreneur group may, to a certain extent, freely control the market by influencing conditions including price, quality or quan-tity (Toho Subaru Case, Tokyo High Court judgment, 19 September 1951). For further details of substantial restraint, see paragraph 3.3 below.

‘Tendency to impede fair competition’ (impediment to fair competition), which can be found where the extent of restriction of competition does not amount to ‘substantial restraint of trade’, is one of the requirements for a finding of unfair trade practices (Article 2, paragraph 9, item 6 of the Antimo-nopoly Act etc.). For details, see paragraph 4.2 below.

PART 3: CARTELS (AGREEMENTS BETWEEN COMPETITORS)

3.1 Overview

Under the Antimonopoly Act, cartels (including bid rigging) and other prac-tices to avoid competition between competitors are prohibited as ‘unreason-able restraints of trade’.

3.2 Prohibitions

The second half of Article 3 of the Antimonopoly Act prohibits the unreasona-ble restraint of trade. This provision prohibits entrepreneurs from substantially restricting competition by coordination among competing entrepreneurs, such as cartel conduct or bid-rigging.

Unreasonable restraint of trade is defined in Article 2, paragraph 6 of the Antimonopoly Act as business activities by which:

(i) ‘any entrepreneur’ (subject); (ii) ‘by contract, agreement or any other means, irrespective of its name

(means)’; (iii) ‘in concert with other entrepreneurs’ (concerted activity with other

entrepreneurs); (iv) ‘mutually restrict or conduct their business activities in such a manner

as to fix, maintain, or increase prices, or to limit production, tech-nology, products, facilities, or counterparties’ (mutual restriction of business activities, etc.);

(v) ‘contrary to the public interest’ (anti-public interest);

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(vi) causing ‘a substantial restraint of competition in any particular field of trade’ (substantial restraint of competition).

3.3 Elements of the prohibition

Agreement between two or more competitors

The term (iii) ’in concert with other entrepreneurs’ requires the involvement of more than one entrepreneur. Unilateral action cannot constitute an unrea-sonable restraint of trade (rather, unilateral action may amount to private mo-nopolization or unfair trade practices). Although the text of the Antimonopoly Act does not expressly exclude the possibility that unreasonable restraint of trade may be committed in vertical relationships, there is judicial precedent which has held that it cannot (Newspaper Sales Channel Restriction Case, Tokyo High Court judgment, 9 March 1953).

An entrepreneur will not be considered as having concerted with other en-trepreneurs if that entrepreneur simply conducts itself in the same way as other entrepreneurs (e.g., simultaneously increasing prices). Rather, there must be some sort of communication of intention between entrepreneurs (Plywood Bid-Rigging Case, JFTC hearing decision, 30 August 1949 and the Tama Bid-Rig-ging (Arai-gumi) Surcharge Case, Supreme Court judgment, 20 February 2012).

However, an express agreement between entrepreneurs is not necessary to prove a ‘communication of intention’, and an implied agreement shall suffice (Toshiba Chemical Case, Tokyo High Court judgment, 25 September 1995.). In many cases, there is no direct evidence of a communication of intention, and the JFTC may prove ‘communication of intention’ by cumulative circum-stantial evidence (Kyowa Exeo Surcharge Case, Tokyo High Court judgment, 29 March 1996). The Toshiba Chemical Case indicates that if entrepreneurs conduct themselves in the same way as other competitive entrepreneurs after exchanging information on an increase in price between them, the existence of a ‘communication of intention’ shall be inferred unless exceptional circum-stances indicate that an act was performed based on independent judgment.

Mutual restriction of business activities

Item (iv) requires mutual restriction of business activities and the like. The concerted activity must have some binding force. A sanction against a breach of the agreement is not necessary to constitute ‘mutual restriction’, and a conclusion of some type of agreement shall suffice (the Tama Bid-Rigging (Arai-gumi) Surcharge Case etc.). In addition to the ‘restriction of business activities’, item (iv) also lists ‘conduct of business activities’ as prohibited ac-tivities. However, the distinction between the two is not important in practice.

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Contrary to the public interest

The term (v) ‘contrary to the public interest’ is also one of the requirements for unreasonable restraint of trade. However, there is no judicial precedent in which the action in question has not constituted an unreasonable restraint of trade on the basis that it was not contrary to the public interest, suggesting that this term does not have any practical meaning when considering unreasonable restraint of trade.

Substantial restraint of competition

Item (vi) ‘a substantial restraint of competition in any particular field of trade’ refers to circumstances in which: – the function of the relevant market is restrained (the Tama Bid-Rigging

(Arai-gumi) Surcharge Case); or – due to a decrease of competition itself, it has emerged, or it is emerging

that the specific entrepreneur or entrepreneur group may, to a certain extent, freely control the market by influencing conditions including price, quality or quantity (Toho Subaru Case).

In practice, this requirement considers price cartels and bid-rigging separately. With respect to price cartels, whether the parties’ total share of the market exceeds 50% is important when determining the impact on the market, though it is not the only criteria for consideration.

For example, in the Takamatsu Tofu Price Cartel Case (JFTC recom-mendation decision, 29 November 1968) seven entrepreneurs, including an entrepreneur who held a share of approximately 30%, (the total share of those seven entrepreneurs was approximately 50%) committed a price cartel. The JFTC determined that competition was substantially restricted because the combined market share of the relevant entrepreneurs was ‘approximately 50%’ in the market and it was difficult for other entrepreneurs (outsiders) to increase output.

With respect to bid-rigging, though there is not yet settled precedent on the treatment of a ‘cooperator’ or ‘outsider’, courts have determined whether competition is substantially restricted by considering many factors, including whether:

– cooperation from other entrepreneurs is generally expected (the Tama Bid-Rigging (Arai-gumi) Surcharge Case);

– price competitiveness of other entrepreneurs is inferior to that of a certain entrepreneur because of their small business size (the Tama

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Bid-rigging (Nishimatsu Construction) Surcharge Case, Tokyo High Court j udgment, 29 May 2009); or

– a certain entrepreneur could have controlled other entrepreneurs by requesting their cooperation (Stoker Type Incinerator Bid-Rigging Case, Tokyo High Court judgment, 26 September 2008).

With respect to the problems of joint development research, see paragraphs 3.9 and 4.9.

3.4 Remedies and sanctions

The method of sanction against unreasonable restraint of trade varies widely as follows.

Administrative disposition

The primary and most common methods of sanction against unreasonable re-straints of trade are a cease and desist order, and payment order for surcharge (kachokin). Both are administrative dispositions.

a) Cease and desist orderA cease and desist order means ‘the measures necessary to eliminate the viola-tion or to ensure that the violation is eliminated’. Such orders may be made by the JFTC pursuant to Article 49, paragraph 1 of the Antimonopoly Act.

Though the specifics of a cease and desist order vary, the typical contents include:

(a) to confirm that the violation has ceased; (b) to notify consumers that it will perform business based on their own

voluntary judgment, after taking corrective measures; (c) to prohibit repeated violations; and (d) to report to the JFTC after taking corrective measures.

The JFTC has in the past also included more tailored requirements in a cease and desist order, for example:

– that a code of conduct for compliance with the Antimonopoly Act be prepared, that regular training of sales staff regarding compliance with the Antimonopoly Act be conducted, that an audit be regularly con-ducted by the legal department (Okayama City Junior High Schools, School Excursion Price Cartel Case, JFTC cease and desist order, 10 July 2009), and

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– that certain employees be transferred to a different position and should not be returned to sales work for at least 5 years (Bridge Bid-Rigging Case, JFTC recommendation decision, 18 November 2005).

Criminal penalties are available for violations of final and binding cease and desist orders. The penalties are imprisonment with work for not more than two years, a fine of not more than three million yen, or both for individuals, and a fine of not more than three hundred million yen for corporations. Violation of a cease and desist order before it becomes final and binding is subject to an administrative fine.

If a cease and desist order against an entrepreneur becomes final and binding, an infringement is presumed (with the possibility of rebuttal by the recipient of the order) in the private action for compensation for damage filed for the relevant violation of the Antimonopoly Act (Oil Price Fixing Case, Su-preme Court judgment, 4 April 1978 and Tsuruoka Oil Case, Supreme Court judgment, 8 December 1989).

Amendments to the Antimonopoly Act in 2009 provide that the JFTC may issue a cease and desist order to the entrepreneur who committed the violation and to the entrepreneur who obtains the business related to the violation, and also extended the period for the statute of limitation for cease and desist orders from three years to five years.

b) Payment order for surchargeIf an unreasonable restraint of trade occurs and it pertains to consideration of goods or services or substantially restrains supply or purchase volume, mar-ket share or transaction counterparties with respect to goods or services and thereby affects the consideration, the JFTC must order a payment of surcharge.

In practice, as the unreasonable restraints of trade the JFTC normally pursues pertain to consideration, a payment order for surcharge comes with a finding of unreasonable restraint of trade.

