Introduction

Japan's Antimonopoly Act (AMA), introduced in 1947, has been used as a means of regulating the transactions between big corporations and small and medium-sized enterprises (SMEs) in many industrial fields. The purpose of the Act is to institute a framework for competitive behaviour in which SMEs are not merely the object of government protection, but are also encouraged to acquire competitive power by their own efforts.

SMEs make up more than three-quarters of Japan's corporate landscape, and fostering these small and medium-sized businesses has been one of the most important parts of the AMA. The legislation prohibits “unfair trade practices” (Article 19), such as the abuse of a superior bargaining position, and is one of the most important provisions in the Act relevant to SMEs.

The Act Against Delay in Payment of Subcontract Proceeds, etc. to Subcontractors (also known as the Subcontract Act of 1956) is a statute that was enacted as a complement to the AMA, in order to enable immediate action by Japan Fair Trade Commission to regulate the abuse of superior bargaining position. The most important point of this legislation is a requirement that an enterprise has to immediately deliver to its subcontractor a written statement setting forth key parts of the contractual arrangements that have been agreed upon. This can include items such as the nature and contents of work to be performed, the amount to be paid, the date of payment, and the method of payment. This Act also prohibits certain conducts, such as delays in payment (without a valid reason) by main subcontracting entrepreneurs.