Amazon Japan’s MFN clause a target of probe by Japanese antitrust regulator

31 January 2017 9:56am

23 August 2016. Toko Sekiguchi

In an attempt to lock steps with regulators in the EU and the US, Japan’s competition authority is investigating whether Amazon Japan’s practice of tying vendors to sell their merchandise at prices no higher than those of its rival e-retailers violates Japan’s antitrust law.

This is the first time that the Japan Fair Trade Commission has taken up the legality of such parity clauses—also known as Most Favored Nation, or MFN, clauses. The JFTC is investigating if Amazon is pressuring sellers to price their products lower than that of rival platforms, said Kazuyuki Katagiri, the director of the commission’s management and planning division.

The development follows a similar probe last year by EU competition authorities, who are investigating Amazon’s MFN clause with publishers.

Katagiri told MLex that the JFTC’s investigation is not limited to Amazon’s e-book operations, which started a service allowing readers to access its e-book library for a flat monthly fee barely a week before the regulator raided the company on Aug. 8.

According to an Internet survey by ICT Research & Consulting, Amazon Japan’s Kindle store was a close second to its rival, Rakuten’s Kobo e-book store, for those who said that they’ve purchased e-books in the fiscal year ended March 31, 2015.

The commission will examine if Amazon Japan’s MFN clause inhibits competition between not just Amazon and its rivals, but also by discouraging its independent vendors from lowering their prices, Katagiri said.

“There are differing views on the [MFN clause], and we’ll be looking into the antitrust issues pertaining to it,” Katagiri said.

Amazon declined to comment on the JFTC investigation.

MLex has learned that it isn’t uncommon for Amazon to demand that its vendors sell at least at the same price as its competitors for their platform business. But while the company has been careful not to demand prices “cheaper than” those of its competitors, Amazon’s fee to sell through its platform tends to be higher than that of other major e-malls.

Legal experts say that may be a gray zone, and depending on how aggressively the JFTC wants to pursue the case, the price parity clause, added with the higher vendor fee, may stick Amazon with allegations of abuse of superior bargaining position.

It will likely take a year for the commission to conclude its investigation, said antitrust lawyer Shunsuke Yabuuchi, who worked as an investigator at the JFTC.

In 2013, Amazon removed its price parity clause in its contracts after antitrust officials in the UK and Germany warned the company of its practice resulting in higher consumer prices.

Former and current Amazon employees say that the company has been fully aware of the scrutiny it is receiving from competition authorities in various countries.

“A probe into the MFN clause, as a first of its kind in Japan, finally puts the JFTC in step with other competition authorities,” said Kazuhiro Tsuchida, a law professor specializing in antitrust law at Waseda University.

“There’s a lot of interest in the development of Japan’s examination of electronic retailing from an antitrust standpoint,” he said.

ABA 2019