Fair Trade Act: FTC Issues Guidance on Non-Punishment of Minor Concerted Actions

[2016/03/15]

Article 14 of the Fair Trade Act defines “concerted action” as any mutually agreed action by competing enterprises to jointly determine the price, quantity, technology, products, equipment, trading counterparties, or trading territory of goods or services, or to otherwise mutually restrict their business activities, in a manner that is sufficient to affect the functioning of the relevant market in terms of production, trade in goods, or the supply of or demand for services. Based on the opinions set out in previous decisions of the Fair Trade Commission (FTC), behavior “sufficient to affect market function” is not limited to actions that have in fact already affected the functioning of the market; nevertheless, the mutually agreed anticompetitive behavior must be of a risk that the market supply and demand mechanism will be affected. When determining whether anticompetitive behavior is sufficient to affect market function, the regulator must give due consideration to all the facts of the individual case. However, the market shares of the enterprises involved are inevitably an important factor to be considered. In other words, if enterprises have a very small market share, the impact of their actions on market function will generally also be relatively minor.

On 1 March 2016, the Fair Trade Commission announced a new “Criterion for Determining Non-Punishment of Minor Concerted Actions.” The Criterion sets a threshold of 10% for the combined market share, in the relevant market, of enterprises engaging in concerted action. If the enterprises’ combined market share is below this threshold, the FTC will make the presumption that their actions are not sufficient to affect market function in terms of production, trade in goods, or the supply of or demand for services. However, the announcement states that this presumption will not apply when the main content of the anticompetitive behavior is action to restrict the price, quantity, trading counterparties, or trading territory of goods or services. Accordingly, the new threshold can be applied to concerted actions with regard to technology, products, equipment, and other matters not expressly excluded by the FTC announcement.