With just days to serve, JFTC chief urges Japanese companies to use antitrust law to their advantage

The outgoing head of Japan’s competition authority called on Japanese companies to more assertively use antitrust laws to their advantage instead of adopting a mindset of passive compliance, in an exclusive interview with MLex.

Kazuyuki Sugimoto, chairman of the Japan Fair Trade Commission, also revealed his renewed interest in Apple’s dealing with app providers.

“Japanese companies must change their mindset,” Sugimoto said in an interview yesterday, referring to the tendency of Japanese companies to view antitrust laws as something they must defend against, rather than laws to protect them from unfair competitors. “They should bring their concerns to us when they experience disadvantages or feel they are victims of unfair treatment, possibly in violation of the Antimonopoly Act.”

Sugimoto was appointed to lead the JFTC in 2013, just as the number of cartel and bid rigging cases was declining. In the years since, he broadened the scope of competition policy to oversee the burgeoning data economy, and opened antitrust law protection to consumers and freelance workers.

His tenure comes to an end over the weekend, when reaches his retirement age of 70.

Sugimoto tackled global antitrust issues involving the likes of Amazon, Apple and Qualcomm as did his peers in other jurisdictions. However, he said the JFTC faces particular difficulty in getting Big Tech’s suppliers and smaller business counterparts to speak up, because Japanese companies tend to shy away from bringing complaints to the JFTC, due to their archaic belief that antitrust laws exist to hinder their businesses.

On that note, he praised the action by online merchants at Rakuten’s online shopping mall, who formed Rakuten Union and filed an antitrust complaint to the JFTC using legal arguments. “Moving forward, it’s going to be an important job for lawyers to urge us to take action, not just to confront us,” he said.

Apple app

A case in point is Epic Games’ lawsuit against Apple for the iPhone maker’s treatment of apps at App Store.

The JFTC started looking into Apple’s handling of app providers back in 2017, along with iPhone sales practices. Nikkei reported nine months later that Yahoo Japan contacted the JFTC after being pressured by Apple to cut back investment into a new game platform, which could bypass App Store and Google Play.

Yahoo Japan has repeatedly declined to comment on Apple’s app practices to MLex.

“The [App store] case isn’t closed,” Sugimoto said, adding that the JFTC is considering its options as it closely monitors related case developments in other jurisdictions.

“There is various conduct, and we don’t believe our antitrust concerns have been cleared,” he said, after showing keen interest in the lawsuit in the US and the European Commission’s investigations into App Store, brought by Spotify.

Qualcomm’s lesson

While JFTC remained mostly undefeated under Sugimoto, Qualcomm’s appeal case was one of its few setbacks.

The JFTC last year revoked its previous corrective order against Qualcomm’s handling of standard essential patent licenses with Japanese mobile phone makers, after a decade-long series of administrative appeal hearings.

Looking back at the ruling, Sugimoto said the theory of harm — based on the rules against trading with restrictive conditions — could have been one of the reasons for JFTC’s defeat, as there wasn’t enough evidence to prove that particular type of unfair trade practice.

“Under the mechanism of our administrative appeal hearings, we couldn’t examine [Qualcomm’s] overall anti-competitive conduct,” Sugimoto said, with the argument focused strictly on whether the company traded with restrictive conditions.

“Perhaps, for example, if the initial order focused on the abuse of superior bargaining position” the outcome may have been different, he said.

Antitrust versus the financial sector

Sugimoto also expressed regret about the public feud between the antitrust regulator and Japan’s Financial Services Agency over the merger of rural banks Fukuoka Financial Group and Eighteenth Bank.

JFTC’s prolonged merger review — phase two began in July 2016 and closed with remedies in August 2018 — prompted the financial services regulator to publicly lash out at the JFTC as being out of touch with the needs of rural communities who were struggling to survive Japan’s socio-economic challenges brought on by a shrinking population.

Sugimoto said that while he isn't personally against consolidating the excessive number of regional banks, the JFTC’s top concern was to preserve competition so that businesses keep their focus on consumers.

“A business surviving on the life-support of its monopolistic advantage with no incentive to serve its consumers is a problem in our view,” the chairman said. “It was very unfortunate that the financial authorities couldn’t understand why we opposed a monopolistic merger, and the debate was restricted to why these banks can’t merge.”

Ultimately, the issue was taken on by Prime Minister Shinzo Abe’s economic policy board, which resulted in the enactment of an antitrust exclusion law for regional banks and bus companies that serve rural economies.

“At the end, the verdict was that the maintenance of the current financial system took precedence” over a longer-term strategy of finding ways to combine banks without creating monopolies.

But on the digital front, the JFTC has pried open the door for banks to reevaluate their decades-long interbank processing fee which has functioned as one of the entry barriers for fintech startups.

“It’s about leveling the playing field and creating an equal footing,” the chairman said. “Our job is how we can lower barriers to entry.”