Abuse of a superior bargaining position (ASBP) is a unique category of anti-competitive conduct under the Anti-monopoly Act. Globally, it is common for antitrust law to prohibit dominant players from abusing their position in the market. However, ASBP applies even if a player does not have a dominant position in the market, but abuses its superior bargaining position. Interestingly, some jurisdictions are starting to resort to ASBP (or the similar concept of infringement) as an additional enforcement tool, although the level of enforcement in this regard remains limited. The Japan Fair Trade Commission (JFTC) is increasingly stepping up its enforcement in this infringement category. Following in the footsteps of foreign jurisdictions such as the European Union, the JFTC is conducting several market surveys in e-commerce and has used ASBP as an enforcement tool for antitrust issues in this area. Further, it has recently extended its investigation reach to include foreign companies. Foreign companies which operate in Japan should thus remain aware of the JFTC's ASBP enforcement, a recent example of which is its investigation into Amazon's supplier contracts.
One reason why ASBP is becoming the JFTC's preferred enforcement tool is that it is politically attractive for reinforcing the JFTC's image of targeting large bullies in order to protect SMEs. In brief, ASBP exists where a party abuses its bargaining power by bullying its contracting party (eg, a vendor or contract manufacturing provider) and is prohibited under the Anti-monopoly Act as a form of unfair trade practice. ASBP occurs where the party that has a superior bargaining position compared with the other transacting party makes use of such position to impose a disadvantage on the transacting party which is unjust in light of normal business practices. Thus, the elements that constitute this practice are:
- a superior bargaining position;
- unjust behaviour in light of normal business practices; and
- acts that constitute the abuse of a superior bargaining position.
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Element |
Factors to take into account |
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Superior bargaining position |
Note: Party A need not have a market-dominant position, it need have only a relatively superior bargaining position in relation to Party B. Therefore, this element can exist in a relationship between two large enterprises. |
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Unjust in light of normal business practices |
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Acts that constitute abuse of superior bargaining position |
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The above elements are abstract and their application has been somewhat arbitrary in many cases. However, this is also what makes ASBP an attractive and effective enforcement tool for the JFTC: it is easier to enforce this rule than abuse of dominance or monopolisation because the JFTC need not prove the existence of solid dominance.
Ultimately, the key factors for compliance are moderation and sufficient negotiation with counterparties. It should be common sense that completely beating down a business partner is dangerous. Similarly, a business partner should be informed of all commercial facts in order to make sure that there are no surprises later on – the risks will be much higher if a party forces its weaker counterparty to accept unexpected negative conditions or requirements after the initial contractual package has already been agreed.
However, not all unfavourable commercial negotiations will constitute ASBP. In fact, the JFTC has previously rejected a complaint alleging ASBP, saying that it "does not want to intervene in companies' commercial negotiations".
JFTC enforcement against foreign companies
The JFTC has seemingly been reluctant in the past to investigate or penalise foreign companies, and its typical enforcement targets have mostly been Japanese companies. However, the JFTC has lately been much more willing to target big foreign companies. One potential reason for this sudden change may be the multiple recent cartel investigations by foreign authorities into Japanese auto components manufacturers, which resulted in significant penalties and the imprisonment of numerous Japanese nationals. This resulted in criticism over why the Japanese authorities, particularly the JFTC, are weak in investigating the misconduct of foreign players when foreign authorities are so aggressive in their approach towards Japanese companies.
Compared with hardcore allegations such as cartel or dominance, ASBP can be described as a regulator-friendly tool due to its somewhat ambiguous criteria. The expected introduction of the JFTC's new commitment system will also ease the pressure on the JFTC and lower the psychological pressure to initiate cases against companies, as they will not need to worry about defending themselves in the appeal's court in a commitment case. ASBP is certainly one of the areas that foreign companies must keep an eye on in the current regulatory landscape.
For further information on this topic please contact Kaori Yamada or Hideto Fujita at Freshfields Bruckhaus Deringer LLP by telephone (+81 3 3584 8500) or email ([email protected] or [email protected]). The Freshfields Bruckhaus Deringer LLP website can be accessed at www.freshfields.com.
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