On 13 November 2026 the Japan Fair Trade Commission (JFTC) announced that it had issued a recommendation to Nishimura Co., Ltd. under Article 7(2) of the pre-amendment Subcontract Act. The company had deducted amounts labelled "cooperation money" from the payments due to its subcontractors, which was found to violate the prohibition on reducing subcontract payments.
This page summarises the JFTC press release and the attached announcement, summary diagram, statutory extracts and recommendation.
Overview
| Item | Details |
|---|---|
| Date announced | 13 November 2026 |
| Announced by | Japan Fair Trade Commission (handled by its Kinki-Chugoku-Shikoku Office) |
| Company | Nishimura Co., Ltd. (head office: Yao City, Osaka) |
| Business | Manufacture and sale of hinges and related products |
| Stated capital | JPY 32.4 million |
| Legal basis of the recommendation | Article 7(2) of the pre-amendment Subcontract Act (applied as before under Article 2(2) of the Supplementary Provisions of the amending Act) |
| Provision violated | Article 4(1)(iii) of the pre-amendment Subcontract Act (prohibition of reducing subcontract payments) |
| Subcontractors affected | 13 |
| Work entrusted | Manufacture of hinge parts and similar items that the company sells or has contracted to manufacture |
| Amount deducted | JPY 11,086,175 in total |
| Period of deductions | June 2024 to April 2025 |
| Repayment | Full amount paid on 13 October 2026 |
Facts of the violation
According to the "Reasons" section of the recommendation, between October 2023 and February 2025 Nishimura entrusted 13 subcontractors with manufacturing hinge parts and similar items that it sells or has contracted to manufacture. At the time, Nishimura was a corporation with stated capital of more than JPY 10 million and not more than JPY 300 million, and the 13 subcontractors were individuals or corporations with stated capital of JPY 10 million or less.
Between June 2024 and April 2025, in order to secure its own profits, Nishimura deducted from the payments for these entrustments a total of JPY 11,086,175, calculated by applying a fixed rate to the payments, under the label of "cooperation money".
On 13 October 2026 Nishimura paid the 13 subcontractors the full JPY 11,086,175 it had deducted.
The recommendation finds that Nishimura made manufacturing entrustments under Article 2(1) of the pre-amendment Subcontract Act, that it was a parent business operator under Article 2(7)(ii), and that the 13 businesses were subcontractors under Article 2(8)(ii). It states that Nishimura reduced subcontract payments without any reason attributable to the subcontractors, which falls under Article 4(1)(iii) of the pre-amendment Act and violates that paragraph.
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Try for free →Explanation in the published materials
The JFTC's summary of the recommendation states, by way of background, that Nishimura began the deductions about 15 years ago, when it changed its method of payment from promissory notes to cash.
The summary explains that, under the Subcontract Act, where payment was temporarily switched from promissory notes to cash at the subcontractor's request, deducting an amount equivalent to short-term borrowing interest (an "interest deduction") had been permitted. It states that this case did not qualify as a temporary change because cash payment had continued for a long period after the change, and that under the Toritekihou, which prohibits payment by promissory note, such interest deductions are not permitted.
The summary also explains that the Subcontract Act fully prohibits paying a reduced amount from the price fixed at the time of the order where the subcontractor is not at fault, and that this is a violation of Article 4(1)(iii) regardless of the label (such as discounts, sponsorship contributions or rebates), the method or the amount, and even if the subcontractor has agreed to it.
Content of the recommendation
The recommendation requires Nishimura to:
- Confirm by board resolution that
- - deducting from subcontract payments an amount calculated by applying a fixed rate to the payments, in order to secure its own profits, falls under Article 4(1)(iii) of the pre-amendment Subcontract Act and violates that paragraph; and
- - it will not in future reduce payments for manufacturing entrustments and other work without a reason attributable to the small and medium-sized contractor
- Take the measures necessary to improve its internal systems, such as providing Toritekihou training to its purchasing staff, so that it does not in future reduce such payments without a reason attributable to the small and medium-sized contractor
- Make its officers and employees fully aware of the fact that it received the recommendation, the content of the recommendation (excluding the appended table), and the measures taken under items 1 and 2
- Notify its small and medium-sized contractors of the fact that it received the recommendation, the content of the recommendation (excluding the appended table), and the measures taken under items 1 to 3
- Report promptly to the JFTC the measures taken under items 1 to 4
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Statutory wording
According to the statutory extracts in the published materials, Article 5(1) of the current Toritekihou (the Act on Preventing Delay in Payment of Consideration to Small and Medium-sized Contractors for Manufacturing Entrustment and Other Work) provides that a commissioning business operator that has entrusted manufacturing or other work to a small and medium-sized contractor must not engage in the acts listed, and item (iii) lists "reducing the amount of the payment for the manufacturing entrustment or other work without any reason attributable to the small and medium-sized contractor".
According to the current text on e-Gov, item (ii) of the same paragraph lists failing to pay the payment after its due date, and states in parentheses that this includes delivering a promissory note in payment, among other things.
As to recommendations, according to the current text on e-Gov, Article 10(1) of the current Toritekihou provides that, where the JFTC finds an act violating Article 5, it is to recommend that the violating commissioning business operator pay the amount reduced or take other necessary measures.
Which law applies
According to a note in the announcement, the Subcontract Act was amended by Act No. 41 of 2025 and became the Toritekihou. The announcement explains that the pre-amendment Subcontract Act applies to manufacturing entrustments made up to December 2025, and the Toritekihou applies to those made from January 2026.
The published materials set out the following correspondence of terms:
| Pre-amendment Subcontract Act | Toritekihou |
|---|---|
| Subcontract payment | Payment for manufacturing entrustment or other work |
| Parent business operator | Commissioning business operator |
| Subcontractor | Small and medium-sized contractor |
Sources
- JFTC, "Recommendation to Nishimura Co., Ltd." (13 November 2026, Japanese) https://www.jftc.go.jp/houdou/pressrelease/2026/nov/261113_kinki_toriteki.html
- JFTC, announcement, summary, statutory extracts and recommendation (PDF, Japanese) https://www.jftc.go.jp/houdou/pressrelease/2026/nov/261113_kinki_toriteki.pdf
- e-Gov Laws and Regulations, Act No. 120 of 1956 (Toritekihou) https://laws.e-gov.go.jp/law/331AC0000000120
This page is compiled from material published by government agencies and from statutory text. Please consult a lawyer where a decision is needed on a specific matter.