Japan's JFTC Is Cracking Down on Unfair Business Practices: What the Abuse of Superior Bargaining Position Reform Means for Foreign Companies

Introduction

If your company does business in Japan — whether through a local subsidiary, a joint venture, or direct supply chain relationships — there is a Japanese competition law concept you need to understand: abuse of superior bargaining position (優越的地位の濫用, Yuetsu-teki Chii no Ran'yō).

Unlike competition law frameworks in the United States or the European Union, Japan's Antimonopoly Act (独占禁止法, Dokusen Kinshi-hō) does not require a company to hold market dominance before it can be found to have abused its position. Instead, Japan applies a relative standard: if your company holds a superior bargaining position over a specific counterparty — a supplier, subcontractor, or distributor — and you engage in conduct that unfairly disadvantages that counterparty, you may be violating Japanese law. No monopoly power required. No market share threshold to clear.

This concept has existed since the Antimonopoly Act's enactment in 1947, but recent enforcement trends and legislative reforms have made it far more consequential. The Japan Fair Trade Commission (公正取引委員会, Kōsei Torihiki Iinkai, or JFTC) has signaled a clear commitment to rigorous enforcement, including against foreign-affiliated companies. In 2025, the JFTC imposed its first fine for exploitative conduct in over a decade. Amendments to the Subcontracting Act took effect on January 1, 2026, expanding protections for smaller business partners. And the JFTC has published draft amendments to its guidelines on abuse of superior bargaining position, alongside a new survey report examining how the doctrine applies to intellectual property, know-how, and data.

For foreign companies operating in Japan, the message is straightforward: the compliance risks associated with your business relationships in Japan have increased, and the JFTC is watching.

What Is Abuse of Superior Bargaining Position?

Abuse of superior bargaining position is codified in Article 2(9)(v) of the Antimonopoly Act and prohibited under Article 19. It falls within the broader category of "unfair trade practices" (不公正な取引方法, Fukōsei na Torihiki Hōhō), which is distinct from cartels, bid-rigging, or monopolization.

The doctrine targets situations where one party in a business relationship leverages its stronger position to impose unreasonable terms on a weaker counterparty. The critical distinction from Western competition law is the standard for establishing "superiority." Under the Antimonopoly Act, the JFTC does not need to prove that a company dominates its market. Instead, it examines the relative relationship between the two parties to a transaction.

How Is "Superior Bargaining Position" Determined?

The JFTC's 2010 Guidelines Concerning Abuse of Superior Bargaining Position identify several factors:

Dependency ratio: What proportion of the counterparty's revenue comes from transactions with the allegedly superior party?
Market position: How does each party's position in the relevant market compare?
Switching costs: How difficult or costly would it be for the counterparty to find alternative business partners?
Business size disparity: Are there significant differences in capital, employee count, or market reach?
Transaction importance: How critical is the transaction to the counterparty's overall business operations?

A party holds a superior bargaining position when the counterparty is unable to avoid disadvantageous terms because terminating or disrupting the relationship would cause significant business harm. In practice, this means that a large multinational company dealing with a small or mid-sized Japanese supplier or distributor is very likely to be considered as holding a superior position — even if that multinational has modest market share in Japan.

What Counts as a Violation?

The Antimonopoly Act specifies three categories of prohibited conduct when committed by a party with superior bargaining position:

1. Forced Purchase or Use of Goods and Services

Requiring a counterparty to purchase products, services, or other items unrelated to the main transaction. For example, a retailer requiring its suppliers to purchase the retailer's promotional materials, or a platform operator requiring merchants to use its proprietary logistics services without legitimate business justification.

2. Demanding Economic Benefits

Requiring a counterparty to provide money, services, or other economic benefits beyond what is justified by the transaction. Common examples include demanding "cooperation fees" (協力金, Kyōryoku-kin), requiring employees to be dispatched to assist the superior party, or imposing financial contributions to the superior party's business events or campaigns.

3. Unfavorable Transaction Terms

This is the broadest category and includes:

Unilateral price reductions: Reducing the purchase price without adequate negotiation or justification
Return of goods: Returning delivered goods without legitimate quality grounds
Payment delays: Delaying payment beyond agreed terms
Unilateral modification of terms: Changing contract terms — including specifications, delivery schedules, or quality requirements — without the counterparty's genuine agreement
Refusal to receive goods: Refusing to accept goods that the counterparty has already produced or prepared in accordance with the contract

All three categories share a common requirement: the conduct must be "unjust in light of normal business practices" (正常な商慣習に照らして不当, Seijō na Shōkanshū ni Terashite Futō). This means the JFTC examines whether the conduct lacks legitimate business justification and impedes the counterparty's ability to exercise free and independent decision-making.

Recent Enforcement Trends

Renewed Enforcement Activity

After a relatively quiet period, the JFTC has significantly stepped up enforcement of abuse of superior bargaining position rules. Key developments include:

The Harley-Davidson Case: In 2025, the JFTC imposed a fine on Harley-Davidson Japan for exploitative conduct toward its dealers — marking the first surcharge order for abuse of superior bargaining position in over 11 years. This case demonstrated the JFTC's willingness to pursue foreign subsidiaries operating in Japan.

Commitment Procedures: Since the introduction of the commitment procedure system in 2018, the JFTC has increasingly used this mechanism to resolve abuse of superior bargaining position cases. Under this approach, companies can voluntarily propose remedial measures without the JFTC issuing a formal finding of illegality — but the cases are still made public, creating reputational consequences.

Naming and Shaming: The JFTC has begun publicly identifying companies suspected of engaging in abuse of superior bargaining position, even before formal proceedings conclude. This practice significantly raises the reputational stakes for companies operating in Japan.