The amount of the surcharge is calculated by multiplying the amount of sales of the object products or services during the period in which the un-reasonable restraint of trade was implemented (the maximum period is three years) by the surcharge calculation rate of the type of relevant business as described in Table 1 (Calculation Rate of Surcharge) below.

In bid rigging cases, the object products or services whose amount of sales will become the basis for calculation of the surcharge are those products or services, among all the products and services subject to the basic or under-lying agreement, which caused actual restrictions on competition by coordina-tion of acceptance of orders etc. based on the underlying agreement (Stoker Type Incinerator Bid-Rigging (JFE Engineering) Surcharge Case, Tokyo High Court judgment, 28 October 2011 (this case is different from the above

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Stoker Type Incinerator Bid-Rigging Case, Tokyo High Court judgment, 26 September 2008) and the Tama Bid-Rigging (Arai-gumi) Surcharge Case). However, in price cartel cases, all of the object products or services subject to the basic or underlying agreement will become the basis for the calculation of the surcharge, unless there are extraordinary circumstances showing that they are excluded from the object products or services by express or implied agreements between the relevant entrepreneurs (Polypropylene (Idemitsu) Surcharge Case, Tokyo High Court judgment, 26 November 2010).

If the entrepreneur has been subject to a payment order for surcharge due to unreasonable restraint of trade or private monopolization within the past 10 years, the calculation rate of surcharge is weighted by 1.5. In addition, the calculation rate of the surcharge imposed against entrepreneurs who play a major role in an unreasonable restraint of trade is weighted by 1.5 (only as to amount of sales on or after the effective date of amendments in 2009). If an entrepreneur satisfies both weighted requirements (i.e., by committing repeated violations and playing a major role), the calculation rate of surcharge is weighted by 2.

The calculation rate of surcharge is reduced by 20% if:

(a) an entrepreneur ceases violation one month prior to the ‘Investigation Start Date’ (which in most cases means the date of on-site inspection (or ‘dawn raid’) conducted by the JFTC);

(b) the entrepreneur does not fall under the event that requires weighting of the surcharge; and

(c) the implementation term of violation is less than two years. Such weight or mitigation of the calculation rate of surcharge is determined in accordance with the rate described in Table 2 (Conditions of Re-duced Calculation Rate of Surcharge). If certain requirements are satisfied, an entrepreneur who has not committed any violation, but who obtains a business related to a violation by merger, corporate split or business transfer, can still be the addressee of a payment order for surcharge.

Table 1: Calculation Rate of Surcharge

General Mitigated WeightedIf several weighted requirements are satisfied

General 10% (4%) 8% (3.2%) 15% (6%) 20% (8%)

Retailers 3% (1.2%) 2.4% (1%) 4.5% (1.8%) 6% (2.4%)

Wholesalers 2% (1%) 1.6% (0.8%) 3% (1.5%) 4% (2%)

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Table 2: Conditions of Reduced Calculation Rate of Surcharge

Type of Business Conditions

Manufacturing business, Construction business, Transportation business or any other business (excluding those mentioned below)

Any corporation whose amount of capital or total amount of contribution is not more than three hundred million yen or any corporation or individual whose number of regular employees is not more than three hundred.

Wholesale business Any corporation whose amount of capital or total amount of contribution is not more than one hundred million yen or any corporation or individual whose number of regular employees is not more than one hundred.

Service business Any corporation whose amount of capital or total amount of contribution is not more than fifty million yen or any corporation or individual whose number of regular employees is not more than one hundred.

Retail business Any corporation whose amount of capital or total amount of contribution is not more than fifty million yen or any corporation or individual whose number of regular employees is not more than fifty.

Other business Standard set forth by the cabinet order.

If a corporation satisfies the following conditions of the relevant type of busi-ness, the figures in the brackets in Table 1 above will apply.

The statute of limitation for payment order for surcharge is five years. The highest amount of a total surcharge in a single case (including those pend-ing) is approximately 27 billion yen and the highest amount of a surcharge imposed on a single company in a case is approximately 13.1 billion yen (as of 1 November 2014).

Criminal sanctions

An unreasonable restraint of trade may be subject to criminal punishment: an individual who commits an unreasonable restraint of trade shall be punished by imprisonment with work for not more than five years, by a fine of not more than five million yen, or both. Any corporation whose employee or officer commits an unreasonable restraint of trade shall be punished by a fine of not more than five hundred million yen.

If several violations are identified, the crimes are consolidated and weighted, and the maximum period of imprisonment with work will be extended to not more than seven years and six months, and the maximum amount of the fine to be imposed on the individual and the corporation will be increased to the upper limit set by the laws and regulations multiplied by the number of violations.

In practice, for individuals, all punishment by imprisonment with work has been imposed with a suspension sentence and actual imprisonment with work has never been executed. If a court sentences imprisonment for over

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three years, a suspension sentence is not available. The amendment in 2009 increased the upper limit of imprisonment period from three years to five years, indicating that ‘even if certain violations do not constitute a consoli-dated punishment, it is possible that actual imprisonment with work may be imposed’.

Any criminal violation of the Antimonopoly Act may only be found if the JFTC files an accusation (Article 96, paragraph 1 of the Antimonopoly Act). In practice, the JFTC determines whether to file the accusation after consult-ing with the Public Prosecutors’ Office at the Accusation Council.

There are 17 cases in total (as of 1 November 2014) in which the JFTC has filed criminal accusations of unreasonable restraint of trade in the Antimo-nopoly Act since the Illegal Oil Cartel Case (including the Nagoya Municipal Metro Engineering Work Bid-Rigging Case, Japan Green Resources Agency Bid-Rigging Case, Zincic Coated Steel Plate Cartel Case). As the employees of an entrepreneur may be arrested if the JFTC files an accusation, criminal punishment serves as an important deterrence.

Civil suits

a) Claim for damageEntrepreneurs and consumers who have incurred damage may file a claim for civil damages against entrepreneurs who committed the unreasonable restraint of trade, and may claim for damages based on joint tort theory (Articles 709 and 719 of the Civil Code and Article 25 of the Antimonopoly Act) or claim for unjust enrichment (Article 703 of the Civil Code).

To claim damages based on joint tort theory, the plaintiff is required to establish:

(a) an infringement of rights; (b) damage; (c) causation; and (d) intention or negligence.

To establish damage, the consumer who has incurred damage due to the un-reasonable restraint of trade is required to establish the difference between the product price increased due to the unreasonable restraint of trade and the price to be set without the unreasonable restraint of trade (assumed price or ‘but for’ price). A Supreme Court precedent concerning price fixing held that the retail price immediately before the implementation of the price fixing may be regarded as the assumed price, provided that there is no significant change to economic factors during the period from implementation of the price fixing up to the purchase of the products by the consumers. It also indicated that

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consumers shall bear the burden of proving that ‘there is no significant change to economic factors and so forth’ (Tsuruoka Oil Case, Supreme Court judg-ment, 8 December 1989, etc.). The plaintiff consumer lost that case because the court decided that the condition for the presumption was not satisfied on the ground that there had been significant changes to economic factors after implementation of the price fixing. The plaintiff of this case was an indirect victim and therefore proof of damage was difficult. If a plaintiff is a direct victim, proof of damage is easier to establish. Increasingly, the Court deter-mines the amount of damages by reference to Article 248 of the Code of Civil Procedure, which came into force in 1998. Article 248 empowers the court to determine a reasonable amount of damages if it is proved that damage has occurred but it is difficult to establish due to the nature of damage.

b) Liquidated damagesIn light of the difficulty in proving damage, if a local public agency or in-dependent administrative institution is involved in a bidding procedure, the agreement often provides that the bidder shall pay a certain amount of money if any bid-rigging or other misconduct is found with respect to the relevant agreement (liquidated damages). This special provision is common in local prefectural governments, ordinance-designated cities, and cities with popula-tions of three hundred thousand or more. Though the amount of the liquidated damages varies on a case by case basis, it is common to set the amount to 10% of the contract amount.

To strengthen the penalty against violating entrepreneurs, there has been a proposal to take strict measures, including increasing the amount to 20% or more of the amount of the contract (e.g., ‘Policy on Prefectural Public Pro-curement Reform (Immediate Report)’ as of 18 December 2006 prepared by the Project Team regarding the Public Procurement of the National Governors’ Association).

c) Derivative actionIf a director of a company allows an unreasonable restraint of trade, or over-looks it because he/she did not pay reasonable attention, the shareholders may file a derivative action against the director for damages incurred by the com-pany. That derivative action can be brought for violation of the Antimonopoly Act was confirmed by the Stock-Loss Compensation Case by Nomura Securi-ties, Supreme Court judgment (7 July 2000). Wilful misconduct or negligence of the director must be proved to establish the director’s responsibility.

