I. Introduction
This article explores prospects Large Retail Chains Regulation in Georgia through competition law. Using the Japanese antimonopoly model as a reference, it analyzes potential approaches for balancing market power between suppliers and retail networks in Georgia. has recently become an active topic of discussion in Georgia, I decided to introduce several international antitrust approaches that illustrate how this issue is addressed in different advanced legal systems.
In a number of European countries, special regulatory regimes already exist for large-scale retail operators, and in the Georgian legal debate it has practically become common practice to compare domestic policy proposals with European legislation and directives.
Naturally, the law of the European Union and its member states remains one of the main reference points for legal reforms in Georgia. However, analyzing alternative perspectives can be equally valuable.
In this regard, the Japanese model deserves particular attention.
The Japanese legal system offers an alternative approach that is conceptually clear, institutionally streamlined, and legally sophisticated. Importantly, it regulates commercial relationships within the retail sector directly within the framework of competition (antimonopoly) law.
Accordingly, this article introduces the key principles and characteristics of the Japanese regulatory model governing the relationship between suppliers/distributors and large retail chains, presenting it as a possible conceptual alternative within the Georgian legal debate.
II. The General Structure of the Japanese Model
In Japan, the regulation of large retail chains is not established through a separate sector-specific statute.
Instead, the system is integrated into the competition law framework through the Act on Prohibition of Private Monopolization and Maintenance of Fair Trade (Antimonopoly Act – AMA). Enforcement is carried out by Japan’s competition authority, the Japan Fair Trade Commission (JFTC).
The Antimonopoly Act grants the JFTC the authority to define both:
- the parameters that qualify an undertaking as a large-scale retail operator; and
- the specific practices that may be considered unfair commercial practices prohibited under competition law.
On this basis, the JFTC adopted in 2005 the regulation titled:
“Designation of Specific Unfair Trade Practices by Large-Scale Retailers Relating to Trade with Suppliers.”
This instrument constitutes the core of Japan’s regulatory model for large retail chains and aims to balance the asymmetry of bargaining power between suppliers/distributors and retail networks.
The system developed under these legal instruments is based on several key principles:
- A company is classified as a large-scale retail chain according to predetermined objective criteria, mainly financial turnover and retail floor space.
- Once qualified as such, the retailer becomes subject to specific behavioral prohibitions defined in advance.
- The legality of particular conduct is assessed within the context of the specific commercial relationship.
- Enforcement is carried out administratively by the competition authority, meaning that there is no separate retail-sector regulatory body.
- The system does not impose administrative price controls.
III. Definition of a Large Retail Chain
Under Japanese law, a large retail chain is defined as a business entity engaged in the retail sale of everyday consumer goods whose:
- annual turnover reaches at least 10 billion yen (approximately USD 65 million), and
- operates retail facilities with a total floor space exceeding certain thresholds:
a) Tokyo special wards and major cities: 3,000 m² or more
b) Other municipalities: 1,500 m² or more
Importantly, this definition includes not only traditional supermarkets and department stores, but also:
- specialized large retail chains (electronics, clothing, DIY stores)
- pharmacy chains
- other large retail outlets.
Thus, unlike the Georgian approach, the Japanese system does not require defining the relevant market or assessing dominance through complex competition law tests.
Instead, once an undertaking falls within the definition of a large retail chain, the special antitrust regime automatically applies.
In this sense, the Japanese model establishes an objective threshold-based legal regime designed to prevent the abuse of market power by large retailers even in the absence of classical dominance.
IV. Prohibited Practices for Large Retail Chains
Japanese legislation specifies a number of practices that are prohibited in the relationship between large retail chains and their suppliers.
The 2005 JFTC designation identifies ten practices that are considered per se violations of Japanese antimonopoly law. Several key examples include the following.
1. Unjust Return of Goods
Large retail chains are prohibited from returning goods to suppliers after purchasing them, except in strictly limited circumstances.
In this context, the concept of “return” is interpreted broadly. It includes not only the physical return of goods but any practice that effectively shifts commercial risk back to the supplier.
Examples include:
Conversion of a Purchase Agreement into a Consignment Arrangement
If goods have already been purchased under a standard sales contract, ownership and resale risk should lie with the retailer.
If the retailer subsequently demands that the transaction be converted into a consignment arrangement, the commercial risk effectively shifts back to the supplier.
Example:
A supermarket purchases 1,000 units of a product and therefore assumes the risk of selling those goods. Under a consignment model, however, the retailer only pays for the goods actually sold and returns the remaining stock.
