Japan Fair Trade Commission publishes ‘Green Guidelines’

June 2023 | EXPERT BRIEFING | COMPETITION & ANTITRUST

financierworldwide.com

In March 2023, the Japan Fair Trade Commission (JFTC) published its ‘Guidelines Concerning the Activities of Enterprises, etc. Toward the Realization of a Green Society Under the Antimonopoly Act’ (the Green Guidelines). The Green Guidelines are a comprehensive set of guidelines that summarise the concept of companies acting to spur growth without significantly impacting the environment. This article provides an overview of the Green Guidelines and its background, such as relevant precedents under the antitrust law in Japan.

Establishment of the Green Guidelines

As the importance of making environmental considerations becomes more widely recognised, particularly in the context of climate change countermeasures, the realisation of a green society – in which economic growth is compatible with reducing environmental burdens – has become an important goal and had a significant impact on companies’ business activities. However, business activities that focus on environmental considerations may cause certain issues under antitrust law. On one hand, the antitrust law aims to ensure fair and free competition and to benefit consumers; on the other hand, environmental considerations are part of a medium- to long-term goal to be pursued within the economy. Therefore, to reduce their environmental impact, it may be desirable for companies to conduct business in a manner that may not necessarily be desirable from the consumers’ perspective. Thus, in conducting environmentally friendly business activities, when those activities negatively impact consumers in the relevant market in the short term but work positively toward medium- to long-term interests serving society overall, we may consider how antitrust law takes these circumstances into consideration as an important competition policy issue.

In recent years, the antitrust community in Europe has been debating whether and how to incorporate sustainability considerations, which directly affect the environment, into antitrust law. The relationship between sustainable, environmentally friendly business activities and competition policy has become a central topic in antitrust law. Recently, the Directorate-General for Competition of the European Commission, through the Guidelines on Vertical Restraints and the proposed revision of the Guidelines for Horizontal Cooperation Agreements, has taken the position of evaluating sustainability perspectives within the existing antitrust framework, rather than giving any special consideration to business activities that take into account sustainability perspectives, including environmental considerations.

There have long been discussions in Japan regarding socially valuable business activities, as seen through the lens of antitrust law. Like other countries, the JFTC announces various guidelines, some of which already include descriptions noting that business activities which provide social value are not problematic under antitrust law if those purposes are legitimate and the means of achieving them are reasonable and appropriate.

Based on the recent developments in Europe and relevant precedents in Japan, a series of discussions were held in several forums, mainly by the JFTC and Ministry of Economy, Trade and Industry (METI), on how the relationship between environment considerations and antitrust law and policy should be organised. In this context, the Green Guidelines were released by the JFTC and submitted for public comment in January 2023.

Green Guidelines

The Green Guidelines state that antitrust law and competition policy play a complementary role in promoting the efficient use of resources and innovation in new technologies through competition to achieve the policy objective of realising a green society. The guidelines are enacted to prevent anti-competitive activities that inhibit innovation and to encourage efforts by businesses to reduce their environmental impact in an economically sound manner by improving the clarity of choice and predictability in the application and enforcement of the law.

The Green Guidelines declare that, in many cases, efforts by businesses to realise a green society are basically not problematic under antitrust law because they have the effect of promoting competition that encourages the creation of new technologies and superior products, which benefits society by reducing greenhouse gas emissions. However, if such efforts are made only nominally, thus only having the effect of restricting fair and free competition by limiting technological innovations and keeping production volumes unnaturally low, and thus prices high, then they are problematic under antitrust law.

In practice, actual business activities that take the environment into consideration may, on the one hand, have anti-competitive effects, such as increased prices for goods or services, while on the other hand, have pro-competitive effects, such as giving consumers more choices that have a positive impact on the environment. The Green Guidelines state that in such cases, whether antitrust law is amenable to certain initiatives shall be determined by a comprehensive balancing test of the anti-competitive and pro-competitive effects arising from those initiatives, along with the reasonableness of the related business purposes and the appropriateness of the means used. This decision-making framework is an extension of the approach described above regarding the application of antitrust law to business activities conducted with a socially valuable purpose.

At nearly 70 pages, the Green Guidelines are quite comprehensive, covering not only joint activities among competitors, but also restrictions on certain business activities, such as unilateral conduct and M&A activities. Considering that the discussions began in Europe with a focus on joint activities between competing businesses, the Green Guidelines are unique.

While the Green Guidelines are intended for business activities with environmental considerations, the Directorate-General for Competition, in its draft revised Horizontal Guidelines and Guidelines on Vertical Restraints, has presented the concept of business activities that consider the overall perspective of sustainability. In other words, the Green Guidelines are characterised by their scope being limited to the perspective of environmental considerations rather than sustainability in general.

The Green Guidelines published by the JFTC have attracted a great deal of attention from those involved in antitrust law and competition policy in various countries, as they present a cohesive view of the relationship between environmental considerations and antitrust law and provide relatively unique insights even compared to the Directorate-General for Competition’s guidelines.

Conclusion

Achieving a green society, where reducing environmental impact and driving economic growth go hand in hand, is vital to delivering future growth, and thus companies’ business activities are expected to be conducted with this goal in mind for a long time to come. It is hoped that the Green Guidelines will make a valuable contribution to global business activities.

Yusuke Takamiya is a partner and Kohei Shiozaki is an associate at Mori Hamada & Matsumoto. Dr Takamiya can be contacted on +81 3 6266 8744 or by email: yusuke.takamiya@mhm-global.com. Mr Shiozaki can be contacted on +81 3 5293 4860 or by email: kohei.shiozaki@mhm-global.com.

Yusuke Takamiya and Kohei Shiozaki

Mori Hamada & Matsumoto