© Springer-Verlag Berlin Heidelberg 2015Pierre Kobel, Pranvera Këllezi and Bruce Kilpatrick (eds.)Antitrust in the Groceries Sector & Liability Issues in Relation to Corporate Social ResponsibilityLIDC Contributions on Antitrust Law, Intellectual Property and Unfair Competition10.1007/978-3-662-45753-5_13
Aoki, Sekine & Tanaka, Tokyo, Japan
Kenta Sugimoto (Corresponding author)
13.1.1 Economic Background
The national market structure at the main vertical levels in Japan is agricultural production, agricultural cooperative, wholesale dealer and grocery retail.
13.1.2 Legal Background
188.8.131.52 Competition Law
The competition law in Japan is the Antimonopoly Act (the “AMA”), which is an act on the prohibition of private monopolization and maintenance of fair trade.1 It includes a ban on unfair competition, as well as the prohibition of anticompetitive practices. General rules are applied to the retail grocery market. There are some prohibitions as an example of the unfair trade practices.
The adopted provision mostly aimed at the retail market is the designation of specific unfair trade practices by large-scale retailers relating to trade with suppliers.2 This is not law. This designates the examples of unfair trade practices by large-scale retailers to suppliers, unjust return of goods, unjust price reduction, unjust consignment sales contract, forcing of suppliers to lower prices for bargain sales, refusal to receive specifically ordered goods, coercion to purchase, unjust assignment of work to employees of suppliers, unjust receipt of economic benefits, unfavorable treatment in response to refusal of requests and unfavorable treatment in response to notification to the Fair Trade Commission.
184.108.40.206 Other Laws and Regulations Applying to the Retail and Grocery Sector
One of the enacted specific laws (uniquely or primarily) aimed at controlling the structure of the grocery retail market or the behavior of large-scale grocery retailers outside of competition law is the Act on the measures by large-scale retail stores for preservation of living environment.3 The material content is that a large-scale retail store should report to the prefectural government and keep the rules about traffic, noise and waste. This is not based on principles of fairness, correcting asymmetry in bargaining power, necessity to prevent inflationary pressure of grocery retail prices or other principles. But this law aims at controlling the living environment around the large-scale retail store.
Small and medium-sized retail business promotion act4 also applies to the retail and grocery sector. The act requires franchise system business to explain to a person who is going to be a franchisee its membership fee or deposit in participation, sale conditions of goods to franchisees, matters regarding trademark or trade name to be used, matters regarding managerial instruction, term of franchise agreement or matters regarding renewal or termination of franchise agreement in order to improve properness of the management of franchise system and to modernize the management of small and medium-sized retail business.
The extent these acts limit the scope for competition in the retail grocery sector is rather small.
220.127.116.11 Exemptions from Competition Law Prohibitions
Some cooperative associations are partly exempted from competition law. The scope of these exemptions and their rationale are to protect small-scale entrepreneurs and promote fair and free competition.
For instance, agricultural cooperatives of small-scale farmers or cooperatives of retail suppliers of food product business that meet the requirements under the laws are exempted from AMA in collectively selling their products in order to counterbalance the buying power of large-scale distributors. However, this does not apply to cases where unfair trade practices are employed or where competition in any particular field of trade is substantially restrained, resulting in unjust increases of prices.
13.1.3 Market Studies
The competition authority in Japan, the Japan Fair Trade Commission (the “JFTC”), has done market studies of the retail grocery sector. The recent studies are as follows.
The Report on the Trade between Food Manufacturers and Wholesalers5 was reported to understand the actual situation on the trades between wholesalers and manufacturers.
The survey results revealed the existence of some conducts in the past that might lead to the abuse of superior bargaining position between food manufacturers and wholesalers and some acts that wholesalers unreasonably requested the manufacturers due to the retailers’ request to wholesalers, that is, the structure that the large retailers’ conducts could be the source of the abuses in questions.
The JFTC will request related trade associations of wholesalers and larger retailers to make their umbrella organizations thoroughly understand the contents of Guidelines Concerning Abuses of Superior Bargaining Position under the Antimonopoly Act6 and will take an active measure against the illegal abuses of superior bargaining position.