An example of a recent significant case which triggered a shareholders’ derivative suit associated with an unreasonable restraint of trade is the deriva-tive action against Sumitomo Electric Industries, Ltd. (‘SEI’). In this case, SEI had received JFTC payment orders for surcharges totalling approximately 8.9

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billion yen for two cartel cases involving optical fibre cables and automotive wiring harnesses. SEI paid the amounts charged and certain SEI shareholders filed a derivative action against SEI’s management for failing to seek leniency, claiming that the management should pay damages in the same amount to SEI. The case was settled on 7 May 2014 on terms including:

(a) payment by the management to SEI of 520 million yen as a settlement amount; and

(b) investigation into the cause of, and development of measures to pre-vent a recurrence of the contraventions by an external investigative committee, as per the shareholders’ demand.

This is considered to be the highest settlement amount for a derivative action in Japan. This case is particularly significant as it suggests that shareholders may pursue management for its decision as to whether to apply for leniency, and also raises the issue as to the need for companies to build a framework for appropriate use of leniency programs where necessary or desirable.

Others: nomination suspension

The ‘Central Public Works Contract System Operational Liaison Council Model for the Outline of Nomination Suspension Measures for Construction Contracts’ (the ‘Nomination Suspension Model’) stipulates that measures to suspend participation in nomination / bidding procedures should be taken against any person who commits a violation of the Antimonopoly Act involv-ing bids for certain public works (‘Nomination Suspension Measures’).

Though the Nomination Suspension Model is not law, it is of great practi-cal influence and many public work outsourcers have established a similar outline of nomination suspension measures. The maximum nomination sus-pension period under the Nomination Suspension Model is three years.

Under the Nomination Suspension Model, an entrepreneur will be subject to the nomination suspension measures upon the receipt of a cease and desist order, and even if the entrepreneur contends against the cease and desist order, the nomination suspension measures will not be suspended. If leniency is ap-plied for and the application of leniency is published by the JFTC (after the JFTC confirming the applicant’s intention to make the application publicly known), the term of the Nomination Suspension Measures is mitigated by half.

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3.5 Leniency/immunity programs

The Leniency System

The Leniency System was introduced by amendments to the Antimonopoly Act in 2005, together with the reform of the surcharge system, to increase the deterrent effect of the surcharge system. Prior to the amendment, the surcharge was calculated based on the amount of sale of products and services that were the subject of the unreasonable restraint of trade, and as such did not have sufficient weight to deter violations for entrepreneurs who provided many products or services. Additionally, entrepreneurs did not previously have any incentive to report violations to the JFTC.

Under the Antimonopoly Act, the JFTC could issue a payment order for surcharge separately from fines as criminal punishment. This was criticized as ‘Double Punishment’ and the nature of the surcharge has therefore been discussed. Previously, the surcharge was explained to be an ‘administrative measure’ aimed at removing unreasonable economic benefits and ensuring social justice and deterring violations, and as such differed from criminal pun-ishment. However, after the amendment in 2005, the nature of the surcharge became closer to a ‘sanction’ because it was weighted for repeat offences and mitigated for voluntary surrenders. Therefore, the amendment aimed to bal-ance the criticism of ‘Double Punishment’ by deducting half of the amount of a criminal fine (imposed by a final and binding decision) from the amount of any surcharge.

The number of leniency applications had increased steadily since the introduction of Leniency System until Fiscal Year 2011 (from 1 April 2011 to 31 March 2012). Since then, the number has been on the decline. The number of leniency applications in Fiscal Years 2011 through 2013 are 143 (record high), 102 and 50, respectively. There have been 725 applications since the introduction of Leniency System (for approximately seven years and three months). There have been 98 published cases where the Leniency System has been used, and those cases identify 235 instances of individual entrepreneurs using the system.

Operation of the Leniency System

If an entrepreneur satisfies certain conditions, the surcharge will be exempted as follows:

(a) for the first applicant who submits reports and materials before the Investigation Start Date, the surcharge will be totally exempted;

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(b) for the second applicant who submits reports and materials before the Investigation Start Date, 50% of the surcharge will be reduced;

(c) for the third applicant who submits reports and materials before the Investigation Start Date, 30% of the surcharge will be reduced;

(d) for the fourth or fifth applicant who submits reports and materials which the JFTC is unaware of before the Investigation Start Date, 30% of the surcharge will be reduced; and

(e) for the applicant who submits a report or submits materials after the Investigation Start Date, 30% of the surcharge will be reduced.

If five entrepreneurs have already made an application before the Investigation Start Date, other companies who make an application before or after the Investigation Start Date will not receive a reduc-tion of the surcharge. If no entrepreneur makes an application before the Investigation Start Date, each of the first three entrepreneurs who claim the violation after the Investigation Start Date can obtain a 30% reduction of the surcharge.

If an entrepreneur satisfies certain requirements, several entrepreneurs within the same business group may jointly apply for exemption or reduction from the surcharge and will be allotted the same rankings.

Under the Leniency System, only the surcharge can be exempted or reduced. Cease and desist orders and responsibilities in civil actions are not exempted. Recently, however, the JFTC valued the fact that the surcharge was exempted due to leniency applied for before the Investigation Start Date and did not issue a cease and desist order for a number of cases. Further, consider-ing that the incentive to apply for leniency is reduced if criminal punishment is still applied even if the surcharge is exempted, the JFTC has adopted a policy not to file criminal accusations against the first entrepreneur who sub-mits reports and materials regarding the exemption of surcharge before the Investigation Start Date (‘The Fair Trade Commission’s Policy on Criminal Accusation and Compulsory Investigation of Criminal Cases Regarding An-timonopoly Violations’). Officers and employees of the relevant entrepreneur will be similarly exempt from accusation if, under the circumstances, they should be treated the same as the relevant entrepreneur (i.e., if they cooperate with the internal investigation of the applicant and the JFTC’s investigation).

Practical points to consider

Under the Leniency System, whether the surcharge is reduced or exempted, or whether the criminal accusation is also exempted or reduced will largely depend on whether the entrepreneurs voluntarily surrender and are the first to submit reports and materials before the Investigation Start Date.

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If entrepreneurs consider themselves to be committing violations, it is highly advisable to promptly decide and act to secure the position as the first one to submit reports and materials, because the timing of applying for leniency by sending a report by facsimile is extremely important under the Japanese Leniency System. If Company A sends a report by facsimile (which may be called ‘marker’) to the JFTC after learning only ‘suspicious events’ and Company B sends a report by facsimile three business days later after carefully confirming facts, Company A will beat Company B in terms of the queue for leniency (provided that Company A submits detailed reports and materials as a follow-up).

3.6 Extraterritorial application

Please see paragraph 1.3.

3.7 Application to state/government entities

Please see paragraph 1.2 above.

3.8 Treatment of related bodies corporate

Though traditional theories suggest there can be no unreasonable restraint of trade between affiliated companies connected via ‘control’ relationship (which are normally found where there one company holds a majority of vot-ing rights in another), the JFTC has in the past issued a cease and desist order and a payment order for surcharge to entrepreneurs for bid rigging among four wholly-owned subsidiaries of a certain company (Eco-station Rigging Case (Kanto Koshinetsu Region), cease and desist order, 11 May 2007). However, the circumstances of that case involved:

(a) a government-subsidized project (for construction of eco-stations) for which public funds were to be used, therefore requiring an appropriate bidding process; and

(b) the JFTC’s traditional belief that due process of bidding must be observed.

Thus, while the JFTC may adopt a similar judgment in future bid rigging cases, it is less likely that the JFTC would rule as illegal any price agreement between affiliated companies other than bid rigging.

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3.9 Treatment of joint ventures

Whether an entrepreneur is a joint venture is not determined under the Anti-monopoly Act. Rather, unreasonable restraint of trade may occur, according to the ‘Guidelines Concerning Joint Research and Development under the An-timonopoly Act’ (most recently revised on 1 January 2010; ‘Joint Research and Development Guidelines’) in the following circumstances:

(a) ‘if by undertaking R&D jointly, its activities are restricted among the participants, and which, in turn, may substantially restrict competition in the technology or product market’; or

(b) ‘in implementing a joint R&D project by “competing” firms in the product market, if business activities are mutually restricted in terms of price and volume, etc. of a product’. As such, joint R&D may amount to an unreasonable restraint of trade, and the Antimonopoly Act will apply.

Though the JFTC has not issued a cease and desist order in regard to joint sales practices and the like, there are cases involving consultation with the JFTC. The JFTC has ordinarily handled cases in accordance with the ‘rule of reason’. For example, if there is a joint creation of a product between an entrepreneur with a large market share in a region and another entrepreneur with a large market share in another region, there is no issue if there is an emergency need for the creation, such as need for mutual accommodation of products in a time of disaster. However, in the absence of such emergency need, the JFTC may rule that such practice constitutes an unreasonable restraint of trade.

If an unincorporated partnership created under the Civil Code engages in bid rigging, each partner or member of the partnership would likely be subject to a cease and desist order and a payment order for surcharge (Kanto Land-scaping and Constructing Cooperative Case, hearing decision, 8 September 2003).

3.10 Other exceptions

Exercise of rights under intellectual property laws

Article 21 of the Antimonopoly Act provides that the provisions of the Anti-monopoly Act do not apply to acts recognisable as the exercise of rights under Japanese intellectual property law – specifically, the Copyright Act, Patent Act, Utility Model Act, Design Act or Trademark Act.

