Cartels and Bid Rigging Under Japan's Antimonopoly Act: Surcharges, Leniency, Criminal Penalties and Compliance

Agreeing with competitors on prices, volumes or customers is prohibited in Japan as an "unreasonable restraint of trade," even when the agreement is oral or merely tacit (Antimonopoly Act, Arts. 2(6) and 3). A company that takes part faces an administrative surcharge of, in principle, 10% of its sales during the violation period, and in serious cases individuals can be sentenced to up to five years' imprisonment and the company fined up to ¥500 million (Arts. 7-2, 89 and 95).

On the other hand, the first company to report the cartel to the Japan Fair Trade Commission (JFTC) before an investigation begins receives full immunity from the surcharge and, under JFTC policy, is not referred for prosecution (Art. 7-4). Because the options narrow sharply once a cartel comes to light, companies should set rules for contact with competitors, and decide how they will respond to a problem, before one arises.

• At drinks after an industry association meeting, a competitor's sales director asks how much you plan to raise prices next year, and you give a figure.
• With raw material costs rising, someone suggests to peers that everyone should time their price increases together.
• A predecessor tells you there is a long-standing practice of taking turns winning public works tenders.
• One morning, JFTC investigators arrive at head office and announce an on-site inspection.

An unreasonable restraint of trade occurs when businesses jointly fix prices or limit volumes, customers or similar terms, mutually restricting their business activities and thereby substantially restraining competition in a particular field of trade (Art. 2(6)). Businesses must not engage in it (Art. 3), and trade associations are likewise prohibited from restraining competition as a body (Art. 8(i)).

Typical examples are price-fixing, output or shipment quotas, the allocation of territories or customers, and bid rigging, where bidders decide in advance who will win a tender and at what price.

The form of the agreement does not matter (Art. 2(6)). Even without a contract or minutes, an oral understanding, or a tacit understanding in which each company anticipates the others' conduct and falls into line, is generally considered enough. An explanation along the lines of "we never agreed anything, we only heard their plans" is unlikely to carry much weight.

The JFTC's Guidelines Concerning the Activities of Trade Associations state that exchanging specific information on current or future prices between competitors may lead to a violation. Sharing production or shipment volumes broken down by member company can raise the same concern. By contrast, providing past prices in aggregated statistical form, without identifying individual companies, is generally not a problem as long as it does not give members a common benchmark for prices.

In practice, the risk arises even in casual conversation. Planned price increases, whether you will bid on a tender, and prices offered to particular customers should not be discussed, even socially.

Set agendas for meetings in advance and keep minutes. If a risky topic comes up, object, leave the meeting, and make a record that you did so.

The Supreme Court has held that the surcharge provisions applied to a price cartel for television cathode ray tubes agreed outside Japan, where Japanese manufacturers set the procurement terms for their overseas subsidiaries (Supreme Court, December 12, 2017). An agreement made only among overseas affiliates can therefore fall within the Act if it affects competition in Japan. Foreign companies with Japan-related sales should not assume they are outside its reach.

The JFTC orders companies that take part in cartels or bid rigging to pay a surcharge (Art. 7-2(1)). The 2019 amendments, in force since December 25, 2020, substantially changed how it is calculated. The main features are:

• The rate is 10% regardless of industry. Small and medium-sized enterprises pay 4%, but only if every company in the corporate group qualifies as an SME (Art. 7-2(1) and (2)).
• The calculation period can reach back up to ten years from the start of the investigation, compared with a maximum of three years before the amendments.
• Sales by wholly owned subsidiaries that were not themselves involved, fees for closely related services, and "financial benefits" such as payments among bid riggers are added to the base (Art. 7-2(1)).
• Repeat offenders within ten years, or companies that played a leading role, pay 1.5 times the amount; both together means twice the amount (Art. 7-3).
• No surcharge is imposed if the calculated amount is below ¥1 million.

A leading role includes not only proposing the cartel to others but also asking other companies to hide documents during a JFTC investigation (Art. 7-3(2)). With up to ten years of sales in the base, a long-standing practice can produce a far larger surcharge than expected. Because subsidiaries' sales are included, the position needs to be understood across the whole group.

The surcharge is an administrative measure separate from criminal penalties. If a criminal fine against the company becomes final in the same case, half of the fine is deducted from the surcharge (Art. 7-7).

Under the leniency program, a company that reports its own violation to the JFTC and submits evidence has its surcharge reduced or waived according to the order in which it applied (Art. 7-4). The reductions are:

The investigation start date is the day on which an on-site inspection or similar measure is first carried out (Art. 7-4(1)(i)).

In addition, applicants other than the first pre-investigation applicant can use the cooperation-based reduction system (Art. 7-5). Under it, an applicant that agrees with the JFTC to provide reports and evidence that help clarify the case receives an additional reduction depending on the value of its cooperation. The cap on that additional reduction is 40% for applicants before the investigation start date and 20% for those after it.

To qualify, the company must also not continue the violation after the investigation start date (or, if it applies later, after the date of its application). The initial application form (Form 1 before the investigation start date, Form 3 after it) must be submitted by email. JFTC materials also recommend an internal leniency policy that reduces disciplinary sanctions for employees who voluntarily come forward.

An individual who commits an unreasonable restraint of trade faces imprisonment of up to five years or a fine of up to ¥5 million (Art. 89(1)(i)), and both may be imposed depending on the circumstances (Art. 92). The company faces a fine of up to ¥500 million (Art. 95(1)(i)). Following amendments to the Penal Code that took effect on June 1, 2025, the former sentence of imprisonment with work has been replaced by a single form of imprisonment (kokin-kei).

These offenses cannot be prosecuted without a criminal referral from the JFTC (Art. 96). The JFTC's stated policy is to seek prosecution actively in serious cases with broad effects on people's lives.