Forced Product Substitution
Retailers may also attempt to force suppliers to replace slow-selling goods with more popular items.
Example:
A supplier delivers Product A to the retailer. When sales do not meet expectations, the retailer demands that Product A be taken back and replaced with Product B.
Economic Logic Behind the Prohibition
The economic rationale behind this rule is straightforward.
In a purchase contract, commercial risks are divided between the parties:
- the supplier assumes production and delivery risks,
- the retailer assumes sales and inventory risks.
If retailers were allowed to shift these risks back to suppliers after purchase, the institution of sale would effectively lose its meaning.
In such a situation, the retailer would operate not as a genuine retailer but as an intermediary protected from commercial risk, while still controlling product selection within its network.
This could seriously destabilize commercial relationships and create significant economic uncertainty for suppliers, especially those heavily dependent on a particular retail chain.
Therefore, Japanese law interprets the concept of “return” broadly to include not only physical restitution but also legal and economic arrangements producing equivalent effects.
2. Unjust Receipt of Economic Benefits
Large retail chains are also prohibited from obtaining economic benefits from suppliers without a legitimate commercial basis.
This prohibition includes not only direct monetary demands but any arrangements that impose additional economic burdens on suppliers.
Examples include:
Entry Fees
A retailer may demand a payment from suppliers as a condition for placing their products on store shelves, even though such fees do not exist in normal wholesale practice.
Disproportionate Marketing Contributions
Retailers may demand that suppliers finance advertising campaigns that primarily promote the retailer’s brand rather than the supplier’s product.
Other examples may include:
- excessive allocation of logistics or IT costs
- unjustified bonuses unrelated to performance.
Even if such arrangements formally appear in contracts, they may still be considered unlawful if they arise from economic pressure or are clearly disproportionate.
Economic Rationale
The economic reasoning behind this prohibition mirrors that of unjust returns of goods.
Commercial relationships should reflect a fair distribution of risks and benefits. If large retailers systematically impose additional financial obligations on suppliers, they may effectively shift part of their operational costs onto suppliers, thereby gaining an indirect competitive advantage over other retailers.
For this reason, Japanese regulation focuses not on the formal structure of the demand but on its economic substance.
If the benefit demanded is disproportionate, lacks a legitimate commercial basis, or reflects a clear imbalance in bargaining power, it may be classified as Unjust Receipt of Economic Benefits.
3. Other Prohibited Practices
Japanese law also prohibits additional unfair practices by large retail chains, including:
- Unjust Consignment Contracts
- Forcing Suppliers to Lower Prices for Bargain Sales
- Refusal to Receive Specifically Ordered Goods
- Unjust Assignment of Work to Employees of Suppliers
- Unfavorable Treatment in Response to Refusal
- retaliation against suppliers for contacting the competition authority.
V. Sanctions for Violations
In the Japanese model, enforcement and sanctions are fully integrated within the competition law framework and administered by the JFTC.
The authority may impose several measures.
1. Cease-and-Desist Orders
The JFTC may require a retailer to immediately cease the unlawful conduct, amend or terminate problematic contracts, and introduce internal compliance mechanisms.
2. Administrative Fines
Financial penalties may also be imposed. The amount is calculated based on factors such as:
- duration of the violation
- financial turnover
- magnitude of harm.
3. Public Announcement
Violations are typically publicly announced by the JFTC.
In Japan, reputational responsibility carries significant weight, and public disclosure can have substantial economic consequences for the brand involved.
4. Compliance Improvement Obligations
Companies may also be required to introduce internal compliance systems, appoint responsible officers, conduct training, and submit periodic reports.
5. Civil Liability
Although enforcement is primarily administrative, injured suppliers may bring civil claims for damages and use JFTC decisions as evidence of unlawful conduct.
VI. The Georgian Context
In Georgia, the conduct of large retail chains is currently assessed exclusively within the framework of competition law.
This means that conflicts between suppliers and retail networks are evaluated under standards related to:
- market power
- unfair commercial practices
- abuse of dominance.
Consequently, managing legal risks in this sector requires a deep understanding of competition law and strategic legal analysis.
For businesses – both retail chains and suppliers – it is important to assess in advance whether contractual structures, bonus systems, discount policies, and commercial arrangements comply with competition law requirements.
Practice shows that legal risks often arise not from clear violations but from poorly structured commercial negotiations.
Effective legal support in competition law therefore includes:
- preventive compliance assessments
- representation in administrative proceedings
- strategic protection of business interests.
This field requires not only knowledge of the regulatory framework but also an understanding of the economic context of market power imbalances and the complex legal tests used to evaluate them.