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Acts by a partnership

Article 22 of the Antimonopoly Act provides that the provisions of the An-timonopoly Act do not apply to acts by a partnership which conforms to the requirements listed in each of the following items and which has been formed pursuant to the provisions of the Act:

(a) The purpose of the partnership is to provide mutual support to small-scale entrepreneurs or consumers;

(b) The partnership is voluntarily formed, and the partners may voluntar-ily participate in and withdraw from it;

(c) Each partner possesses equal voting rights; and (d) If a distribution of profits among partners is contemplated, the limits

of the distributions are prescribed by laws and regulations or in the articles of partnership.

3.11 Sector/ industry-specific regulation/ exceptions

Japanese law includes provisions that exempt the application of the Antimo-nopoly Act, similar to other countries’ laws (Article 110 of the Civil Aeronaut-ics Act and Article 28 of the Marine Transportation Act).

Article 110, item 2 of the Civil Aeronautics Act stipulates that, with regard to a route between a point in the country (Japan) and another point in a foreign country, ‘in the case where any domestic air carrier concludes an agreement on joint carriage, fare agreement and other agreements relating to transporta-tion with another air carrier’, the provisions of the Antimonopoly Act shall not apply, provided that the domestic air carrier obtains an authorization from the Minister of Land, Infrastructure, Transport and Tourism (‘MLIT’).

Similarly, Article 28, item 4 of the Marine Transportation Act stipulates that ‘in the case where any shipping business operator concludes an agreement on terms and conditions of shipping, routes, placement of vessels, and loading with another shipping business operator’ the provisions of the Antimonopoly Act shall not apply, provided that prior notification be filed with the MLIT.

3.12 Enforcement action

An example of a recent significant case involving an unreasonable restraint of trade is the Tama Bid-rigging (Arai-gumi) Surcharge Case (Supreme Court judgment, 20 February 2012). This case is most significant as the Court offered an exhaustive interpretation of the requirements for bid rigging to constitute an unreasonable restraint of trade as set out in Article 2, paragraph 6 of the Antimonopoly Act.

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3.13 Key recent developments and proposals for reform

The JFTC primarily sanctions cases of ‘unreasonable restraint of trade’, and in particular, has recently been sanctioning an increasing number of price cartels (rather than bid rigging, which has generally been more prevalent in the past) (see Figure 1).

Since the Leniency System was introduced in 2006, there has been a decrease in the number of entrepreneurs contending cease and desist orders. However, the number of entrepreneurs challenging payment orders for sur-charges has not decreased significantly.

Recent amendments (yet to take effect) to the Antimonopoly Act will abolish the hearing procedures under the Antimonopoly Act, and cease and desist orders, etc. will be reviewed in appeal litigation by the Tokyo District Court. The amendments will also strengthen due process for entrepreneurs by implementing hearings by officers appointed by the JFTC, and establishing entrepreneurs’ right to inspect and copy evidence prior to the cease and desist orders, etc. The amendments will come into effect within one and a half years from the date of promulgation (i.e., no later than 13 June 2015).

PART 4: RESTRAINTS IN VERTICAL AGREEMENTS

4.1 Overview

The Antimonopoly Act prohibits entrepreneurs from engaging in unfair trade practices (Article 19 of the Antimonopoly Act). There are 16 types of ‘unfair trade practices’, of which several may occur in vertical relationships.

There are five types of actions that are subject to surcharge as ‘unfair trade practices’ (as set out in Article 2, paragraph 9, items 1 through 5 of the Antimonopoly Act) and 11 types of actions which are never subject to surcharge (as set out in item 6 of the same paragraph and the JFTC Public Notice No. 15 of 1982, the ‘General Designations’). There are other unfair trade practices that may be committed only in a specific industry.

4.2 Prohibitions

The following are the types of unfair trade practices listed in Article 2, para-graph 9 and the General Designations, and prohibited under Article 19 of the Antimonopoly Act:

(1) Concerted refusal to trade; (2) Other refusal to trade;

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(3) Discriminatory consideration; (4) Discriminatory treatment on trade terms; (5) Discriminatory treatment in a trade association; (6) Unjust low price sales; (7) Unjust high price purchasing; (8) Deceptive customer inducement; (9) Customer inducement by unjust benefits; (10) Tie-in sales; (11) Trading on exclusive terms; (12) Resale price restriction; (13) Trading on restrictive terms; (14) Abuse of superior bargaining position; (15) Interference with a competitor’s transactions; and (16) Interference with the internal operation of a competing company.

The prohibition on unfair trade practices largely regulates the legality of verti-cal restraints; however, the prohibition is not restricted to vertical relation-ships. This chapter focuses on action (13), which is a type of unfair trade practice potentially applicable to any vertical relationship.

Actions (1), (6), and (12) are common in foreign competition laws. Action (14) (abuse of superior bargaining position) is a peculiar type of regulation in Japanese law and is dealt with at paragraph 6.2. Concerted refusal to trade (action 2) is dealt with in Part 5, and the prohibition on resale price restriction (action (12)) is dealt with in Part 7.

Actions (1), (3), (6), (12), and (14) will be subject to surcharge if they satisfy certain additional requirements.

Prohibition: trading on restrictive terms

If an entrepreneur conducts a transaction with another party on terms that un-justly restrict any trade between the said party and its other transacting party or other business activities of the said party, other than on exclusive terms or resale price restriction, the transaction will be an illegal trading on restrictive terms.

One of the typical types of trading on restrictive terms is a ‘territorial restriction’. The Guidelines Concerning Distribution Systems and Business Practices (most recently revised June 23, 2011; ‘Distribution Guidelines’) classify territorial restrictions as:

(1) area of responsibility system (compelling active sales in the area of primary responsibility);

(2) location system (restricting or designating the place of sales);

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(3) exclusive territory (restricting the distributor from selling outside each assigned area); and,

(4) restriction of sales to outside customers (restricting sales to a customer located outside an area from within an assigned area even if there is a request from such customer).

Although territory restriction types (1) and (2) are not, in principle, recognized as illegal, types (3) (if conducted by an ‘influential entrepreneur’, which has a market share of 10% or more or is within the top three) and (4) may be illegal if there is a possibility of causing price maintenance of a product. The JFTC is widely criticized for its strict view of type (3). However, in the Sankogan Honten Case (Tokyo District Court judgment, 15 April 2004), it was held that to prove that the exclusive territory restriction has an anticompetitive nature, it must be proven that:

(a) the entrepreneur is an influential entrepreneur in the market; (b) the restriction unjustly restricts business activities; and (c) it has the effect of maintaining price (which differs from the JFTC’s

Distribution Guidelines, which require the ‘possibility of causing’ price maintenance).

4.3 Elements of the prohibitions

Terms such as ‘unjustly’ or ‘without justifiable grounds’ are used in the provi-sions for each of the types of action of unfair trade practices under Article 2, paragraph 9 of the Antimonopoly Act and the General Designations. These terms are interpreted to describe the tendency to impede fair competition. Tendency to impede fair competition involves:

(a) a reduction in competition; (b) competition by unjust means; and (c) infringement of the basis of free competition.

Each of the above types of actions has one or two elements of (a) through (c).With regard to the tendency to impede fair competition of each of the

types of action, Article 2, paragraph 9 of the Antimonopoly Act and the General Designations refer to ‘unjustly’ and ‘without justifiable grounds’. ‘Without justifiable grounds’ is used for certain types of actions which will be considered as illegal unfair trade practices, unless there are justifiable grounds. However, recently there has been strong criticism against heavily relying on the use of one of these terms.

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The JFTC often pursues entrepreneurs for unfair trade practices if it is difficult to determine if the case was one of private monopolization, which requires ‘substantial restraint of competition’.


The following types of unfair trade practice actions are subject to a payment order for surcharge and the same method of enforcement as for unreasonable restraint of trade if certain additional requirements are met:

(a) concerted refusal to trade (action (1)); (b) discriminatory consideration (action (3)); (c) unjust low price sales (action (6)); (d) resale price restriction (action (12)); and (e) abuse of superior bargaining position (action (14)).

However, there is no criminal punishment available for breaches of the prohi-bitions on unfair trade practices.

There is also a system to seek injunctive relief from the civil court so that a victim can avoid damage to be incurred in the future. However, since ‘material damages’ need to be proved, there has been only one case in which injunctive relief has actually been granted.


The Leniency System is not available for a breach of the prohibition on unfair trade practices.


Please see paragraph 1.3 above.


As mentioned in paragraph 1.2 above, a State or a local government consti-tutes an ‘entrepreneur’ and is subject to the Antimonopoly Act if it is engaged in business activities.

Notable cases in which the entrepreneurial nature of the State or a local government was recognized with unfair trade practices include:

– the New Year’s Lottery Postcards Case (Supreme Court judgment, 18 December 1998), which recognized the entrepreneurial nature of the

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State (the former Ministry of Posts and Telecommunications) for the issuance and sale of postcards, and

– the Tokyo Metropolitan Shibaura Slaughterhouse Case (Supreme Court judgment, December 14, 1989) which affirmed the entrepre-neurial nature of the Tokyo Metropolitan Government in its engage-ment in the slaughtering business.

