Japanese Medicine Businesses

1223rd Commissioners' Meeting (2015)

Case:

The FTC initiated an ex officio investigation into suspected violation of the Fair Trade Law by domestic Japanese medicine businesses for failing to reflect foreign exchange difference after Japanese Yen depreciation

Keyword(s):

Japanese Yen depreciation, medicine

Reference:

Fair Trade Commission Decision of Apr. 15, 2015 (the 1223rd Commissioners' Meeting)

Industry:

Raw Material Medicine Manufacturing (2001), Drugs and Medicines Manufacturing (2002)

Relevant Law(s):

Article 15 of the Fair Trade Law

Summary:

1. The media reported that the Japanese Yen continued to depreciate but related businesses insisted on not lowering the prices of their products. To find out whether Japanese pharmaceutical businesses were in violation of the related regulations in the Fair Trade Law, the FTC initiated an ex officio investigation.

2. The FTC’s investigation showed that Japanese medicines sold in the country came from various sources and import prices could be quoted in USD, TWD or JPY. Furthermore, domestic Japanese medicine businesses also had to take into account the costs of their imported raw material, personnel costs, as well as advertising and marketing expenses. Depreciation of the Japanese Yen was not the only factor they shall take into consideration. In addition, market competition in the retail market of Japanese medicines was fierce. Furthermore, retailers could even import Japanese medicines on their own and had the independence and capacity to decide their retail prices. Watson’s and Cosmed, for example, did lower the retail prices of some Japanese medicines they sold.

3. Domestic Japanese medicine businesses adopted different price strategies and made price adjustments at various points of time. There was no price consistency at all. Each business competed on price, quality and service. In other words, both of their market positions and advertising appeals were dissimilar and the market competition was quite intense. There was no evidence indicating any domestic Japanese medicine businesses having established mutual understandings to make price decisions jointly or create price consistency. Hence, it was difficult to conclude that any domestic Japanese medicine businesses had violated the related regulations in the Fair Trade Law. However, the FTC will continue to keep a close watch on the developments in the domestic medicine market.