Japan’s FTC wants to protect carriers from greedy shippers; Revision of the law on subcontractors to be applied for

The Japan Fair Trade Commission will work on an overhaul of the Subcontract Law to tackle unfair transactions between shippers and transport companies, it has been learnt. The move comes in light of the “2024 problem” facing the logistics industry, with a shortage of truck drivers expected to reduce transportation capacity.

Transactions between shippers and transport companies are currently exempt from the Subcontracting Act. The JFTC seeks to change the law to make it applicable to such transactions.

Should the law be changed, it will allow swift action against shippers who abuse their superior bargaining power to keep the transaction prices they pay to trucking companies unfairly low.

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

A study group including the Liberal Democratic Party will soon propose revisions to the law to the government. The government is considering amending the law during the regular session of parliament next year.

Although shippers are often in a stronger position than transport companies, the Subcontracting Act 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 subcontracting law, the shipper merely “mediates” in the transaction between the consumer and the carrier, which is not considered a subcontracting relationship.

The same applies when a company purchases parts from a parts manufacturer with which it has a business relationship. The parts manufacturer, acting as shipper, arranges for a carrier to deliver the product to the company, and the transaction is exempt from the Subcontracting Act.

The administration plans to change the law so that transactions between shippers and carriers are considered subcontracting relationships, allowing the JFTC to aggressively crack down on unfair transactions between shippers and carriers.

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

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

There have been cases in which shippers refuse to accept transaction prices due to increases in labor costs and gas prices, or in which shippers refuse to pay for the time drivers have to wait at loading and unloading locations for the shipper’s convenience, the agency said.