The Tokyo District Court on Friday rejected a complaint by cosmetics retailer Kawachiya Co. that a sales affiliate of Shiseido Co. violated the Antimonopoly Law when it canceled its wholesale contract with the retailer after it began discounting Shiseido products.
While Tokyo-based Kawachiya demanded that Shiseido Sales Co. withdraw cancellation of the contract, the court said the cancellation was reasonable because Kawachiya violated a clause on reselling the products to other retailers.
The Shiseido side argued that Kawachiya not only sold Shiseido products at discount prices to individual customers, but was also selling them wholesale.
According to the complaint, filed in 1994, Shiseido Sales canceled its wholesale contract with Kawachiya, which runs five cosmetics shops in Tokyo, after Kawachiya started to sell Shiseido products at discount prices in 1993.
Kawachiya claimed that Shiseido intended to control the retail price of its products by suspending shipments to the discounter. Shiseido maintained that the discounter violated the contract by selling wholesale.
Shiseido said the clause exists to maintain its brand image and customer safety -- through advice about the appropriate products for each skin type.
Shiseido and other major cosmetic makers make it a rule to have their products sold through sales clerks who serve each customer and explain the products and prohibit the resale of their products to other retailers.
While the firms reason that the rule is to secure customer safety, some discounters have complained to courts and the Fair Trade Commission that the rule is merely a tool to control retail prices.
In rejecting Kawachiya's complaint, the court said the resale ban is reasonable when taking into account the unique nature of cosmetic products, and it does not necessarily violate Article 19 of the Antimonopoly Law, which bans price-binding by manufacturers.