Parallel Imports and the Japan Fair Trade Commission

We review the facts pertaining to some recent antimonopoly cases in Japan involving interference with unauthorized imports, so-called parallel imports, and propose economic explanations for the behavior of the foreign manufacturers in these cases. Japan's intellectual property law provides a mechanism for private obstruction of parallel imports, but under Japan's antimonopoly law as implemented by the Japan Fair Trade Commission (JFTC) such obstruction is per se illegal. To the extent that price discrimination is the rationale for obstruction of parallel imports, the JFTC policy has promoted lower prices and increased economic welfare in Japan. But we argue that in several of the cases we examine the rationale for obstructing parallel imports was to preserve incentives for distributors to invest and innovate and to preserve efficient marketing arrangements that depended upon resale price maintenance.