And the Fact Finding survey on the Trades between Large-Scale Retailers and Suppliers7 was reported to understand the actual situation of unfair trade practices between large-scale retailers and suppliers that were designated by the Designation of Specific Unfair Trade Practices by Large-Scale Retailers Relating to Trade with Suppliers.
The JFTC examined how many suppliers had experienced requests or conducts by large-scale retailers that could lead to the abuse of superior bargaining position (8.4 % for payment of monetary contribution, 5.9 % for return of goods and 3 % for price reduction).
The percentage of the suppliers that bear all the cost due to the requests or conducts by the retailers is more than 70 %.
The JFTC will make every effort to promote fair trade between large-scale retailers and suppliers and to prevent the abuse of superior bargaining position. Furthermore, the JFTC requested the trade associations of large-scale retailers to take a voluntary action for the fair trade between large-scale retailers and suppliers.
13.1.4 Pricing Regulations
Some grocery products are subject to price control in Japan. First, rice, barley and wheat are subject to price control under the Act for Stabilization of Supply, Demand and Prices of Staple Food,8 which aims to help in the stabilization of supply and demand or prices of main food and thereby to contribute to the stabilization of the people’s living or the national economy. Second, milk, butter and meat are subject to price control under the Act Concerning the Stabilization of Livestock Products,9 which aims to ensure the stable supply of domestic sugar canes and starch from domestic potato and thereby to contribute to the stabilization of improvement of the people’s eating habits. Third, sugar is subject to price control under the Sugar Price Adjustment Act,10 which aims to help in the stabilization of supply and demand and prices of main food and thereby to contribute to the stabilization of the people’s living.
13.2 Competition Law Enforcement
13.2.1 Case Law Related to the Conduct of Grocery Retailers
The following are the cases related to the conduct of grocery retailers in Japan in the last 6 years. All of them are cases on abuse of superior bargaining position described below.
Cease and Desist Order against Marukyo Corporation
On 23 May 2008, the JFTC issued a cease and desist order against Marukyo Corporation (“Marukyo”) operating grocery supermarkets (large-scale retailer), which conducted the following acts.
Unjust return of goods
Marukyo set its own “sell-by” dates and returned goods whose “sell-by” date had passed to a supplier of the food products or general merchandise with whom Marukyo had an ongoing business relationship and over whom Marukyo enjoys a superior bargaining position on the ground that the “sell-by” life of the goods had expired, even though no conditions for return had been agreed in advance with the supplier.
Unjust price reduction
Marukyo carried out discount sales on the ground that, variously, the goods concerned had a low turnover ratio; that a store was due to be closed; that the sales period for seasonal products had ended; or that the goods were damaged as a result of, for example, falling from a shelf, and Marukyo returned goods to a supplier on the grounds that the goods had a low turnover ratio, etc., even though no conditions for return had been agreed to in advance with the supplier or coerced a supplier of goods subject to discount into accepting a reduction in the delivery price of those goods by the amount arrived at by multiplying 0.5 by the price before the discount.
Unjust assignment of work to employees of suppliers
Marukyo coerced suppliers to dispatch their employees to Marukyo stores without having concluded prior agreements with such suppliers concerning the conditions for dispatching employees and without accepting liability for the costs normally incurred in dispatching employees.
Cease and Desist Order Against Eco’s
The JFTC issued on 23 June 2008 a cease and desist order against Eco’s Co., Ltd (“Eco’s”), operating grocery supermarkets (large-scale retailer), which conducted the following acts.
Unjust price reduction
Eco’s coerced the suppliers to discount the supply prices of the goods decided to be discounted at the closing of the applicable stores or those first displayed at the opening of the applicable stores, although there was no reason attributable to the suppliers.
Unjust assignment of work to employees of supplier
Eco’s coerced the suppliers to dispatch their employees for display, restock and other work at the applicable stores that do not require the skill or ability of such employees although Eco’s had not reached any agreement on dispatching conditions and did not bear the cost usually required to have temporary staff dispatched.