Competition Law in Japan
The Antimonopoly Act
Japanese competition law is centered on the Act on Prohibition of Private Monopolization and Maintenance of Fair Trade (Shiteki Dokusen no Kinshi oyobi Torihiki no Kakuho ni kansuru Horitsu), commonly referred to as the Antimonopoly Act (AMA) . Enacted in 1947 during the Allied Occupation, the AMA was modeled on the US Sherman Act, the Clayton Act, and the Federal Trade Commission Act, reflecting the occupation authorities’ goal of dismantling the pre-war zaibatsu conglomerates and introducing American-style competition principles.
The AMA has been amended extensively, most significantly in 1977 (introduction of surcharges), 2005 (expansion of the leniency program), 2009 (criminal penalty enhancements), and 2019 (revisions to the surcharge calculation methodology and the introduction of commitment procedures). The Act is administered by the Japan Fair Trade Commission (JFTC) (Kōsei Torihiki Iinkai), an independent administrative commission composed of a chairperson and four commissioners, appointed by the Prime Minister with the consent of the National Diet.
Prohibited Conduct
The AMA prohibits three categories of conduct: (i) private monopolization (shiteki dokusen); (ii) unreasonable restraint of trade (futō na torihiki seigen); and (iii) unfair trade practices (fukōsei na torihiki hōhō).
Private monopolization (Article 2(5)) covers exclusionary or monopolistic conduct by a single firm — conduct that excludes or controls other business operators to create, maintain, or strengthen a monopoly. This parallels the US offense of monopolization under Section 2 of the Sherman Act. The JFTC has brought private monopolization cases most frequently in the telecommunications, pharmaceutical, and information technology sectors.
Unreasonable restraint of trade (Article 2(6)) covers agreements between business operators that substantially restrain competition in a relevant market. This encompasses hard-core cartels — price-fixing, output restriction, market allocation, and bid-rigging (dangō) — which have been a persistent enforcement priority. Bid-rigging in public procurement is particularly significant in Japan, with the JFTC and the Ministry of Land, Infrastructure, Transport and Tourism collaborating on detection and prosecution.
Unfair trade practices (Article 2(9)) is a category without direct equivalent in US or EU law. The JFTC designates specific practices as unfair, and the AMA also provides for general designation. The designated practices include: unjust refusal to deal, discriminatory pricing, unjust low-price sales, resale price maintenance, abuse of superior bargaining position, and interference with a competitor’s transactions. This provision functions as a supplement to the competition rules, catching conduct that may not amount to private monopolization or restraint of trade but nonetheless distorts competitive processes.
The JFTC and Enforcement
The JFTC combines investigative, prosecutorial, and adjudicative functions. It may initiate investigations ex officio or in response to complaints. Its investigative powers include the authority to conduct dawn raids (totsunyu kensa), demand the submission of documents, and compel testimony. The JFTC may issue cease-and-desist orders, impose surcharges (kachokin), and file criminal accusations with the Public Prosecutor General. Criminal prosecutions are reserved for the most egregious violations, particularly international cartels and bid-rigging.
The surcharge system (kachokin) is the primary administrative sanction. Surcharges are calculated as a percentage of the violator’s sales during the infringement period, with rates varying by category of conduct: 10% for large enterprises in manufacturing (8% for small and medium enterprises), 3% for retail, and 2% for wholesale. For repeat offenders, the surcharge rate is increased by 50%. The 2019 amendments introduced a commitment procedure (yakusoku tetsuzuki), under which the JFTC may close an investigation without finding a violation if the respondent commits to take corrective measures, similar to the EU commitment decision.
Leniency Program
Japan’s leniency program (kōbai kōjo seido), introduced in 2005 and expanded in 2009, is modeled on the US Corporate Leniency Policy. The first applicant to report a cartel and cooperate with the JFTC receives full immunity from surcharges and criminal referral. The second applicant (provided they applied before the investigation began) receives a 50% reduction, while third, fourth, and fifth applicants receive 30% reductions. The program also provides for “markers” that preserve an applicant’s place in the queue pending the submission of a complete application. The leniency program has been highly successful: the JFTC receives numerous applications each year, and the majority of cartel investigations originate from leniency applications.
Merger Control
The AMA requires prior notification of mergers, acquisitions, and shareholdings that meet specified thresholds. The current thresholds, revised in 2019, require notification where (i) the total domestic turnover of the acquiring group exceeds 20 billion yen and (ii) any one target company has domestic turnover exceeding 5 billion yen. For share acquisitions, notification is required when the acquiring company will hold 20% or more (or 50% or more) of a company’s shares and the above turnover thresholds are met.
The JFTC reviews transactions under a substantial lessening of competition (SLC) test (Article 15). The review is conducted in two phases: a Phase I review (30 days, extendable) followed by a Phase II review if substantive concerns arise. The JFTC publishes merger guidelines that specify the analytical framework for market definition, competitive assessment, and potential efficiencies. Since 2011, the JFTC has also applied a safe harbor for transactions where the combined market share is below specified thresholds.
Competition Law and Intellectual Property
The relationship between competition law and intellectual property is governed by the Guidelines for the Use of Intellectual Property under the Antimonopoly Act (IP Guidelines) , issued by the JFTC in 2007 and revised in 2016. The IP Guidelines provide that the exercise of IP rights that falls within the “substantive scope” of the right is generally not subject to the AMA, but conduct that goes beyond the legitimate scope — such as tying arrangements, grantback clauses, or refusal to license essential facilities — may constitute an unreasonable restraint of trade or unfair trade practice.
Appeals and Judicial Review
Decisions of the JFTC may be appealed to the Intellectual Property High Court (Chiteki Zaisan Kōtō Saibansho) for cases involving the AMA, following an amendment in 2002 that consolidated appeal jurisdiction. The appeal is a de novo judicial proceeding, and the court may overturn the JFTC’s factual findings if they are not supported by “substantial evidence” and its legal conclusions if they are erroneous. The leading appeal case is Sony Computer Entertainment v. JFTC (Intellectual Property High Court, 2005), in which the court set aside a JFTC cease-and-desist order for lack of substantial evidence.
International Dimensions
Japan is a party to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which includes a competition chapter requiring the maintenance of competition laws, procedural fairness, technical cooperation, and limitations on state-owned enterprises. The CPTPP has influenced Japan’s enforcement approach, particularly in relation to transparency obligations and the treatment of SOEs.
Japan has also entered into bilateral cooperation agreements with the US Department of Justice and the European Commission, and the JFTC is an active member of the International Competition Network (ICN) and the OECD Competition Committee. Extraterritorial enforcement of the AMA has increased, with the JFTC asserting jurisdiction over conduct occurring abroad that has anticompetitive effects in Japan.
Conclusion
Japanese competition law has evolved from a post-war transplant into a mature, actively enforced regime. The AMA prohibits private monopolization, unreasonable restraint of trade, and unfair trade practices, enforced by the JFTC through administrative surcharges, cease-and-desist orders, and — in serious cases — criminal prosecution. The leniency program has been a key driver of cartel detection, and merger control follows international best practices. Japan’s competition law faces ongoing challenges from digital markets, globalization, and the interaction between IP rights and competition policy.