Dubbed the ‘Guidelines for Promoting Fair Trade between Food Manufacturers and Retailers’, the guidelines were published by Japan’s Ministry of Agriculture, Forestry and Fisheries (MAFF) with the incorporation of principles from the country’s existing Antimonopoly Act and Subcontract Act.
“The aim is to promote proper and fair transactions between the food manufacturing industry and the retail industry, [and as such] we have strived to make these guidelines as clear and easy to understand as possible,” MAFF stated via a formal statement.
“[For instance], we have highlighted ‘potential problematic cases’ based on the Antimonopoly Act and Subcontract Act, and the ‘desirable transaction actions’ that the food manufacturer/retailer should take to prevent [the former] from occurring.”
Examples of ‘potential problematic cases’ include increased product prices as a result of raw material cost hikes being implemented without discussion, or manufacturers being demanded to produce unreasonable order numbers and being left with wasted product.
‘Desirable transaction actions’ for these include holding proper negotiations and black-and-white agreements, and frequent contact between both parties to confirm production quantities prior to actual manufacturing.
“[Although it may seem that more demands are being put on the sectors], adhering to these guidelines will help the entire food industry by increasing the value of the final product, reducing [the risk of unethical transactions] and enabling stable transactions to take place in the medium to long term,” said the ministry.
“There are already various movements within the country calling for fair transactions, with recommended guidelines already available for sectors such as tofu and dairy manufacturers – what we have done here is to formally formulate and expand such guidelines to apply to the entire food manufacturing and retail industries.”
Another objective that the government is looking to achieve using these new guidelines is to prevent monopolies, particularly from bigger corporations in what have been deemed ‘dominant bargaining positions’.
“Although the law forbids businesses from using unfair trading methods regardless of the size of the business, when a company is in a ‘dominant bargaining position’, this puts the other party at a disadvantage and makes it difficult to negotiate or trade fairly, and tend to have to accept [disadvantageous terms],” said MAFF.
“[An example of this would include] the a large-scale retailer misusing its influence against a food supplier, e.g. using the so-called buying power to request unreasonable sponsorships and rebates or unreasonable returns, [or] to change the terms and conditions of the transaction that are unrelated to the prior contract or have been agreed on in advance.
“[Such actions are considered] abuse of the dominant bargaining position, where one party’s trading position is superior to the other party - The Antimonopoly Act aims to prevent the abuse of this ‘dominant bargaining position’ [and these new guidelines] look to strengthen that.”
Trade secrets
The guidelines also highlighted the delicate issue of handling trade secrets, calling for retailers in particular to pay attention to their handling of these.
“The Unfair Competition Prevention Law stipulates that the act of illegally acquiring ‘trade secrets’ such as technology and know-how owned by another business [such as recipes and food technologies by a food manufacturer], and the act of using and disclosing these illegally acquired secrets are defined as ‘unfair competition’,” the guidelines stated.
“In addition to being subject to claims for suspension and compensation for damages, some of these malicious acts are also subject to criminal penalties.
“It is thus hoped that retailers will deepen their understanding of the management and handling of any trade secrets, and give due consideration to the handling of these so as not to cause any loss to [any] businesses or subcontractors they work with.”
Interestingly, the loss of ‘trade secrets’ has been one of the top areas of complaint and concern highlighted by the New Zealand food industry in its quest to establish a local Grocery Code of Conduct, with various smaller food brands having previously expressed concerns over local supermarkets learning their know-how and being able to transfer these into private label products.
In this sense, it bodes well for the future of Japan’s local food and grocery sectors that these new guidelines can serve as its own Code of Conduct of sorts, which has been published and implemented much more quickly and decisively than others have.