Problematic Aspects of the Japan Fair Trade Commission’s Proposed Distribution Guidelines
In April 2017, the Japan Fair Trade Commission (JFTC) released its proposed revisions to its Guidelines Concerning Distribution Systems and Business Practices Under the Antimonopoly Act (Draft Guidelines). While the Draft Guidelines appropriately recognize that vertical restraints may have either pro- or anticompetitive effects, there are a number of troubling aspects, which were identified by the Global Antitrust Institute (GAI) at Scalia Law School at George Mason University in its comment to the agency. These include:
1. Presumptions of illegality for conduct such as minimum resale price maintenance (RPM);
2. Failure to require proof of actual anticompetitive effects while requiring proof of actual procompetitive benefits;
3. Failure to require substantial but-for foreclosure, which includes an analysis of the counterfactual world to identify the difference between the percentage share of distribution foreclosed by the allegedly exclusionary agreements or conduct and the share of distribution in the absence of such an agreement;
4. Vague and ambiguous standards for unfair trade practice liability, for example, prohibiting unilateral refusals to deal that “tend to make it difficult for the refused competitor to carry on normal business activities”;
5. Impositions of unfair trade practice liability for vertical restraints that “tend to impede fair competition” without requiring either dominance or a showing of actual harm to the competitive process; and 6. Seeming presumptions that network effects create either market power or barriers to entry, without requiring a fact-specific case-by-case analysis with empirical backing on the presence and effect of any network effects.