In both of these cases, the Supreme Court acknowledged the entrepreneurial nature of the State or the local government without providing any detailed reasons.


The JFTC’s position on unfair trade between related bodies corporate is set out in the Distribution Guidelines. According to the Distribution Guidelines, ‘a trade between a parent company and its wholly-owned subsidiary is, in gen-eral, substantively equivalent to intra-company trade and thus is not regulated as unfair trade practices’.

However, the Distribution Guidelines also state that ‘when a trade be-tween a parent company and its subsidiary is substantively equivalent to intra-company trade and the parent company restricts the business activities of third parties that is a business partner of the subsidiary, for example, the subsidiary restricts the selling price of its business partner based on the instructions of the parent company, such action of the parent company would be regulated as an unfair trade practice’.


In so far as the parties to a joint venture continue to conduct their own business activities even after the commencement of operations of the joint venture, it is possible that unfair trade practices will be found.

For example, the Joint Research and Development Guidelines drafted by the JFTC state that ‘if an arrangement unjustly restricts the business activities of a participant under an arrangement, and may thereby impede fair competi-tion, the arrangement will constitute unfair trade practices’ and list a number of typical joint venture conducts that are unlikely to, may, or are likely to, con-stitute unfair trade practices. The Joint Research and Development Guidelines go further to state that restrictions on the sales prices to a third party of the products based on the fruits of joint research and development would likely be regarded as trading on restrictive terms.

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There are no other general exceptions for the unfair trade practices provisions, except for those mentioned in paragraph 3.10 above.

4.11 Sector/industry-specific regulation/exceptions

There are 3 industry-specific unfair trade practices (as set out in the JFTC Public Notice No. 9 of 1999, the ‘Special Designations in the Newspaper Business’, the JFTC Public Notice No. 1 of 2004, the ‘Special Designations in the Logistics Business’ and the JFTC Public Notice No. 11 of 2005, the ‘Special Designations in the Large-Scale Retail Business’).

For example, the Special Designations in the Newspaper Business prohibits newspaper publishers from selling newspapers by setting different prices or discounting the set price differently depending on the area or target person. The Special Designations in the Logistics Business and the Special Designations in the Large-Scale Retail Business prohibit certain consignors and large-scale retailers from abusing superior bargaining position against logistics service providers and suppliers (respectively).


The Supreme Court has considered whether restricting sales methods amounted to trading on restrictive terms in two cases: the Shiseido Tokyo Sales Case (Supreme Court judgment, 18 December 1998) and the Kao Cos-metics Sales Case (Supreme Court judgment, 18 December 1998) considered whether restricting sales methods amounted to trading on restrictive terms. The issue in these cases was whether manufacturers requiring face-to-face selling of cosmetics to sales stores amounted to trading on restrictive terms. The Supreme Court held that the restriction on the sales method would not be considered ‘unjust’ as:

(i) ‘there are some reasonable grounds’ for the restriction of its sales method; and

(ii) manufacturers are imposing the ‘same restrictions against other busi-ness partners.’

Additionally, acts that prohibit prices from being shown on the advertisement upon selling of the products would be considered as trading on restrictive terms and a cease and desist order could be issued (Johnson & Johnson Case, JFTC cease and desist order, 1 December 2010).

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PART 5: OTHER ANTI-COMPETITIVE AGREEMENTS

5.1 Overview

There is no general prohibition on anti-competitive agreements.Under the Antimonopoly Act, horizontal concerted actions may consti-

tute unreasonable restraints of trade described in Part 3 and vertical concerted actions or restrictions may constitute, unfair trade practices described in Part 4, or private monopolization described in Part 6.

In this Part, we outline the prohibition on unfair trade practices which relates to concerted refusal to trade.

5.2 Prohibition: concerted refusal to trade

The Antimonopoly Act prohibits entrepreneurs from employing unfair trade practices (Article 2, paragraph 9, item 1, item 6 of the same paragraph, para-graph 1 of the General Designations, and Article 19 of the Antimonopoly Act). The act of refusing or restricting trade in concert with competitors, or causing other entrepreneurs to refuse or restrict their trade, is one type of unfair trade practices.

This conduct will amount to illegal concerted refusal to trade except where there are ‘justifiable grounds’ (see paragraph 4.3). For example, estab-lishing standards regarding product safety between entrepreneurs and reach-ing an agreement not to purchase any products failing to fulfil those standards will not be regarded as ‘illegal’, provided that the standards and practices of the product safety are reasonable. If a concerted refusal to trade occurs in transactions related to supply (Article 2, paragraph 9, item 1, Antimonopoly Act), and certain requirements are satisfied, entrepreneurs who commit this violation more than once shall be subject to surcharge.


Concerted refusal to trade is punishable by surcharge. Please see paragraph 4.4 for further detail.





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As mentioned in paragraph 1.2 above, a State or a local government consti-tutes an ‘entrepreneur’ and is subject to the Antimonopoly Act if it is engaged in business activities.


Please see the discussion at paragraph 4.8 above.


Please see the discussion at paragraph 4.9 above.


There are no other general exceptions in relation to concerted refusal to trade except for those mentioned in paragraph 3.10 above. Also, it is unlikely that the exception under Article 21 will completely alleviate concern regarding concerted refusal to trade (see paragraph 6.5).


One case involving a concerted refusal to trade is the Rockman Construction Method Case (JFTC recommendation decision, 31 October 2000). This case concerned the rockman machines necessary for the advanced method of con-structing sewers called the ‘rockman method’. The constructors (members of the Rockman Association) and machine manufacturer made it impossible for nonmembers to conduct construction using the rockman method by refusing to lend or resell the machines to nonmembers, and refusing to sell or lend the machines to nonmembers. The act of the constructors amounted to a concerted refusal to trade, and, as it was not a joint action with competitors, the act of the machine manufacturers amounted to ‘other refusal to trade’).

PART 6: ABUSE OF DOMINANCE/MARKET POWER

6.1 Overview

Under the Antimonopoly Act, there is no concept of abuse of dominance or misuse of market power which is substantially similar to that in other jurisdic-tions. Instead, an abuse of superior bargaining position generally amounts to

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unfair trade practices, and market control (including by way of exclusionary act) amounts to private monopolization.

Part 4 provided a general outline of the unfair trade practices regime. This Part provides further detail about the specific unfair trade practice of abuse of superior bargaining position, and sets out the prohibition on private monopo-lization. It also identifies industry-specific regulation designed to protect the interests of firms in inferior bargaining positions.

6.2 Prohibition: unfair trade practices – abuse of superior bar-gaining position

Abuse of superior bargaining position is a peculiar type of regulation in Japa-nese law. To the best of our knowledge, only South Korea and Taiwan have similar regulations.

Entrepreneurs that impose terms and conditions disadvantageous to other entrepreneurs by using their superior bargaining position will be engaging in illegal abuse of superior bargaining position.

Superior bargaining position

The JFTC issued ‘Guidelines Concerning Abuse of Superior Bargaining Po-sition under the Antimonopoly Act’ on 30 November 2010. The Guidelines clarify the scope of the prohibition and provide examples of conduct which is likely to breach it. The JFTC has also published a number of other Guidelines concerning abuse of superior bargaining position in relation to particular types of entities or in particular industries.

The Guidelines indicate that whether one party is in a superior bargaining position in relation to the other party is a question of fact which will be deter-mined on a case-by-case basis. Determining whether Party A is in a superior bargaining position is a relative question which takes into account the parties’ comparative positions, rather than their size or dominance. The Guidelines indicate that the JFTC will consider:

– the degree of dependence by Party B on transactions with Party A; – the position of Party A in the market; – the possibility of Party B changing its business counterpart; and – other concrete facts indicating the need for Party B to carry out trans-

actions with Party A.

In relationships between a bank and a borrower, a franchiser and a franchisee, and a major retailer and a supplier, the former entrepreneur may have superior bargaining positions over the latter entrepreneur.

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Acts which may breach the prohibition

Article 2, paragraph 9, item 5 of the Act specifies types of acts which, when engaged in unjustly in light of normal business practices, will constitute il-legal abuse of superior bargaining position:

– causing the party to purchase goods or services other than the one pertaining to the transactions in question;

– causing the party in regular transactions to provide money, services or other economic benefits;

– refusing to receive goods or causing the party to take back the goods; – delaying payment or reducing the amount of the payment; or – otherwise establishing or changing trade terms or executing trans-

actions in a way disadvantageous to the party.

The Guidelines indicate that whether the conduct is unjust in light of normal business practices is also a question of fact to be determined case by case from the viewpoint of maintaining and promoting fair competition. An act is not justified merely because it is in line with current business practices.

An entrepreneur that continues to abuse its superior bargaining position over a period of time shall be subject to a surcharge, even if the entrepreneur has not received a cease and desist order for the same action in the past. As of 1 November 2014, there are 5 pending cases where the recipient of a payment order for surcharge is challenging the order.

