Using exclusive tubing rights to shut out imports — and the JFTC recommendation (2000)

What it means to hold the upstream

It is not enough to read this case as the lapse of a firm drunk on its dominant position. For Nipro, glass tubing was the entrance to the whole business — a line that ran from the start of dealings with Nippon Electric Glass in 1950 to the sole western-Japan agency of 1954. Hold the upstream of a narrow market, sell the processing machinery and have the customer buy the material: the commercial method Sano Minoru described as selling technique before goods is the other face of controlling supply. Open a second entrance in the form of imports and the premise of that method collapses. The instruction served on Naigai can be seen as an attempt to defend the shape of the business itself.

Set against the size of what it was defending, though, what Nipro lost was not small. The ¥133 million awarded is a light sum for a company with consolidated sales around ¥200bn, but the Japan Fair Trade Commission found exclusionary private monopolisation, and the record stayed in the risk section of the annual reports for close to twenty years. The company that had once used its own processing machines to narrow 300 workshops to fifteen was now squeezing a single firm by manipulating price and supply. Between thinning out competitors through technology and closing off their options by cutting supply — both forms of market power — the law has drawn a line. This case had the effect of teaching the party where that line lies.