Japan: Recent JFTC case clarifying the scope of the Proper Transactions Act: JFTC Proper Transactions Act enforcement update

Significant revisions to Act on Proper Transactions for Small and Medium-Sized Contractors (Law No. 120 of 1956, amended in 2025 (“Proper Transactions Act”)) took effect on 1 January 2026. These changes are now being actively enforced by the Japan Fair Trade Commission (JFTC). On 30 March 2026, the JFTC issued an official recommendation (“Recommendation”) to a Japanese auto parts company (JA) stating that requiring a contract manufacturer to store quality-related documentation and product samples free of charge constitutes a “request for the provision of unfair economic benefits,” even where such storage is clearly contractually stipulated in advance. The JFTC further stated that imposing such a requirement constitutes a violation of the Subcontracting Act — the predecessor to the Proper Transactions Act.