In the Mitsukoshi Case (JFTC consent decision, 17 June 1982), Mitsu-koshi held a very strong position in the relevant market (it had the largest market share in the department stores industry and the second largest share in the retail industry). It conducted coercive sales to suppliers by forcing them to purchase products and/or services, among other things.

In the Seven-Eleven Japan Case (JFTC cease and desist order, 22 June 2009), the acts of the franchiser against franchisees amounted to an abuse of superior bargaining position. Seven-Eleven Japan, a franchiser of convenience stores, was operating a system in which the franchisees were responsible for the cost of the products even if the products were disposed of (typically, boxed lunch after the sell-by dates). Under this system, Seven-Eleven Japan forced its franchisees who sold boxed lunches or other products with close expiry dates at reduced prices to stop discounted sales, resulting in the franchisees losing the opportunity to minimize the burden arising from the cost allocation method mentioned above.

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6.3 Prohibition: private monopolisation

The first half of Article 3 prohibits entrepreneurs from effecting private mo-nopolisation. Private monopolization is defined in Article 2, paragraph 5 as business activities by which:

(i) ‘any entrepreneur’; (ii) ‘individually, by combination or conspiracy with other entrepreneurs,

or otherwise by any other manner’; (iii) ‘excludes or controls the business activities of other entrepreneurs,

thereby causing’; (iv) ‘contrary to the public interest’; (v) ‘a substantial restraint of competition in any particular field of trade.’

The regulation applies to foreign companies, as shown in the MDS Nordion Case.

Unilateral action may suffice

Communications of intention with other entrepreneurs are not necessarily required for ‘private monopolization’, and unilateral action taken by an en-trepreneur may be subject to the prohibition of private monopolization. As the regulations of private monopolization differ from those of unreasonable restraint of trade, it is possible that a case which was initially considered to be an unreasonable restraint of trade may be recognized as private monopoliza-tion if communication of intention cannot be proved.

Excluding or controlling the business activities of other entrepreneurs

There are two types of private monopolization regarding the requirements of actions as referred to in item (iii): exclusionary type and control type. The exclusionary type ‘excludes’ the business activities of other entrepreneurs and the control type ‘controls’ the business activities of other entrepreneurs.

As exclusion of other entrepreneurs’ business activities may occur naturally by fair business activities, the simple fact that some entrepreneurs are being excluded is insufficient to be considered as ‘exclusionary’. Rather, the activity must have some element of blame which distinguishes it from justifiable business activities. The ‘Guidelines for Exclusionary Private Mo-nopolization under the Antimonopoly Act’ set the standards for determining whether a case is exclusionary. The MDS Nordion Case is an example of the exclusionary type. MDS Nordion dominated the majority of the worldwide manufacturing quantity of Molybdenum 99 and also had a large part of the

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sales quantity. Under the agreement with two entrepreneurs who purchased Molybdenum 99 in Japan, MDS Nordion imposed obligations on those entre-preneurs to exclusively purchase the total amount of Molybdenum 99 from MDS Nordion to the exclusion of the business activities of its competitors.

An example of the control type is the Noda Shoyu Case (Tokyo High Court judgment, 25 December 1957), in which Noda Shoyu conducted resale price maintenance. Since Noda Shoyu held the largest market share among the four major soy sauce companies, other competing companies had no op-tions other than to maintain the price established by Noda Shoyu to maintain the ‘prestige’ of their brand and the act was considered as a ‘control’ type of private monopolization.


The JFTC may impose a surcharge on an entrepreneur which illegally abuses its superior bargaining position. For more information about surcharges, please see paragraph 6.2.

The JFTC often pursues entrepreneurs for unfair trade practices if it is difficult to determine if the case was one of private monopolization, which requires ‘substantial restraint of competition’.

The following are brief comparisons between the enforcement methods used for private monopolization and unreasonable restraint of trade.

First, as an administrative measure, cease and desist orders and payment orders for surcharge are possible for both of private monopolization and un-reasonable restraint of trade. However, the Leniency System is not applicable to private monopolization.

Secondly, criminal sanctions are available to both, i.e., an individual person shall be punished by imprisonment with work for not more than five years or a fine of not more than five million yen, or a combination thereof and a company shall be punished by a fine of not more than five hundred million yen. However, there is no private monopolization case in which these penal-ties were actually applied.

Thirdly, for both private monopolization and unreasonable restraint of trade, there is possibility of a civil action including:

(1) a claim by an entrepreneur or consumers for damages incurred by them; and

(2) derivative actions (see paragraph 3.4).

From a practical viewpoint, it is important to note that:

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(i) there has been no payment order for surcharge as to private monopo-lization since surcharges have been available for exclusionary type (in 2010) and for control type (in 2006); and

(ii) there has been no criminal case as to private monopolization in the history of the Antimonopoly Act.

6.5 Collective dominance

Private monopolization may be committed ‘by combination or conspiracy with other entrepreneurs’. In one case, which may be characterized as the Japanese equivalent of a ‘collective dominance’ case, 10 manufacturers of pachinko pinball game machines established a patent pool and had that entity refuse to grant licenses to outsiders. It was found that this act resulted in sub-stantial restraint of competition and amounted to exclusionary type of private monopolization (Pachinko Patent Pool Case, JFTC recommendation decision, 6 August 1997).

6.6 Price discrimination

Discriminatory consideration and discriminatory treatment on trade terms are both expressly prohibited as types of unfair trade practices under Article 2, paragraph 9, item 2 of the Antimonopoly Act and paragraphs 4 and 5 of the General Designations. It is not necessary that a party be in a dominant position to demonstrate a breach of those prohibitions.

6.7 Private monopolization and access to natural monopoly infrastructure/facilities

There is no specific regime in the Antimonopoly Act providing for third-party access to natural monopoly infrastructure or facilities. However, refusal to provide services may amount to private monopolization.

In the NTT East Japan Case (Supreme Court judgment, 17 December 2010), the entrepreneur was legally obliged to allow other telecommunica-tions carriers to use its optical fibre facilities for users established by the entrepreneur. However, the entrepreneur effectively set the fees for users of its own retail service cheaper than the lowest available fees which other telecommunications carriers could set for their retail services, which reflected the wholesale fees the entrepreneur charged to those telecommunications carriers.. The court held that the action amounted to the exclusionary type of private monopolization as the entrepreneur used its position as the only provider in the optic fibre facilities market to set higher wholesale prices for competitors, who had no option but to accept given the need for access. The

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action therefore had the effect of complicating competitors’ entry to the mar-ket. This case may be seen as the Japanese version of a ‘squeeze out’ case.

6.8 Unfair trade practices and intellectual property rights

Non-assertion of patents clauses (or ‘NAP clauses’) are one of the most typical issues of unfair trade practices involving intellectual property. The Intellectual Property Guidelines provide that a NAP clause has a tendency to impede fair competition if it would result in an enhancement of the relevant party’s influential position in the product or technology market, or undermine the incentives for the licensees to conduct research and development, thereby impeding the development of new technologies (Microsoft Case, JFTC hear-ing decision, 16 September 2008; Qualcomm Case, JFTC cease and desist order, 28 September 2009 (under hearing)).

6.9 Other relevant legislation

A key additional regulation relevant to this area is the Subcontract Act. The Subcontract Act has two key purposes:

– to prevent delays in payment of subcontract proceeds, and thus to ensure that transactions between main subcontracting entrepreneurs and subcontractors are fair; and

– to protect the interests of the subcontractors, thereby contributing to the sound development of the national economy.

Although the Act has not yet been enforced against companies located over-seas, foreign companies must still be aware of the regulations particularly if they have a subsidiary in Japan.

The Subcontract Act specifies that, with respect to manufacturing con-tracts, repairing contracts, information-based product creation contracts and service contracts, if the main subcontracting entrepreneur’s scale of business exceeds a certain size, and the subcontractor is less than a certain size (e.g., when a main subcontracting entrepreneur with capital exceeding JPY 300 mil-lion concludes a manufacturing contract with a subcontractor with a capital of not more than JPY 300 million), a document must be delivered to the subcontractor stating the details of work, the amount of the subcontract pro-ceeds, the date of payment, the method of payment, and other items (Article 3, paragraph 1 of the Subcontract Act). The Act also specifies the matters that should be complied with by main subcontracting entrepreneurs (Article 4 of the Subcontract Act) and sets a penalty interest rate for a delay of payment

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by main subcontracting entrepreneurs at 14.6% per year (Article 4-2 of the Subcontract Act).

Recommendations are the primary method of enforcing the Subcontract Act (Article 7 of the Subcontract Act). These are documents which urge vio-lators to take remedial action concerning the violation. If there is a breach of the document delivery obligation under Article 3 of the Subcontract Act, the representatives of the main subcontracting entrepreneur would be subject to a criminal fine of up to JPY 500,000 and the same would be charged for the main subcontracting entrepreneur itself. The risk for breach is not high however, as there has not been a case to date in which a penalty has been imposed. However, a breach of the Subcontract Act carries a relatively high reputational risk as it is possible that the names of entrepreneurs who have received a recommendation and the summary of violations will be published.

