Amazon Japan raided by JFTC on suspicions of abuse of dominance

21 March 2018 10:19am
Japanese Flag

By Toko Sekiguchi on 15 March 2018.

Japan’s antitrust watchdog raided Amazon Japan today on suspicions that it is abusing its market dominance in its dealings with suppliers over discount prices, MLex learned.

The Japan Fair Trade Commission, or JFTC, raided the online retailer to investigate Amazon Japan’s practice of having its suppliers shoulder the cost of discounting products on Amazon by having them pay the difference between the original retail and discount prices.

The JFTC is looking into Amazon’s practice of charging its direct suppliers, including those in the highly competitive electronics sector, for the cost of discounts on products sold by Amazon. Third-party vendors who pay Amazon to sell their products on the Amazon Marketplace platform are not included in the investigation, MLex understands.

Such charges to suppliers may be in violation of Japan’s Antimonopoly Act, which prohibits abuse of superior bargaining power. Retailers of Amazon’s caliber may possess a level of dominance that provides an unfair trade advantage that suppliers have no choice but to comply with.

It’s not known whether Amazon Japan attempted to charge all of its hundreds of suppliers across the board with the added charges or was sector-specific in those practices.

Last month, it was reported that Amazon in November began demanding that manufacturers pay it 2 percent of sales of food and other daily supplies sold on its platform, while other suppliers were asked to pay anywhere from 1 percent to 5 percent. However, these fees are not the subject of the ongoing probe, MLex understands.

According to Nikkei Shimbun, Amazon Japan is the country’s sixth-largest retailer, both online and offline. The explosive growth in online retailing in recent years has overburdened the nation’s distribution network, forcing delivery companies to hike their prices — in turn raising the cost of e-commerce operations such as Amazon's.

In a survey of suppliers published in January, the JFTC said that such “support fees” paid to retailers — charges that lack a clear basis or go beyond a reasonable operating fee — were the top “possibly problematic behavior” cited by suppliers.

Thursday’s raid breaks the truce between Amazon and the JFTC brokered last summer when the online platform agreed to remove so-called Most Favored Nation clauses from its Marketplace vendors. The company’s voluntary commitment ended JFTC’s year-long investigation into its parity clause practices.

Joh Sung-Wook Interview