Trading on restrictive terms is a category of unfair trade practice under Japan's Antimonopoly Act. It covers a company that deals with a customer, supplier or distributor on conditions that unjustly restrict that partner's business, including whom the partner may trade with and on what terms. The rule exists because contracts can exclude rivals as effectively as outright refusals to deal. In November 2026 the provision was the legal basis for the Japan Fair Trade Commission (JFTC) settlement over how Amazon.co.jp chooses the offer shown beside its "Add to Cart" button.

The legal text

Japan's Act on Prohibition of Private Monopolization and Maintenance of Fair Trade (Act No. 54 of 1947) prohibits unfair trade practices in Article 19. Article 2, paragraph (9) defines them. Five types sit in the statute itself; item (vi) lets the JFTC designate further types by public notice.

The Designation of Unfair Trade Practices, JFTC Public Notice No. 15 of June 18, 1982, uses that power. It lists 15 practices that apply across all industries. Paragraph (12), titled Trading on Restrictive Terms, covers "trading with another party on conditions which unjustly restrict any trade" between that party and its own counterparties, "or other business activities of the said party." Two carve-outs keep the categories separate: conduct caught by paragraph (11), trading on exclusive terms, and resale price restriction under Article 2(9)(iv) of the Act are handled under their own provisions.

The paragraph lists no prohibited clauses. The working test sits in the word "unjustly", which the JFTC reads through the general requirement that an unfair trade practice must tend to impede fair competition. Its September 2008 Microsoft decision described that test as letting the regulator act "at an early stage", before harm reaches the level required for private monopolisation.

How a case is assessed

In practice the JFTC asks who imposes the condition, what it restricts, and what follows for competitors. Market position comes first. The commission's July 22, 2025 approval in the Visa case set out the interpretation in plain terms: "It would be problematic if an influential enterprise in markets enters into a transaction with its trading partners under conditions that restrict their business activities," creating a risk that new entrants or existing competitors may be excluded or lose trading opportunities. The JFTC's Guidelines Concerning Distribution Systems and Business Practices, first issued on July 11, 1991, give a numerical shortcut. After a 2016 revision, a supplier with a market share of 20 per cent or less is normally treated as unlikely to cause harm through non-price vertical restraints, according to Jones Day. The safe harbour does not cover resale price maintenance.

Common restrictions include territorial limits, customer allocation, online sales bans and parity or most-favoured-nation clauses that require a seller to offer a platform terms at least as good as those offered elsewhere.

Effects are then weighed: foreclosure of rivals, higher prices or reduced choice against legitimate justifications such as preventing free riding.

The JFTC can issue a cease-and-desist order under Article 20. It can accept a commitment plan under Articles 48-2 to 48-9, a procedure that took effect on December 30, 2018. Or it can close a case after voluntary changes. No surcharge, the Japanese administrative fine, applies. Surcharges cover only the five statutory types, so designated practices such as trading on restrictive terms carry no financial penalty. PPC Land noted this limit when Japan took its first action against Google in April 2025.

The Amazon Japan case shows how the provision reaches algorithmic conduct. Since September 2019, Amazon's system withheld the Featured Offer, the seller selection next to "Add to Cart", from any seller whose price exceeded the lowest price for the same product on rival shopping sites. When no seller qualified, no offer appeared at all. In the words of the JFTC, as translated in PPC Land's report, "from the consumer's point of view, it is as if the product were not being sold."

The condition was not a contract term. It operated through eligibility for a placement which, in the language quoted in the case, accounts for "the majority of products purchased in the Amazon store." A seller wanting to win that placement had to keep its prices elsewhere no lower than on Amazon. The JFTC identified three harms: reduced pricing freedom for sellers, weaker promotional tools for competing stores, and pressure from sellers on rival stores not to discount.

Under the commitment plan approved on November 11, 2026, Amazon must show the lowest-priced available offer whenever no seller meets its competitive-price threshold. The display must run for five years, under a third-party monitor approved by the JFTC that reports annually. There was no fine, and the JFTC stated that approval is not a finding of a violation.

Origin and evolution

The designation system dates to 1953. The 1982 rewrite produced the modern list, with trading on restrictive terms as paragraph 13. A 2009 statutory amendment moved several practices, including resale price restriction and abuse of a superior bargaining position, into the Act itself so they could attract surcharges. The designation was revised to match, with effect from January 2010, and trading on restrictive terms became paragraph 12.

Early enforcement focused on manufacturers limiting where and to whom dealers could sell. On September 16, 2008, after hearings that began in September 2004, the JFTC ruled that Microsoft's Non-Assertion of Patents provisions, which from January 1, 2001 to July 31, 2004 barred Japanese PC makers from suing over Windows-related patents, fell under the provision.

Platforms followed. On June 1, 2017, the JFTC closed an investigation into Amazon Japan after the company deleted price parity and selection parity clauses from seller contracts. On October 25, 2019, Rakuten's commitment plan removed parity requirements on hotel rates and room allocation in Rakuten Travel contracts, an early use of the new commitment procedure.

The provision then reached search and payments. On April 15, 2025, the JFTC ordered Google LLC to stop requiring Android manufacturers, through Mobile Application Distribution Agreements and revenue-share agreements, to preinstall Google Search and Chrome and to exclude rival search services. The order, the first such action against a major digital platform company in Japan, requires an independent monitor for five years. On July 22, 2025, Visa Worldwide committed to offer card companies a choice of how preferential interchange rates are measured, ending a rule notified in February 2018 and applied since November 2021.

