Competition Law Interference Prior to the Formation of a Digital Market -The JFTC's Enforcement Action Against DeNA

Abstract

The Japanese Fair Trade Commission (JFTC) has generally been reserved in applying its Act on Prohibition of Private Monopolization and Maintenance of Fair Trade (Antimonopoly Law or AML) to new developments in the market. It should come as no surprise that there is barely any reference to an enforcement action of the JFTC in the debate on the digital economy and competition law. This is not to say that the JFTC is ignorant to the developments in the digital economy. In his New Year’s message of 2016, Chairman Kazuyuki Sugimoto recognized the change the digital economy has brought to business models and calls for careful consideration on how competition policy should be shaped towards these business models. To position itself in the digital economy, the JFTC has participated as an observer in the Cross-sectional System Study Group for the Fourth Industrial Revolution (Study Group). The Study Group made one important statement in relation to the above-mentioned debate. In the report, the Study Group opined, without making any reference to any case, that “[i]n order to maintain a fair competitive environment in the ever-changing digital market, it is important to not only correct the wrongs of business operators who conflict with the Act [the Antimonopoly Law] but also provide an environment where potential rivals to existing business operators can grow before the market is exposed to an unfair competition.” The opinion in the report of the Study Group seems to collide with a decision that the JFTC has taken in relation to mobile social game industry. In 2011, the JFTC issued a cease-and-desist order (DeNA case) against DeNA, Inc. (DeNA). By using this case, this paper will argue that the DeNA case reflects decision-making of the JFTC prior to the formation of a market. The paper will explain that such a decision-making process is possible due to the conceptualization of Japan’s competition law. Besides the prohibition of unreasonable restraints of trade and private monopolization in Article 3 AML, the AML also prohibits unfair trade practices in Article 19 AML. The paper will further argue that, if Japan wants to have a proactive competition law enforcement, a choice has to be made to keep Article 19 AML and the scholarly calls for abolishing this article have to be disregarded. In secondary order, the paper will contend that even the provision 14 of the General Designation of Unfair Trade Practices as revised in 2009 (2009 General Designation), which is a further interpretation of Article 19 AML, would have been probably the only choice to take enforcement action in the DeNA case.