new capitalism in the Kishida administration and competition policy in Japan | White & Case LLP
Fumio Kishida was appointed Prime Minister of Japan on October 4, 2021, and the Kishida administration was formed on the same day. They target the “new capitalism” based on the concept of a “virtuous cycle of growth and distribution” and “the development of a new society after the COVID-19 pandemic”, in particular by strengthening competition policy to promote fair competition.
On October 4, 2021, Fumio Kishida was appointed 100th Prime Minister of Japan and was re-elected 101st Prime Minister of Japan on November 11, 2021. The Kishida administration established the seat of the new capitalism to achieve the “new capitalism” based on the concept of “virtuous cycle of growth and distribution” and “the development of a new society after the COVID-19 pandemic” and began discussions on October 26, 2021. Currently, there is a movement in the world to build a new capitalism that emphasizes sustainability and “people” and leads to new investments and growth. The Kishida administration aims to lead this movement.
On November 8, 2021, the Kishida administration announced “The Urgent Proposal -“ The New Capitalism ”for the Future and Its Launch” (“Proposal”).1 The proposal consists of two main pillars: growth strategies and distribution strategies. This article focuses on strategies specifically related to competition policy in Japan.
I. Growth strategies
Growth strategies include: (i) promoting a nation of science and technology; (ii) revive the dynamism of Japanese companies, by providing in-depth support to start-ups, leaders of innovation; (iii) revitalize local regions and launch the “Digital Garden City Nation Concept” to connect with the world; and (iv) economic security.
Promotion of digital transformation (DX) is one of the growth strategies for promoting a nation of science and technology. In this context, the proposal suggests improving the cashless payment environment by making settlement fees transparent. Interchange fees (that is, fees paid by a settlement company that contracts with a store to a settlement company that contracts with a user when payment is made by credit card) apparently account for 70 percent of merchant credit charges. The Japanese Fair Trade Commission (“JFTC”) is conducting an informational investigation into the status of disclosure of standard rates, etc. 2022). In addition to the JFTC, other relevant ministries and agencies (for example, the Ministry of Economy, Trade and Industry (“METI”) will examine effective ways of disclosing information to develop the payments society. cashless.
Regarding the revival of the dynamism of Japanese companies and extensive support for start-ups, the Proposal aims to strengthen competition policy to promote fair competition. In order to advance New Capitalism, it is important to create a thriving middle class, comprising small and medium enterprises, contractors and start-ups. The effectiveness of the advocacy function of the JFTC should be enhanced, especially with regard to appropriate transactions for start-ups and SMEs as well as in infrastructure sectors such as digital markets (e.g. telecommunications) and energy markets (eg electricity). The JFTC should be strengthened in a targeted and systematic manner through qualitative improvement (eg improvement of professional knowledge) as well as quantitative improvement (eg drastic expansion of the organization and staff).
Previously, the JFTC and METI jointly formulated the “Guidelines for Business Partnership Contracts with Startups” on March 29, 2021.2 The guidelines have been prepared to aim to present ideal approaches for contracts with startups. In addition, on December 23, 2021, the JFTC and METI released draft “Guidelines for Business Collaboration with Startups and Investing in Startups” and began soliciting comments from the public.3. Comments are due by 6:00 p.m. on January 21, 2022 JST.
In addition to the above, the proposal aims to promote transparency and fairness in the digital advertising market. Digital advertising is an important infrastructure that supports the digital market. As the market becomes more and more oligopolistic, various issues have been reported, such as unilateral rule changes by platform operators and bogus claims for advertising costs due to filling the number of ads viewed. In light of these circumstances, the digital advertising market should be added to the scope of the Law on Improving Transparency and Fairness (Law No. 38 of 2020; “TFDPA”). In the context of the TFDPA, the METI designates certain digital platform operators as “Specified digital platform providers” who are subject to the regulations. So far, some operators of full online shopping malls digital platforms selling goods and some operators of digital app store platforms have been designated as the providers of specific digital platforms.4, but not the operators of digital digital advertising platforms. The proposal suggests developing systems of transparency and fairness in the digital advertising market by adding it to the scope of the TFDPA; it aims to require large digital platform operators to disclose details and reasons in advance when changing the rules and to demand a detailed explanation of the risks of getting advertising fees incorrectly.
Any further, review of the initial public offering (IPO) process and the Special Purpose Acquisition Company (SPAC) system is also one of the Growth Strategies in terms of reviving the dynamism of Japanese companies, by providing in-depth support to start-ups, leaders in innovation. Currently, Japan’s rating system is not user-friendly for entrepreneurs who wish to undertake further changes. It was pointed out that the Japanese quotation system is structured in such a way that clients of securities companies, not start-ups, make money and there is not enough money to startups. Specifically in the case of IPOs, a share price on the first day of listing (opening price) tends to be significantly higher than a price (IPO price) at which entrepreneurs have. sold their shares, and entrepreneurs tend to earn less money compared to foreign countries. In light of such a situation, the JFTC should endeavor to understand the reality of the situation regarding the IPO pricing process.
II. Distribution strategies – Strengthen investment in “people” who will bring security and growth
Distribution strategies include: (i) support for strengthening distribution in the private sector, including in the medium and long term, and (ii) strengthening the distribution function in the public sector.
One of the strategies of (i) is to strengthen distribution to non-regular workers through new legislation to protect the self-employed. The COVID-19 pandemic has had a major impact on independents. In order to create an environment where the self-employed can work in all serenity, a new law protecting the self-employed will be submitted to the Diet as soon as possible. At the same time, the execution structure of the JFTC should be developed accordingly.
In this regard, the JFTC and METI, as well as the Cabinet Secretariat, the Agency for Small and Medium Enterprises, and the Ministry of Health, Labor and Welfare have issued the “Guidelines for the Establishment of a safe working environment as a self-employed worker ”on March 26, 2021.5
The proposal states that the headquarters of the new capitalism will compile its concrete vision and plans next spring, and take the initiative in disseminating them to the world. When formulating the plans, the administration of Kishida will organize roundtables as needed and listen carefully to the voices of various stakeholders.
1 The proposal is available in Japanese at https://www.cas.go.jp/jp/seisaku/atarashii_sihonsyugi/pdf/kinkyuteigen_honbun_set.pdf
2 The METI press release entitled “Guidelines on commercial partnership contracts with startups formulated” (March 29, 2021) is available in English at https://www.meti.go.jp/english/press/2021/0329_003.html; the Guidelines are only available in Japanese at https://www.meti.go.jp/press/2020/03/20210329004/20210329004-1.pdf
3 The JFTC press release of December 23, 2021 is available in Japanese at https://www.jftc.go.jp/houdou/pressrelease/2021/dec/211223pressrelease.html; the draft guidelines for public comment are available in Japanese at https://www.jftc.go.jp/houdou/pressrelease/2021/dec/211223_pressrelease2.pdf
4 The METI press release entitled “Designation of Digital Platform Providers Subject to Specific Regulations Under the Act on Improving Transparency and Fairness of Digital Platforms” (April 1, 2021) is available in English at https://www.meti.go.jp/english/press/2021/0401_001.html
5 The JFTC press release of March 26, 2021 is available in Japanese at https://www.jftc.go.jp/houdou/pressrelease/2021/mar/210326.html; the Guidelines are available in Japanese at https://www.jftc.go.jp/houdou/pressrelease/2021/mar/210326free03.pdf