The Fair Trade Commission (FTC) on Nov. 12 said it will review the so-called “specified designations” rules for five industry categories, including the newspaper industry. The FTC said it might abolish the protective rights system.

The FTC said it would study current validity and alternatives in the aim of reporting by the end of the fiscal year ending next March.

The commission said it has no plan to review the resale price maintenance scheme, in which newspaper companies, publishers and record companies tell retailers and wholesalers what to charge the public for their products. The current system of controlled prices ensures that newspaper agents, bookstores and record shops sell copyrighted works at the same fixed prices.

Responding to the FTC announcement, the Japan Newspaper Publishers and Editors Association (NSK) issued a protest, demanding that the fixed prices remain and arguing that resale price maintenance and “specified designations” protections are inseparable.

Under the Anti-monopoly Act, the FTC designates unfair trade practices but makes 'specified designations' of seven kinds of trade practices or industries, including the newspaper industry, eligible for special consideration and protection. The FTC aims to review the protections for the newspaper industry, school textbook publishing industry, shipping industry, foodstuff packing industry, and the practice of so-called “Open prizes,” or the offering of prizes without the need to buy any products or services.

In 1998, the FTC said it would review the specific designations for the newspaper industry and ever since then, NSK has been negotiating with the FTC on the matter.

In an FTC revision of the specific designations in 1999, it stopped newspaper companies and sales agents from setting “discriminatory prices” and discounting “fixed prices” as unfair trade practices.

It also came out against newspaper companies that supplied affiliated newspaper sales agents a larger volume of copies than ordered. But newspaper publishers were permitted to still set discount prices for supplies to schools as educational materials, supplies to bulk buyers, and “for other legitimate and rational reasons.” The FTC again confirmed the continuation of the resale price maintenance system in 2001.

The FTC says the previous review of specific designations was held in parallel with reexamining the resale price maintenance system. It says no conclusion was reached on specific designations themselves due to the limited scope of the review and the FTC now wants to conduct a full review of the system of specific designations.

NSK Nov.2 response said:

The specific designation for the newspaper industry safeguards and maintains the newspaper delivery system by banning “discriminatory prices,” “discounting of fixed prices” and other conduct.

The resale price maintenance system and the specific designation are inseparable. Any revision of the specific designation may undermine the resale price maintenance system. Newspaper sales agents with weak management could have to close, leading to a collapse of the nationwide newspaper home-delivery system.

The FTC’s announcement comes on the heels of the enactment of the law to promote printed media culture, backed by the public and private sectors. We strongly protest the FTC plan as running against the needs of the times. We demand the maintenance of the existing system.

The following are forbidden trade practices, under FTC designations revised on July 21, 1999.

1. Publishers of daily newspapers shall be forbidden to sell newspapers, directly or indirectly, by setting prices different from the fixed ones or discounting the fixed prices to specific purchasers in specific areas. However, such practices are permitted in case newspapers are used at schools as educational materials, or are directed to bulk purchasers, and if there are legitimate and rational reasons to do so.

2. Newspaper sales agents shall be forbidden to sell newspapers, directly or indirectly, by setting prices different from the fixed ones or discounting the fixed prices to specific purchasers in specific areas.

3. Newspaper publishers shall be forbidden to engage, without legitimate and rational reason, in trade practices, which fall into the following categories, toward newspaper sales agents and thereby put newspaper sales agents at a disadvantage;

(1) Supplying newspaper copies in a quantity larger than ordered by a sales agent. (the act of a newspaper company’s imposition of the purchase of a larger number of newspaper copies than is ordered by its newspaper sales agent.)

(2) Instructing a sales agent to place an order in specific quantity and supplying a padded volume of merchandise to that agent. (the act of a newspaper company forcing a sales agent to pad the order itself.)