6.10 Industry-specific or other exceptions

There are no other general or industry-specific exceptions for a breach of the prohibitions on abuse of superior bargaining position or private monopoliza-tion, except for those mentioned in paragraph 3.10 above.


In the JASRAC Case (Tokyo High Court judgment, 1 November 2013, pend-ing at the Supreme Court), an entrepreneur was entrusted with the management of music copyrights from owners of copyrights. The entrepreneur allowed broadcasters to use the music, collected royalties from the broadcasters and distributed them to the owners of copyrights. The entrepreneur calculated the royalties without reflecting the ratio of music managed by the entrepreneur to the number of all of the music the broadcaster used.

The only meaningful competitor of the entrepreneur argued that ‘if the broadcasters use music managed by other management companies, the total amount of payment of royalties by broadcasters would be increased because the broadcasters should pay royalties to both the entrepreneur and other man-agement companies, so the broadcasters will not use the music managed by other management companies and it is difficult for management companies to do business concerning management of music for broadcasters’, and claimed for rescinding the JFTC’s decision that held that the business of the entrepre-neur did not amount to exclusionary type of private monopolization.

The court held that the competitor had standing to commence litigation rescinding the JFTC’s decision and that the entrepreneur’s business had an exclusionary effect. The court rescinded the JFTC’s decision.

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PART 7: OTHER PROHIBITIONS ON UNILATERAL CONDUCT

7.1 Overview

This Part explains the prohibition on resale price restriction, which is a form of ‘unfair trade practices’ under Article 2, paragraph 9, item 4 and Article 19 of the Antimonopoly Act.

7.2 Prohibition: unfair trade practices – resale price restriction

Resale price restriction is the illegal act of one party making another party who purchases goods from the first party maintain its resale price, or other-wise restricting its free decision to set its own resale price, and maintaining further resale prices.

Though a simple recommendation of a resale price is not illegal, the JFTC determines whether entrepreneurs are simply recommending resale prices or rather are engaging in illegal resale price restriction strictly.


Entrepreneurs who repetitively restrict resale prices (and who satisfy certain additional requirements) shall be subject to surcharge.

For general commentary regarding remedies for breaching the prohibi-tion on unfair trade practices, please see paragraph 4.4.






As mentioned in Paragraph 1.2 above, a State or a local government consti-tutes an ‘entrepreneur’ and is subject to the Antimonopoly Act if it is engaged in business activities.



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There are no other general exceptions to the prohibition on resale price restriction.


There is an exemption system for resale price restrictions for certain types of copyrighted works under the Antimonopoly Act. While resale price restric-tions constitute an unfair trade practice, the Antimonopoly Act shall not ap-ply to legitimate acts performed to fix and maintain the resale prices of six items: books, magazines, newspapers, music records, music tapes and music compact disks (II-2 of Chapter 12 (Resale Price Maintenance Contracts) of JFTC Annual Report for FY1992). There is no exemption for DVDs and other products not within six categories. The exemptions do not apply if the acts would unreasonably harm the interests of general consumers, or if the seller maintains the resale price of any copyrighted work against the will of the publisher.


In the Baby Formula Resale Price Case (Supreme Court judgment, 10 July 1975), the relevant entrepreneur argued that the act of maintaining the resale price promoted inter-brand competition and therefore had a ‘justifiable rea-son’. The Supreme Court rejected the claim by stating that ‘though such act may lead to strengthen the competition between the actor and competitors, since such act will not necessarily bring the same economic effects as when free price competition has been conducted between the distributors of such products, existence of anti-competitiveness cannot be denied’.

PART 8: MERGERS

8.1 Overview

The Antimonopoly Act provides two types of regulations for business com-binations (stockholdings, interlocking directors, amalgamations, splits, joint share transfer and acquisitions of business, etc.):

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(a) substantial regulation which forbids a business combination if it is determined as having the effect of substantially restraining competi-tion in any particular field of trade or conducted through unfair trade practices; and

(b) formalistic regulation which requires a prior notification for business combinations of a certain size.

8.2 Application to offshore acquisitions

Mergers outside Japan will be subject to the Antimonopoly Act where they have an impact on competition in a relevant market in Japan. Mergers between foreign companies are also subject to the same notification thresholds as Japanese companies, even where they do not have any subsidiaries in Japan. Please see paragraph 8.4 for an explanation of the thresholds.

8.3 Competition assessment

Chapter IV of the Antimonopoly Act forbids business combinations the ef-fect of which may be substantially to restrain competition in any particular field of trade, or which is conducted through unfair trade practices (Article 10, paragraph 1 (stockholdings), Article 13, paragraph 1 (interlocking directors), Article 14 (stockholdings by individuals), Article 15, paragraph 1 (amalgama-tions), Article 15-2, paragraph 1 (splits), Article 15-3, paragraph 1 (joint share transfers) and Article 16, paragraph 1 (acquisitions of business, etc.) of the Antimonopoly Act).

These provisions focus on how business combinations substantially affect competition, and determine the effect of business combinations on the markets, regardless of whether they meet the threshold for prior notification mentioned in 8.4 below, or whether the notification has actually been submitted.

The JFTC issued ‘Business Combination Guidelines’ on 31 May 2004. The Guidelines set out the standard for judging whether the effect of a business combination may be substantially to restrain competition, explain the JFTC’s ideas for the regulation of business combinations, and clarify the standard for regulating business combinations by setting a safe harbour rule to provide predictability for entrepreneurs.

The Business Combination Guidelines divide business combinations into three types: horizontal business combination, vertical business combination and conglomerate business combination.

Horizontal business combinations are the most likely business combina-tion to become an issue in practice. In reviewing a horizontal business combi-nation, the Business Combination Guidelines consider:

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(i) the position of the company groups involved and the competitive situation;

(ii) the pressure on import; (iii) barriers to entry; (iv) competitive pressure from neighbouring markets; (v) competitive pressure from users; (vi) overall business capability; (vii) efficiency; and (viii) the financial conditions of the company groups.

If the parties’ corporate groups involved meet any of the following, the hori-zontal business combination is generally not considered to be a restraint on competition in a particular field of trade. The factors above do not need to be considered if:

(1) the Herfindahl-Hirschman Index (‘HHI’) after the business combina-tion is not more than 1,500;

(2) the HHI after the business combination is more than 1,500 but not more than 2,500 while the increment of HHI is not more than 250; or

(3) the HHI after the business combination is more than 2,500 while the increment of HHI is not more than 150.

The HHI referred to above is the sum of the square value of the market share for each entrepreneur in the particular field of trade.

The Business Combination Guidelines also provide a quasi safe harbor if the HHI is not more than 2,500 and the market share of the parties’ corporate group after the business combination is not more than 35%, considering the past experiences of the JFTC.

8.4 Filing requirements and thresholds

The Antimonopoly Act also requires prior notification for business combina-tions meeting a particular threshold. Acquisitions of shares, amalgamations, splits, joint share transfers and acquisitions of business, etc. are subject to this requirement.

If a business combination is subject to prior notification, it is prohibited to close the transactions subject to the notification for a period of 30 days after submitting the notification. The JFTC may, however, shorten this period if deemed necessary where it is satisfied that the effect of the transaction may not be to substantially lessen competition, and there is a rational reason for shortening the period.

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The threshold for prior notification can be briefly described as follows, by taking acquisition of shares as an example: prior notification would be required if:

– the ‘total domestic sales’ of the acquiring company side exceeds JPY 20 billion;

– the total amount of domestic sales of the acquired company and all of its subsidiaries exceeds JPY 5 billion; and

– the ratio of voting rights of the acquiring company in the acquired company after acquisition newly exceeds 20% or 50%.

‘Total domestic sales’ means the amount combining the domestic sales of the companies belonging to the same business combination group as the company acquiring the shares within the most recent fiscal year. ‘Business combination group’ means the group consisting of the ‘ultimate parent company’ (among the company’s parent companies, the company that is not a subsidiary of other companies) and the subsidiaries of the ultimate parent company.

There is no obligation to notify a business combination within the same business combination group.

Although there are detailed provisions for the thresholds applicable to amalgamations, splits, joint share transfers and acquisitions of business, etc., in many situations the standard of JPY 20 billion and JPY 5 billion with re-spect to the total domestic sales is used. Accordingly, if Company A acquires a certain business from Company B, and Company B contemplates another transaction, the domestic sales arising from the business acquired under the first transaction must be counted for the purpose of calculation of the domes-tic sales of Company B when analysing whether the second transaction is notifiable.

8.5 Remedies

Under Article 17-2 of the Antimonopoly Act, where an act in breach of the substantive regulations on business combinations has been committed, the JFTC may order the entrepreneur concerned to dispose of all or some of its shares, transfer a part of its business or take any other measures it considers necessary.