At the same time, it will not refer the first company to apply for leniency before an investigation begins. Its officers and employees who cooperate in the company's application are generally treated the same way, which gives an early application real weight for individuals as well.

Under the commitment procedure, a company notified by the JFTC that its conduct is suspected of violating the Act can draw up its own plan to remedy it and apply for approval (Arts. 48-2 and 48-3). Once the plan is approved, no cease-and-desist order or surcharge payment order is issued for that conduct (Art. 48-4).

However, the JFTC's Policies Concerning Procedures Relating to Commitment exclude serious violations such as bid rigging and price cartels, repeat violations within ten years, and cases that warrant a criminal referral. Commitment procedures have mainly been used for matters such as resale price maintenance and abuse of a superior bargaining position. Where a cartel is suspected, a company should consider a leniency application rather than count on a commitment.

A company with a stronger bargaining position that uses it to impose unjust disadvantages on a counterparty, in light of normal business practices, commits an "abuse of a superior bargaining position" (Art. 2(9)(v)). Typical examples include forcing the purchase of unrelated goods, demanding sponsorship payments, refusing to accept delivery, returning goods, delaying payment and cutting the agreed price. Where the conduct is continuous, a surcharge of 1% of the transaction amount with that counterparty is imposed (Art. 20-6).

Manufacturing and similar outsourcing to smaller suppliers is also governed by more specific rules under the Act on Preventing Delay in Payment of Remuneration to Small and Medium-sized Contractors in Manufacturing Outsourcing, etc. (known in Japan as the "Torihiki Tekiseika Act"). It amended and renamed the former Subcontract Act and took effect on January 1, 2026.

It newly prohibits, for example, setting prices unilaterally without engaging in negotiation and paying by promissory note. These are separate issues from cartels, but it is efficient to cover them together in training for sales and purchasing teams.

An on-site inspection is an administrative investigation based on statute (Art. 47(1)(iv)).

On the day, the basic sequence is as follows.

1. 1

   Check identification and the notice

   Check the investigators' identification and the written notice describing the case and the provisions concerned, and contact the legal department and outside counsel (Art. 47(1)(iv)).

2. 2

   Stop document destruction

   Instruct the whole company not to destroy documents or delete emails (Art. 94(iv)).

3. 3

   Record what is taken

   Keep a list of materials taken, and ask for permission to copy those needed for business.

4. 4

   Decide on leniency

   At the same time, decide quickly whether to apply for leniency. Applications after the investigation start date must be made within a short deadline and compete for a limited number of places (Art. 7-4).

If the company objects to an inspection or similar measure, it can file a written objection within one week of the measure.

Customers harmed by a cartel can claim damages from the company (Art. 25(1)). The company cannot escape this liability by proving that it acted without intent or negligence (Art. 25(2)). Such claims can be brought in court once a cease-and-desist order or similar order has become final (Art. 26(1)).

• Put rules for contact with competitors in writing: prohibit discussing prices, volumes, tenders or customers, and require advance approval and a report after any contact.
• Identify employees who attend industry association meetings, and make sure agendas are checked in advance and minutes are kept.
• Run scenario-based training at least once a year, focusing on sales and purchasing managers.
• Set up an internal whistleblowing channel and an internal leniency policy, and state in your rules that employees who come forward early will receive lighter discipline.
• Prepare a written response procedure for on-site inspections and share it with reception, general affairs and legal staff.
• Take stock of any alliances, joint purchasing or information-sharing with competitors, including at overseas subsidiaries.

Consult a lawyer early in situations such as the following. Because the outcome of a leniency application depends on its ranking, it is safest to seek advice while the facts are still being established.

• An employee reports, or a whistleblower alleges, that someone discussed prices with a competitor.
• A trade association or competitor proposes coordinating price increases or tenders.
• The JFTC has conducted an on-site inspection or sent an order to submit a report.
• A foreign competition authority is reported to have opened a cartel investigation that may involve your business.
• You are considering an alliance or joint purchasing arrangement with a competitor and want to confirm it raises no Antimonopoly Act issues.

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The form of the agreement does not matter, and a tacit understanding can be enough (Antimonopoly Act, Art. 2(6)). JFTC guidelines state that exchanging specific information such as current or future prices may lead to a violation. Aggregated statistics on past prices that do not identify individual companies are generally not a problem.

In principle it is 10% of sales of the goods or services concerned during the violation period (Antimonopoly Act, Art. 7-2). SMEs pay 4%, but only if every company in the group qualifies as an SME. The period can reach back up to ten years from the start of the investigation, and repeat violations or a leading role increase the amount by 1.5 or 2 times (Art. 7-3).

For applications before the investigation start date, the first applicant receives full immunity, the second a 20% reduction, the third to fifth 10%, and sixth and later 5% (Antimonopoly Act, Art. 7-4). Applicants other than the first can receive an additional reduction of up to 40% through the cooperation-based reduction system, or up to 20% if they applied after the investigation began (Art. 7-5). Because ranking is first come, first served, speed matters.

Individuals can be sentenced to up to five years' imprisonment or fined up to ¥5 million, and the company can be fined up to ¥500 million (Antimonopoly Act, Arts. 89(1)(i) and 95(1)(i)). Prosecution requires a criminal referral from the JFTC (Art. 96). The JFTC has stated that it will not refer the first company to apply for leniency before an investigation begins, or officers and employees who cooperated in the company's internal investigation.

Under the JFTC's Guidelines on Administrative Investigation Procedures, having a lawyer present is not a right of the company, and investigators may begin without waiting for a lawyer. Refusing or obstructing an inspection is a criminal offense (Antimonopoly Act, Art. 94(iv)). Cooperate with the inspection while contacting your lawyer immediately and instructing staff not to destroy any documents.