Kazuyuki Sugimoto is chairman of the Japan Fair Trade Commission and the author of Competition Policy in the Digital Age. In October 2019, he spoke at a White & Case seminar in Tokyo on the digital economy and competition law. The following Q&A is an edited and condensed version of a discussion that took place after the event.
The competition agencies of the G7 countries reached a common understanding that emphasizes the importance of international cooperation and convergence in the application of competition laws
Q: What’s the link between innovation and competition?
A: Competition plays a vital role in fostering innovation that leads to economic growth. This is particularly important in Japan given our shrinking and aging population, which has led to saturated markets for existing products and services. Innovation can boost demand and generate economic growth. A critical objective of competition law is to ensure a competitive environment that encourages businesses to innovate, while also benefiting consumers.
Q: When do digital platforms raise competition issues?
A: Dominant digital platforms can limit access to data generated by companies and consumers who use them. Japan’s Antimonopoly Act (AMA) prohibits platforms from hoarding data in ways that put other companies at an unjustifiable disadvantage. We also recognize that digital platform operators may be in a superior bargaining position in relation to consumers who provide data in exchange for using their services. We have to strike a balance that ensures the collection and use of data don’t harm consumers. In addition, while it is important to address competitive issues quickly in the fast-changing digital economy, it is also important to ensure we don’t create barriers to competition and innovation.
Q: How do you handle the competition issues raised by platforms?
A: We need to investigate what is really taking place in relevant markets. The Japan Fair Trade Commission (JFTC) conducts large-scale, comprehensive and thorough fact-finding surveys to understand trade practices. Last October, we issued a report about digital business-to-business transactions on online retail platforms and app stores. It identified practices that might disadvantage trade partners or exclude competitors. We are now conducting fact-finding surveys in other areas such as online advertising. If the JFTC finds specific conducts that raise competitive concerns, it will apply the AMA to those conducts in a prompt and strict manner. In particular, if a digital platform operator has a superior bargaining position over consumers and collects and uses personal information unduly against their interests, it may be subject to the regulation on abuse of a superior bargaining position under the AMA. The JFTC issued new guidelines to clarify this regulation last December.
We must also address so-called killer acquisitions, where large digital platform operators acquire startups to nip competition in the bud. The JFTC recently amended its policies to recommend that parties whose business combination plans do not meet notification thresholds consult with the commission if their acquisition values exceed ¥40 billion and other conditions are met.
Q: You’ve talked about the importance of converging competition laws globally. How can that best be accomplished?
A: Global convergence of competition law is critical to the smooth operation of businesses that cross borders. Last June, the competition agencies of the G7 countries reached a common understanding that emphasizes the importance of international cooperation and convergence in the application of competition laws. The borderless nature of the digital economy requires this approach.
The JFTC has more than 20 bilateral antitrust cooperation agreements or arrangements as well as multilateral cooperation frameworks. The agreements or arrangements enable agencies to enforce their competition laws in close cooperation with other agencies, accounting for possible impacts on other jurisdictions.
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