​Japan's antitrust regulator eyes 'superior bargaining position' tool to go after online abuses

30 May 2018 8:42am

25 May 2018. By Toko Sekiguchi and Leah Nylen

A uniquely Japanese antitrust tool, once widely criticized for its far-reaching application, is gaining new traction as the country’s regulator ponders using a legal clause on superior bargaining position to go after new competition challenges such as data hoarding and the exploitation of freelance labor.

The Japan Fair Trade Commission, or JFTC, is currently investigating whether Amazon Japan abused its bargaining power with suppliers. The agency’s chairman, in an interview with MLex this week, also left open the possibility of using that avenue to probe Facebook.

JFTC Chairman Kazuyuki Sugimoto has focused the regulator on e-commerce and online platform businesses, portraying antitrust regulators as the gatekeepers of innovation — the driving force of competition in the global economy.

The JFTC last year published a report on the data economy, raising competition concerns about an industry where free data is turned into a growing source of revenue.

In recent weeks, Sugimoto has referred frequently to his concerns about possible unilateral abuse of dominance in the sector, singling out such conduct as a red flag.

In the interview with MLex, he explained how provisions in the country’s competition law on abuse of superior bargaining position — recently mobilized in the investigation into Amazon Japan (see here) — offers Japan a ready tool to go after abuse of dominance, and may also be applied to unreasonable data collectors.

“I realize that some view the superior bargaining position [clause] as unique to Japan,” Sugimoto said, adding that other jurisdictions respond to abuse of dominance through alternative methods. Australia, for instance, enforces “unconscionable conduct.” In Europe, it would be exploitative business practices by purchasers of goods and services.

— Amazon, Facebook —

Sugimoto refused to comment on the ongoing Amazon Japan investigation, which MLex understands to be a classic case of abuse of a superior position by a giant retailer over suppliers that are dependent on it. Amazon is accused of retroactively demanding discounts from suppliers, which would be a textbook example of a violation that has little to do with the fact that the company sells its products online (see here).

But JFTC officials have said that the regulator is aware of the importance of acting quickly when it comes to e-commerce enforcement, because of the exponential network effects that can irreversibly cement dominance online (see here).

Moreover, Sugimoto told MLex that while his agency still has a way to go before stepping into the area of data-collection practices, abuse of superior bargaining position may provide a path for competition policy to examine the issue.

Asked about whether the JFTC has begun looking into Facebook, as has Germany’s competition regulator, the Bundeskartellamt, Sugimoto said he is closely monitoring the German probe as he weighs the much-debated topic of Big Data and its implications for antitrust policy.

“It is a very difficult area, how to evaluate the situation from the competition viewpoint,” Sugimoto said. But as suppliers of data, individuals may be handing over excessive amounts of personal information to their detriment, “possibly as a result of abuse of superior bargaining position” by operators of online platforms, he suggested (see here).

— Freelance workers —

In keeping with current structural shifts in the economy, the regulator is increasingly open to the unconventional expansion of the idea of superior bargaining position to evaluate the relationship between a company and individuals, as businesses deal directly with individuals as market players.

In February, the JFTC released a report exploring the possibility of protecting self-employed freelance workers under antitrust law when neither labor laws nor contracts offer them adequate rights.

The report for the first time also said that abuse of superior bargaining position should be applied to freelance workers in their dealings with their employers, covering a wide range of concerns, including exceedingly low or late payments, unfair concession of rights such as copyrights and failure to accept the goods or services produced.

“While transactions between enterprises are quite common in markets for goods and services, in the market for human resources, contracting parties normally are enterprises, while service providers tend to be individuals,” the report said.

“Such special circumstances of the market for human resources can be considered to support the argument that the contracting party is in a superior bargaining position against the service provider,” it said.

Japan’s definition of superior bargaining position “enables us to approach the issue of dominance from a comprehensive standpoint of competition policy,” Sugimoto said.

Joh Sung-Wook Interview