Japan FTC Aims to Protect Carriers from Miserly Shippers; Revision of Subcontractor Law to Be Sought

The Yomiuri Shimbun

6:00 JST, May 23, 2024

The Japan Fair Trade Commission is to work toward a revision of the Subcontract Law to crack down on unfair transactions between shippers and transport firms, it has been learned. The move is being taken in light of the “2024 problem” facing the logistics industry, in which a shortage of truck drivers is expected to reduce transportation capacity.

Transactions between shippers and transport firms are currently exempt from the Subcontract Law. The JFTC seeks to amend the law to make it applicable to such transactions.

Should the law be amended, it will allow for a swift crackdown on shippers who abuse their superior bargaining power to keep the transaction prices they pay to transport firms unfairly low.

The planned revision of the law is expected to make it easier for transport companies to pass on cost increases in transaction prices.

A study group of the Liberal Democratic Party, among other groups, will soon suggest revisions to the law to the government. The government is eyeing amending the law at the ordinary Diet session next year.

Although shippers are often in a stronger position than transport companies, the Subcontract Law states that there is no clear subcontractor relationship between them.

For example, when a consumer purchases appliances, the appliance retailer, acting as the shipper, arranges for a carrier to deliver the goods to the consumer’s home for a fee. Under the Subcontract Law, the shipper merely “mediates” the transaction between the consumer and the carrier, which is not considered a subcontracting relationship.

The same is true when a company purchases parts from a parts manufacturer with whom it has a business relationship. The parts manufacturer, acting as the shipper, arranges for a carrier to deliver the product to the company, and the transaction is exempt from the Subcontract Law.

The government intends to amend the law so that transactions between shippers and carriers will be considered subcontracting relationships, allowing the JFTC to aggressively crack down on unfair transactions between shippers and carriers.

The proposed change in the law is also intended to create an environment in which carriers can pass on increased costs through transaction prices and secure funds for wage increases. This will help alleviate the driver shortage facing the logistics industry.

In terms of the percentage of cost increases passed on to transaction prices, trucking had the lowest rate among major industries at 24%, according to a Small and Medium Enterprise Agency survey.

There have been cases where shippers refuse to accept transaction prices reflecting increases in labor costs and gas prices, or where shippers refuse to pay for the time drivers must wait at loading and unloading locations for the convenience of the shipper, according to the agency.