iGreater China
A. China establishes a consolidated anti-monopoly mechanism.
On Nov. 18, 2021, the State Anti-Monopoly Bureau was officially established as a consolidated anti-monopoly mechanism, composed of Competition Policy Coordination Division, No. 1 Anti-Monopoly Enforcement Division, and No. 2 Anti-Monopoly Enforcement Division. The Competition Policy Coordination Division will be responsible for (i) drafting anti-monopoly policy and guidelines, enforcement against administrative monopoly, and domestic and international communication; (ii) the No. 1 Anti-Monopoly Enforcement Division for enforcement against monopoly agreements, abuse of market dominance, and abuse of intellectual property; and (iii) the No. 2 Anti-Monopoly Enforcement Division for merger control review. Being a separate department often means abundant staffing and budget. Before the reform, these three functions worked under the State Administration for Market Regulation (SAMR) rather than as a specialized anti-monopoly component.
B. Another internet giant fined for “pick one from two” policy.
On Oct. 8, 2021, the SAMR imposed a fine of about RMB 3.4 billion (approx. US$ 533 million, equating to 3% of its 2020 domestic revenue) on a food delivery internet giant Meituan for abuse of market dominance in its “pick one from two” practice, and ordered the cessation of such “pick one from two” practice. The company also must return RMB 1.29 billion of deposits stemming from exclusivity arrangements.
The legality of “pick one from two,” a variety of policies and practices adopted by internet platforms aiming to compel merchants to have exclusive partnerships or distribution channels with the platforms, remains a crucial issue in this case. SAMR found that Meituan forced merchants to enter into an exclusive partnership with Meituan by differentiated commission rates and delayed the online launch of non-exclusive merchants. Furthermore, Meituan implemented internal policies to cause its employees to enhance “pick one from two” in dealing with the merchants and monitored the performance of “pick one from two” by big data, disciplinary measures, and collecting deposits from exclusive merchants. According to SAMR’s ruling, these practices restrict competition in the internet food delivery market and harm the interests of the merchants and consumers. As a company dominant in the internet food delivery market, Meituan’s “pick one from two” practices have violated Subparagraph 4, Subsection 1 of Article 17 of Anti-Monopoly Law, which prohibits an undertaking with market dominance from forcing its counterparties to trade exclusively with it without justification.
Japan
A. JFTC announces proposed penalties in a bid-rigging matter.
On Nov. 5, 2021, the Japan Fair Trade Commission (JFTC) announced proposed penalties for bid-rigging on prints and/or deliveries of notices regarding the Japanese national pension system. In October 2019, the JFTC launched an investigation (including on-site inspection) into suspected violations of the Anti-Monopoly Act (unreasonable restraint of trade, bid-rigging). The Japan Pension Service orders more than 5 billion yen per year for these services. The JFTC suspected that, in advance of bids, the companies colluded to determine which companies received the orders to prevent the order price from falling.
These proposed penalties include (i) a total of approximately 1.4 billion yen in surcharge payment orders to approximately 20 companies and (ii) a “cease and desist order” to take necessary measures to eliminate violations and prevent a recurrence.
B. JFTC submits opinion to court on algorithmic restaurant evaluation.
A restaurant filed a lawsuit in the Tokyo District Court challenging the fairness of restaurant evaluations by a gourmet website. The restaurant claims that a unilateral change in the algorithm used to calculate restaurant evaluation scores on a gourmet website caused the chain’s restaurant evaluations to drop, resulting in a decrease in restaurant sales. JFTC submitted its opinion to the Tokyo District Court regarding whether there was an Antimonopoly Act violation.
JFTC assessed that the act of rating restaurants by points constituted a “transaction” between the gourmet website and the restaurants, as the restaurants may conclude a paid membership contract with the gourmet website to increase their ratings. In addition, JFTC said the change in the algorithm in this case may constitute unfair discrimination depending on the influence of gourmet website. Furthermore, if a large percentage of customers came to the restaurant through the gourmet website, changing the algorithm without prior notice could be considered an abuse of the dominant position held by the restaurant.
In March 2020, JFTC released a report on the actual transaction situation regarding gourmet websites, and this lawsuit will determine how the Antimonopoly Act will be applied in the Algorithmic digital fields.
Pamela J. Marple, Yuji Ogiwara, Stephen M. Pepper, Gillian Sproul, Hans Urlus, Dawn (Dan) Zhang, Mari Arakawa, Anna Bryńska, Filip Drgas, John Gao, Marta Kownacka, Pietro Missanelli, Massimiliano Pizzonia, Anna Rajchert, Jose Abel Rivera-Pedroza, Chazz Sutherland, Ippei Suzuki, Rebecca Tracy Rotem and Alan W. Hersh contributed to this article.