Why it matters for marketers

Search distribution deals decide which engine, and therefore which ad auction, a phone user in Japan reaches first. The Google order covered six Android manufacturers with distribution agreements as of December 2024 and four manufacturers plus a carrier with revenue-share agreements as of July 2024.

Retail media depends on the same mechanism at Amazon. Sponsored Products ads generally run only for offers that hold the Featured Offer, so an eligibility rule tied to external prices also decides which sellers can advertise. German authorities raised the point directly, finding that listings priced outside Amazon's range could lose advertising eligibility.

Japan has since added ex ante rules. The Mobile Software Competition Act took effect in December 2025, and Apple opened iOS in Japan to alternative app marketplaces and payment processing.

Limitations and criticisms

The absence of fines is the main criticism. Amazon's price-linked eligibility rule ran from September 2019 until the 2026 approval without financial consequence in Japan. In Germany, by contrast, the Federal Cartel Office ordered Amazon in February 2026 to stop controlling third-party seller prices and to disgorge €58.8 million.

Commitments raise a second concern. Each approval states that no violation has been found, which leaves no binding precedent and little guidance for other firms. The Amazon procedure ran just seven days from the November 4, 2026 notice to approval, a sign that negotiation happened before the formal stage.

Breadth is a third. "Unjustly restrict" can capture almost any vertical term, and the line between a legitimate quality standard and an exclusionary condition depends on JFTC judgement. Amazon's defence of price checks as protection against overpriced listings is left untested.

What it is not

Trading on exclusive terms. Paragraph (11) covers conditions that a partner not deal with a competitor at all. Trading on restrictive terms covers lesser restrictions, such as on price, territory or listing behaviour.

Abuse of a superior bargaining position. Article 2(9)(v) targets exploitation of a weaker partner, such as unpaid returns or forced contributions, and can carry a surcharge. Amazon Japan's September 2020 commitment to repay suppliers, about $18 million according to Competition Policy International, fell under this heading, not restrictive terms.

Resale price restriction. Article 2(9)(iv) covers a supplier fixing a reseller's price, also subject to surcharge. Parity clauses link prices across channels without fixing them, which is why the JFTC treats them as restrictive terms.

Restrictive agreements in EU and UK law. Article 101 of the Treaty on the Functioning of the European Union targets agreements restricting competition and carries fines of up to 10 per cent of turnover. The Japanese rule needs no agreement in that sense and carries no fine.

Recent developments

The Amazon approval of November 11, 2026 is the provision's most prominent marketing case to date. It came four months after Amazon removed seller performance as a standalone Featured Offer eligibility gate from July 2026, a separate global change. Counting Google and Visa, the JFTC has applied paragraph 12 to search, payments and marketplaces within 19 months, and it remains the general tool for platform conditions outside the new mobile statute.

Timeline

  • 1947 - Antimonopoly Act (Act No. 54 of 1947) enacted.
  • 1953 - JFTC issues its first general designation of unfair trade practices.
  • June 18, 1982 - Public Notice No. 15 rewrites the designation; trading on restrictive terms is paragraph 13.
  • July 11, 1991 - JFTC publishes its distribution systems and business practices guidelines.
  • July 13, 2004 - JFTC recommendation against Microsoft over Non-Assertion of Patents provisions.
  • September 16, 2008 - JFTC hearing decision finds Microsoft's provisions to be trading on restrictive terms.
  • January 2010 - Revised designation takes effect after the 2009 amendments; the practice becomes paragraph 12.
  • 2016 - Distribution guidelines revised; safe harbour set at 20 per cent market share.
  • June 1, 2017 - JFTC closes Amazon Japan parity clause investigation after the clauses are removed.
  • December 30, 2018 - Commitment procedure takes effect.
  • September 2019 - Amazon begins tying Featured Offer eligibility to rival-site prices, according to the JFTC.
  • October 25, 2019 - JFTC approves Rakuten Travel commitment on parity clauses.
  • October 23, 2023 - JFTC opens investigation into Google's Android agreements.
  • April 15, 2025 - Cease-and-desist order against Google LLC under paragraph 12.
  • July 22, 2025 - JFTC approves Visa Worldwide commitment on interchange conditions.
  • December 2025 - Mobile Software Competition Act fully in force.
  • November 4, 2026 - JFTC notifies Amazon Japan of commitment procedures.
  • November 11, 2026 - JFTC approves Amazon Japan's Featured Offer commitment plan with five-year monitoring.

Summary

Who. The Japan Fair Trade Commission enforces the rule against companies with market influence. Recent subjects include Amazon Japan, Google LLC, Visa Worldwide and Rakuten; earlier cases involved Microsoft and distribution networks.

What. An unfair trade practice under paragraph (12) of the JFTC's 1982 Designation of Unfair Trade Practices: dealing with a partner on conditions that unjustly restrict the partner's trade or business, prohibited by Article 19 of the Antimonopoly Act.

When. Designated since 1982 and renumbered in January 2010. Applied to Microsoft in 2008, Amazon parity clauses in 2017, Rakuten in 2019, Google and Visa in 2025, and Amazon's Featured Offer rule on November 11, 2026.

Where. Japan, across all industries, with most recent cases involving online marketplaces, mobile search distribution and card payments.

Why. Contract conditions such as parity clauses, preinstallation requirements and price-linked eligibility can exclude rivals without explicit exclusivity, and the provision lets the JFTC intervene early, though without fines.