ASBP Task Force: The JFTC established a dedicated task force that has reduced the time from complaint to intervention from approximately 122 days to just 40–50 days, enabling faster enforcement action.

Digital Platform Enforcement

The JFTC has extended the abuse of superior bargaining position doctrine into the digital economy. In 2019, the JFTC issued Guidelines Concerning Abuse of a Superior Bargaining Position in Transactions between Digital Platform Operators and Consumers, applying the concept to how platforms collect and use consumer data. More recently, the JFTC has examined whether platform operators unilaterally alter contract terms with media companies, set unreasonably low usage fees, or otherwise engage in unfair practices — investigations that have clear implications for foreign technology companies operating platforms in Japan.

The 2026 Reforms: What's Changing

Subcontracting Act Amendments (Effective January 1, 2026)

The Subcontracting Act (下請法, Shitauke-hō) operates alongside the Antimonopoly Act to protect smaller businesses in subcontracting relationships. Amendments enacted in May 2025 and effective from January 1, 2026, introduce several important changes:

Prohibition on unilateral price determination: Companies can no longer set prices without genuine negotiation with subcontractors. This directly addresses the widespread practice of large companies dictating terms on a take-it-or-leave-it basis.
Ban on promissory note payments: Payment by promissory note — a longstanding Japanese business practice that effectively delays payment — is now prohibited for subcontracting transactions.
Transport consignment coverage: The Act now explicitly covers transport consignment transactions, reflecting concerns about exploitative practices in logistics supply chains.
Strengthened area-wide enforcement: The JFTC has enhanced its ability to investigate and enforce across broader industry segments rather than individual transactions.

Updated JFTC Guidelines

The JFTC has published draft amendments to its Guidelines Concerning Abuse of Superior Bargaining Position. The revisions reflect the JFTC's evolving enforcement priorities and incorporate lessons from recent cases. The amendments clarify how the guidelines apply to new business models, digital transactions, and cross-border relationships.

Concurrently, the JFTC proposed a new designation of specific unfair trade practices regarding payment for manufacturing subcontracting, along with amendments to logistics-specific designations.

IP, Know-How, and Data

The JFTC has released a survey report specifically addressing abuse of superior bargaining position in transactions involving intellectual property rights, know-how, and data. This is particularly relevant for foreign technology companies and firms engaged in collaborative R&D with Japanese partners. Practices such as requiring counterparties to surrender IP rights, demanding access to proprietary data without adequate compensation, or imposing restrictive licensing terms may now attract heightened scrutiny.

Labor Cost Pass-Through Guidelines

The JFTC has also revised its Guidelines on Price Negotiation for Appropriate Pass-Through of Labour Costs (originally published in November 2023, revised January 2026). These guidelines address the practice of larger companies refusing to accept price increases that reflect rising labor costs — a form of conduct that can constitute abuse of superior bargaining position when it forces subcontractors to absorb costs they cannot sustain.

How This Differs from EU and US Competition Law

Understanding the difference between Japan's approach and Western competition law frameworks is essential for compliance planning.

	Japan (ASBP)	EU (Abuse of Dominance)	US (Section 2 Sherman Act)
Standard	Relative superiority between parties	Market dominance (typically >40% share)	Monopoly power or dangerous probability thereof
Market power required?	No — relative position suffices	Yes — dominance must be established	Yes — monopoly power required
Scope	B2B and B2C transactions	Primarily B2B, but also B2C	Primarily B2B
Enforcement mechanism	Cease-and-desist orders, surcharges (1% of relevant sales), commitment procedures	Fines up to 10% of global turnover	Treble damages, injunctions, criminal penalties
Closest analogy	French/German "abuse of economic dependence"	—	—

The practical implication is significant: a foreign company that has never been subject to competition enforcement in its home jurisdiction may still face enforcement in Japan if it holds a relatively superior position over a Japanese counterparty. Market share is not the issue — the relationship is.

This makes abuse of superior bargaining position a compliance concern for virtually any foreign company with meaningful business relationships in Japan, including those that would consider themselves mid-market participants rather than industry leaders.

Compliance Checklist for Foreign Companies

If your company operates in Japan or maintains supply chain relationships with Japanese businesses, consider the following compliance measures:

Audit your supplier and subcontractor relationships — Identify counterparties that may depend significantly on your business. Higher dependency ratios increase your risk profile.
Document all price negotiations — Maintain written records showing that prices and terms were set through genuine bilateral negotiation, not unilateral imposition.
Eliminate unilateral contract modifications — Any changes to delivery terms, specifications, payment schedules, or pricing must be negotiated and agreed upon, not dictated.
Review payment practices — Ensure payments are made on time and in cash. The use of promissory notes for subcontracting transactions is now prohibited.
Assess "cooperation fee" practices — If your company requests financial contributions, employee dispatch, or other economic benefits from counterparties, ensure these are clearly justified by the underlying business relationship and not imposed by leveraging your position.
Examine IP and data sharing arrangements — If your contracts require counterparties to transfer IP rights, share proprietary data, or accept restrictive licensing terms, assess whether these terms are reasonably justified and adequately compensated.
Train procurement and sales teams — Employees who manage supplier, subcontractor, and distributor relationships should understand the concept of abuse of superior bargaining position and the specific conduct that can trigger violations.
Consider labor cost pass-through — If your Japanese suppliers or subcontractors request price adjustments to reflect rising labor or raw material costs, engage in genuine negotiation rather than reflexively refusing.
Monitor JFTC enforcement actions — The JFTC publishes enforcement actions and survey reports that signal its current priorities. Staying informed enables proactive compliance adjustments.

This article provides general information about Japan's competition law framework and recent regulatory developments. It does not constitute legal advice. Companies should consult qualified legal counsel for guidance on specific compliance matters.