The Rise of Antitrust Private Enforcement in Japan: The Tabelog Case

In Japan, antitrust litigation has not yet played a significant role in terms of private enforcement of the Anti-Monopoly Act (AMA).

Characteristics of the Japanese legal system including the lack of class actions, treble/punitive damages, jury trials and discovery are obviously some key factors that make it less attractive for plaintiffs to recover damages in court. Furthermore, although a special provision enabling private plaintiffs to seek injunctive relief regarding conduct that falls under unfair trade practices (which is a category in the AMA that covers a variety of conduct including vertical restraints and unilateral conduct) was introduced in 2001, only a few cases have been successful to date.

In addition, the general tendency among Japanese companies to avoid formal litigation to resolve disputes may also be a factor leading to the low utilisation of antitrust litigation as a means of private enforcement.

Indeed, the majority of antitrust litigation cases to date have concerned follow-on damage claims brought by government and municipal offices in the context of bid-rigging in public procurement matters, where the difficulty of bringing the claim is rather low due to the fact that the claim could piggyback on the findings of the Japan Fair Trade Commission (JFTC) and the difficulty of establishing damages could be mitigated by liquidated damages clauses.

However, recent years have seen a gradual change. On the one hand, though mainly through appellate cases where parties have challenged the JFTC's decisions (so not purely in the context of private enforcement), the judicial courts, including the Supreme Court, have rendered decisions providing clearer guidance regarding the courts interpretation of the AMA. On the other hand, Japan has witnessed cases where major companies resort to claims based on antitrust to resolve commercial disputes.

Against such an evolving background, on 16 June 2022, a notable decision was issued by the 8th Division of the Tokyo District Court (the Court) The case concerned a damages claim and an injunctive relief claim brought by Hanryumura, which operates a Korean restaurant chain called Kollabo against Kakaku.com, which operates several price comparison sites including a restaurant ranking site called Tabelog.

According to press reports (as the court order is currently sealed), plaintiff Hanryumura alleged that defendant Kakaku.com had manipulated its ranking algorithm for its restaurant ranking site to demote Kollabo's rankings, and in so doing violated the laws protecting entities against discriminatory treatment and abuse of superior bargaining power under the AMA (both of which are types of unfair trade practices).

In the Tabelog case, the Court reportedly found that the defendant had a superior bargaining position over the plaintiff given the strong influence the defendants ranking site has over a restaurant operator; a restaurant operator thus has no choice but to accept even extremely disadvantageous requests. The Court further found that the algorithm change in question imposed disadvantages that were not foreseeable for the plaintiff, and concluded that the defendants conduct amounted to an abuse of superior bargaining position under the AMA.

The Courts opinion is not yet published (and partially sealed), and the case is now pending at the Tokyo High Court on appeal. As a result, the details of the case are not yet available. However, the following items are worth noting.

In this case the Court reportedly held that manipulation of the ranking algorithm amounts to an abuse of superior bargaining position under the AMA. Apparently, the holding is based on the specific facts of the case (the details of which have not been made public) and thus care must be taken not to extrapolate too far from this one decision.

That said, the court actually holding that a manipulation of an algorithm could amount to an abuse of superior bargaining position and ordering payment of damages is noteworthy.

The case was handled by the 8th division of the Tokyo District Court which specialises in commercial matters and is also tasked with trying private actions concerning antitrust claims. A judgment by such a specialised court is likely to provide guidance for other general courts and in turn urge potential antitrust claim plaintiffs to seek redress before the courts.

During the proceedings, at the courts request, the JFTC provided its opinion. If such practice were to become the norm, courts might become more proactive in finding a violation of the AMA.

Prior to the filing of the complaint, the JFTC had published a market survey report on restaurant portal sites, which included those that provide rankings, setting out its findings and potential concerns from the perspective of the AMA, and this report may have supported the plaintiff significantly.

The details of the underlying facts and holding in the Tabelog case are not necessarily clear, and the scope of the opinion can only be determined based on the actual facts and the Courts holding. It is also necessary to see how the Tokyo High Court rules on this case.

However, that said, this case may open up new ways of handling antitrust cases by judicial courts and may also further encourage private plaintiffs to seek redress through judicial court procedures. Indeed, the Chairman of the JFTC emphasised that companies and the business community could also play a role in establishing a better competition environment during a regular press conference on 28 October 2021 when touching upon the JFTC's submission of its opinion in this case, which suggests that the JFTC is willing to support private enforcement as well.

In addition, the JFTC has recently been very active in conducting market surveys, and while the key focus of these is on how to tackle the digital economy and digital platforms, there are also surveys covering other industries and markets. As the Tabelog case demonstrates, the findings of such market studies may encourage private enforcement as well.

Such developments suggest the rise of private antitrust enforcement in Japan may be on the horizon.