Cabinet Secretariat and Japan Fair Trade Commission Release Guidelines Concerning Price Negotiation for Appropriate Shifting of Labor Costs

On November 29, 2023, the Cabinet Secretariat of Japan and the Japan Fair Trade Commission (“JFTC”) jointly issued the Guidelines Concerning Price Negotiation for Appropriate Shifting of Labor Costs (“the Guidelines”).

Rapid price inflation has made it particularly important to create a business environment in which small and medium-sized companies can secure resources for wage increases. The Japanese government has been working on price-shifting measures and established the Guidelines as one of its efforts to improve the business environment.

The JFTC has clarified that where prices do not reflect increases in labor and other costs, they may constitute an “abuse of superior bargaining position” under the Act on Prohibition of Private Monopolization and Maintenance of Fair Trade (“Antimonopoly Act”) or “unjustly low-priced purchases” under the Act Against Delay in Payment of Subcontract Proceeds, etc. to Subcontractors (“Subcontract Act”). In addition, the Guidelines state that the JFTC will take strict action under the Antimonopoly Act and/or the Subcontract Act if fair competition may be impeded by any conduct by a purchaser of goods or services from a counterparty who is not in compliance with the Guidelines. In light of this, it is highly likely that the JFTC will strengthen enforcement in the very near future.