Article 18 enables the JFTC to bring a lawsuit to have amalgamations, splits and joint share transfers in breach of formalistic regulations declared invalid. Although the Antimonopoly Act does not impose any statutory limita-tion on the time within it must bring such an action, it is generally interpreted that Article 828 of the Companies Act (Act No. 86 of 2005) is applicable to

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a lawsuit and the statutory limitation for the lawsuit is 6 months from the effective date of the amalgamations, etc.

The Business Combination Guidelines indicate that entrepreneurs can offer remedies at any stage of the JFTC’s review, based on facts in individual cases. The JFTC prefers structural measures such as the transfer of business in order to restore competition lost as a result of the combination; however, it acknowledges that in some cases behavioural measures may be appropriate. Normally, the JFTC requires remedies to be implemented prior to the trans-action closing.

8.6 Appeals

See paragraph 9.3.

8.7 Use of expert economic evidence

The Business Combination Guidelines do not explain the value and role of expert economic evidence. Though it is widely recognized that the JFTC has staff that have a background in economics, and that use of this type of evidence is a common practice in ‘mega deals’, it is not clear to what extent the JFTC relies on this evidence as the JFTC’s announcement of any Phase II review (or mega deal that is worth public announcement of the review results) is not as detailed as those of other competition authorities.


Since 1953, there have been only three decisions claiming a business combi-nation as a breach of the Antimonopoly Act. The primary reason for such a small number of decisions is that many of the parties involved have reduced the risk of legal actions being taken by the JFTC by consulting with the JFTC in advance (‘prior consultation system’; see paragraph 8.9).

One case that involved a breach of amalgamation regulations (Article 15 of the Antimonopoly Act) is the Yahata Steel and Fuji Steel Case (the JFTC consent decision, 30 October 1969). Although the production volume of crude steel after the merger was 35.4% of the production in Japan, it was held that, if the business combination was conducted, ‘the competition would be sub-stantially restricted’ in some markets such as railway rails. As a result, various measures were ordered in the consent decision to resolve the issues.

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8.9 Key recent developments and proposals for reform

Prior consultation system

From July 1, 2011, the JFTC abolished the prior consultation system, and will now review business combination plans requiring a notification under the Antimonopoly Act only in the course of the formal procedure after the notifi-cation. However, according to the JFTC’s ‘Policies Concerning Procedures of Review of Business Combination’ dated 14 June 2011, a company planning to file a notification may consult with the JFTC on how to make entries on the notification form.

PART 9: ENFORCEMENT

9.1 Regulator’s enforcement powers and tools

If the JFTC has doubts as to whether the actions of an entrepreneur violate the Antimonopoly Act, the JFTC may carry out administrative investigations (Article 47 of the Antimonopoly Act) and criminal investigations (Article 101 of the Antimonopoly Act). As criminal investigations are rarely conducted, only administrative investigations will be detailed in this Part.

The Antimonopoly Act specifies that administrative investigations may include:

(a) orders to appear, be interrogated and report; (b) orders to appraise; (c) orders to submit documents and keep them; and (d) on-site inspections.

Administrative actions have legal force (as indirect compulsory execution) and a person who disturbs, or does not obey, investigations may be subject to criminal penalties.

Requests to appear

The JFTC may request persons concerned to voluntarily appear to the JFTC office for questioning. As a request to appear is not an indirect compulsory execution, the requested person has the discretion as to whether to attend. However, most persons that are requested for questioning comply with the request. Attorneys are not permitted to attend the voluntary questioning.

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On-site inspections

On-site inspection is a particularly important method of administrative in-vestigations. Inspections are conducted by investigators designated by the JFTC, who may visit business offices and other sites. The investigators may investigate business circumstances and properties, and the books and records of entrepreneurs. The investigations are carried out without prior notice or warrants, and as ‘privilege’ does not exist under Japanese law, it is not pos-sible to refuse to submit documents, and it is difficult to delay the inspection until an attorney arrives.

The media will often report the facts after an on-site inspection has been conducted, representing a significant potential for reputational damage.


If a violation of the Antimonopoly Act is found, the following actions are available:

(a) cease and desist orders, and payment order for surcharge issued by the JFTC (administrative penalty);

(b) criminal penalties issued by the Court with accusations by the JFTC; (c) claims for damage by third parties that incurred damage from the vio-

lation (including derivative lawsuits), and injunctions by the Court; and

(d) nomination suspensions.

For more detail on the remedies available for each type of prohibition see paragraphs 3.4, 4.4, 5.3, 6.4, 7.3 and 8.5.

9.3 Relevant courts/tribunals

Any person dissatisfied with a cease and desist order or payment order for surcharge may request that the JFTC initiates a hearing regarding such order (administrative hearing) within 60 days of the service of the order.

If that person is dissatisfied with the decision of the hearing, the person may appeal to the Tokyo High Court within 30 days of the service of the hearing decision, and subsequently to the Supreme Court if necessary, for can-cellation of the order. Once amendments made in December 2013 come into effect, the hearing procedure will be abolished, and cease and desist orders and payment orders for surcharge will be reviewed in appeal litigation by the Tokyo District Court.

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9.4 Litigation – matters of procedure

Litigation under the Antimonopoly Act includes actions for:

(a) claims for damage by third parties that incurred damage from the violation; and

(b) injunctions by third parties (however injunctions are only available for unfair trade practices. See paragraph 4.4).

Though competition litigation proceeds in a way substantially similar to stand-ard civil litigation, there are procedures applicable only to litigation under the Antimonopoly Act.

Claims for damage

Third parties damaged by unreasonable restraint of trade, unfair trade prac-tices, or private monopolization have the right to claim for damage in tort. The period of the statute of limitation is 3 years from the time when the victim knows the damage and the tortfeasor, or 20 years from the time of the tort, whichever is earlier (Article 724 of the Civil Code).

A competent court is decided based upon the general rule under the Code of Civil Procedure. In accordance with the same general rule, the lawsuit is subject to the ‘three-level and three-instance’ system, starting with one of the District Courts, followed by one of the High Courts and the Supreme Court. See also paragraph 3.4.

Generally, claims by third parties for damages require intention or negli-gence by the entrepreneur. However, the Antimonopoly Act stipulates that ‘no entrepreneur … may be exempted from the liability … by proving the non-existence of intention or negligence on its part’. As such, the Antimonopoly Act imposes on entrepreneurs no-fault liability to protect third parties (Article 25, paragraph 2 of the Antimonopoly Act). However, third parties may only claim no-fault liability after cease and desist order (or, in a certain case, pay-ment order for surcharge) has become final and binding on the entrepreneur (Article 26, paragraph 1 of the Antimonopoly Act).

The right to make a no-fault claim for damage expires by prescription after three years from the date on which the cease and desist order or the payment order became final and binding on the entrepreneur (Article 26, paragraph 2 of the Antimonopoly Act). If the hearing procedure and appeal litigation take a significant amount of time, this statute of limitation may be advantageous to victims. A no-fault claim is currently heard by the Tokyo High Court under the special ‘two-level and two-instance’ system, but will be heard by the Tokyo District Court (Article 85-2 of the Antimonopoly Act)

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under the ‘three-level and three-instance’ system, after an amendment passed by the Diet on 7 December 2013 takes effect, which should be no later than June 2015.

Irrespective of whether or not a cease and desist order has become final and binding on the entrepreneur, third parties may claim for damages under Article 709 of the Civil Code. The right to claim under the Civil Code will ex-pire by prescription after three years from the time when the claimant comes to know of the damages and the identity of the perpetrator. The court with jurisdiction to hear a claim under the Civil Code is the same as under ordinary civil procedures.

Injunctions

Injunctions are only available for unfair trade practices. If an injunction is necessary ‘in order to avoid any substantial detriment or imminent danger’ a third party may seek an order of provisional disposition (Article 23, paragraph 2 of the Civil Provisional Remedies Act). Given the nature of relief sought, the statute of limitation is irrelevant. The competent court and the numbers of levels and instances are pursuant to the general rule under the Code of Civil Procedure. However, there are certain special provisions that add a few courts as competent court which may apply. See also paragraph 3.4.

However, since introduction of injunctions against unfair trade practices in 2001, an injunction has only been issued in one case. One of the reasons for this seems to be the requirement of ‘extreme damage’ to have been suffered or likely to be suffered. Where the likelihood of success is not high, one pos-sible option is to report an alleged violation to the JFTC hoping that the JFTC launches its own investigation.

Class actions

There is no specific provision under Japanese law for class actions. Under the Japanese Code of Civil Procedure, a number of persons who share com-mon interests may appoint a representative to make a claim on their behalf. However, any judgment will only apply to the representative and any persons who made the appointment. Though a legal action similar to a class action (only to seek injunctions, not compensation for damages) has been newly introduced to certain ‘consumer contracts’ as a result of recent legal reform, it is unlikely that it will be used effectively by victims of violations of the Antimonopoly Act.

Documents

Competition Law in Asia Pacific...ix Competition Law in Asia Pacific JAPAN Yusuke Nakano is a partner at Anderson Mori & Tomotsune, with broad expe- rience in the areas of antitrust,