The JFTC conducted market research ("Research") from April 2019 until March 2020 on online portal sites ("Portal Sites") that review restaurants and bars ("Restaurants") and published a report of its findings on March 18, 2020 ("Report"). The Research was part of a series of JFTC market research conducted with respect to developments of the digital economy.
In the past few years, the JFTC has been conducting research and publishing reports on various markets with respect to developments of the digital economy, including the "Report of Study Group on Data and Competition Policy" (June 6, 2017)1 and the "Report regarding trade practices on digital platforms – Businessto-Business transactions on online retail platform and app store"2 (October 31, 2019).
The Portal Sites are restaurant review digital platforms that connect consumers and Restaurants. Restaurants contract with Portal Sites, often with multiple Portal Sites, to post their information and advertisements on their online platforms. The Portal Sites facilitate the collection of information on Restaurants in one place for consumers.
The JFTC recognizes that Portal Sites have substantial influence on the decision making of consumers, and that such influence has been expanding. The purpose of the Research was to identify business practices, if any, that may violate the Anti-Monopoly Act or that may not be appropriate from competition policy perspective. The Report references some desirable practices in addition to identifying potential issues under the Anti-Monopoly Act.
The Research was conducted by questionnaire and hearing surveys during the period from April 2019 to March 2020.
Questionnaires were sent to (i) 17 Portal Sites and 16 of them responded and (ii) 8,000 Restaurants and 491 of them responded. In addition, the JFTC carried out an online survey for consumers and 10,000 of them responded.
The JFTC conducted hearing surveys for 46 companies, including 17 online portal sites for Restaurants, 24 Restaurants and agencies and 5 booking service providers.
The Report indicates that some of the Portal Sites are likely to be in a superior bargaining position, which may allow them to conduct abusive conduct against Restaurants. If and when abusive conduct is engaged by a party in a superior bargaining position, it will be deemed a violation of the Anti-Monopoly Act as an abuse of superior bargaining position ("ASBP"). For example, when a Portal Site in a superior bargaining position unilaterally changes terms and conditions that were previously agreed with a Restaurant and such change harms the Restaurant, it may constitute an ASBP. To avoid such a risk, the Report suggests Portal Sites to take such steps as (i) explaining grounds for changing terms and conditions to Restaurants, (ii) setting sufficient time before updated terms and conditions become effective, (iii) communicating with Restaurants sufficiently and (iv) taking into account the opinions of Restaurants to the extent possible.
Further, the Report mentions a possibility for constituting an ASBP in the situation where unreasonable disadvantage has been placed on Restaurants when a dominant Portal Site, without reasonable grounds, arbitrarily sets and operates rules (i.e., algorithm) and lowers the credit of certain restaurants (e.g., the rank or evaluation score). To avoid such a risk, the Report suggests Portal Sites to take steps to provide transparency and fairness. It mentions that it would be desirable if (i) Portal Sites disclose substantial factors for the credit to Restaurants and consumers to the extent possible (i.e., transparency) and (ii) its operation could be reviewed by a third party (i.e., fairness).
In addition to ASBP, the Report mentions about potential violation of other types of conduct under the AntiMonopoly Act, including a trading on restrictive terms (i.e., one of the unfair trade practices) when a dominant Portal Site independently or in parallel with other Portal Site(s) sets most favored nation clauses (aka. parity clauses) that would bring price maintenance and/or market closure effect.
At the end of the Report, the JFTC concludes that it will continue to watch the competition environment involving Portal Sites as their roles increasingly become greater and the players in the environment in which they operate continues to evolve to include not only other portal sites but search engine providers as well.
1 Tentative English translation by the JFTC is available at https://www.jftc.go.jp/en/pressreleases/yearly2017/June/170606_files/170606-4.pdf (report): https://www.jftc.go.jp/en/pressreleases/yearly-2017/June/170606.html (press release); https://www.jftc.go.jp/en/pressreleases/yearly-2017/June/170606_files/170606-3.pdf (summary)
2 Tentative English translation by the JFTC is available at https://www.jftc.go.jp/en/pressreleases/yearly2019/October/191031Report.pdf (report); https://www.jftc.go.jp/en/pressreleases/yearly-2019/October/191031.html (press release); https://www.jftc.go.jp/en/pressreleases/yearly-2019/October/191031Summary.pdf (summary).