The Fair Trade Commission has issued a cease and desist order against Japan's largest convenience store franchisor on the grounds of abuse of dominant position. It found that the franchise agreement gave franchisees sole discretion to set product prices, but that the franchisor's employees who supervised the management of the convenience stores had violated the Anti-monopoly Act.
Japan's largest convenience store franchisor has announced that it is being investigated by the Fair Trade Commission for potential violations of the Anti-monopoly Act. The question of the extent to which a franchisor can prohibit franchisees from discounting perishable foods could prompt closer scrutiny of other restrictions in franchising agreements.
The Tokyo District Court has ruled in an unusual case in which a sub-franchisor sought damages from its master franchisor, alleging that the latter's use of trademarks infringed its rights. As the decision shows, master franchisors should ensure that their rights are clearly embodied in express agreements that bind not only the parties, but also their successors.
A number of franchisees have successfully filed suit against their franchisor, claiming that the latter was required to disclose details of its payments to its recommended vendors. Franchisors may be subject to this reporting duty under the Civil Code, even if no such duty is explicitly stipulated in their franchise agreements.
Forum selection clauses in franchise agreements are generally valid in Japan. However, such clauses may not always be enforced by the courts. Therefore, franchisors should be aware of the possibility that lawsuits filed by franchisees may be litigated in the court of the franchisee's place of business, not in the agreed forum, and that a request to transfer the case may be refused.
The newly promulgated Act on the Civil Jurisdiction of Japan over Foreign States allows private parties and states better to predict whether they will be subject to the civil jurisdiction of the Japanese courts. In particular, private individuals seeking to engage in transactions with a foreign state will be better able to ascertain and avoid potential risks related to jurisdictional immunity.