Japan’s Fair Trade Commission Recommends Measures Against Costco Wholesale

Japan’s Fair Trade Commission (JFTC) has issued recommendations to Costco Wholesale Japan Ltd. following revelations of violations of the subcontract law. The antitrust watchdog disclosed on Tuesday that the company, renowned for its member-based stores across Japan, had engaged in unjust practices, including reducing payments to subcontractors and returning goods unreasonably.

The JFTC’s investigation uncovered instances where Costco Wholesale Japan had significantly reduced payments to subcontractors and returned goods without justification, thereby violating established laws. In response to the probe’s findings, the company has been compelled to pay approximately 35 million yen to 23 subcontractors, encompassing both reduced payments and the value of the returned goods acknowledged by the commission.

According to the JFTC’s report, Costco Wholesale Japan, headquartered in Kisarazu, Chiba Prefecture, east of Tokyo, neglected to remunerate 20 companies responsible for manufacturing ready-made meals and confectioneries under the Costco private brand for discount sales and food samples related to new store openings between November 2021 and October 2023. The cumulative shortfall in payments amounted to around 33.5 million yen.

Furthermore, between November 2021 and December 2023, the company reportedly returned approximately 2 million yen worth of products supplied by 11 subcontractors without conducting proper quality checks. The JFTC posited that such actions were likely carried out unilaterally by Costco Wholesale Japan, exploiting its dominant market position.

The recommendations put forth by the JFTC serve as a stern admonition to Costco Wholesale Japan to rectify its practices and adhere strictly to subcontracting regulations. Failure to comply with these directives could potentially lead to further regulatory action.

Source: Nippon