Court Decision on SMC's Injunction Claims against IAI Corporation for Unfair Competition and Results of Related Cases Abroad



October 3, 2022

On September 13, 2022, the Tokyo District Court issued a decision in a court case in which SMC Corporation ("SMC" or "our") filed an injunction against IAI Corporation ("IAI") for unfair competition (Case No. 2021 (Wa) 5314) (the "Case"). The Court ruled that (i) IAI's product catalogue and other marketing materials which compare IAI's electric actuators and rod-type air cylinders contain false information regarding the performance of certain SMC rod-type products ("SMC Products") and (ii) the false information regarding SMC Products contained in the marketing materials of IAI has caused damage to the reputation of the SMC Products as well as SMC's business and ordered IAI to pay SMC compensation for the harm caused.
In addition, on July 19, 2022, the Administration for Market Regulation in Xuhui District in Shanghai ruled that the advertisements of IAI's Chinese subsidiary ("IAI China") in China comparing IAI's electric actuator and air cylinders, which contain statements that the expected lifetime of an electric actuator is five times that of an air cylinder, are considered to be false or misleading commercial advertisements, and violates Article 10 of the Shanghai Anti-Unfair Competition Ordinance. The Administration for Market Regulation in Xuhi District in Shanghai ordered IAI China to pay a fine of RMB 300,000 and cease all illegal activities.

[Background]
On March 3, 2021, we, SMC, filed a lawsuit against IAI in the Tokyo District Court to seek compensation for the harm caused etc., claiming that IAI's announcements or spreading of false information about the expected lifetime and mileage of air cylinders through electric actuators catalogues published by IAI entitled "ELECYLINDER General Catalog 2020", "ROBO Cylinder Industrial Robot General Catalog 2020", etc. ("Comparative Advertisement") constitutes unfair competition, which falls into the unfair competition under Article 2, Paragraph 1, item 21 of the Unfair Competition Prevention Law in Japan.
[IAI's Response to the lawsuit]
During the lawsuit, IAI took the following actions:
(1) IAI discarded all catalogues containing the Comparative Advertisements as of February 25, 2022, and also deleted the Comparative Advertisements from IAI's online catalogues.
(2) On March 11, 2022, in the Nikkan Kogyo Shimbun, a Japanese industrial newspaper, IAI published an article entitled "Correction of Comparative Advertisements" stating that "When providing an explanation of the electric actuator in our advertisements,
we compared it to an air cylinder (including comparison to Φ25 or Φ32 circular air cylinders) and made inappropriate statements that
the lifetime of air cylinder products are generally inferior to that of our electric actuator products. We hereby apologize for this and
would like to correct this statement. We also have decided to take measures to prevent the recurrence of similar situations in the
future." In addition, IAI posted an article with the same title and content as the article published in the Nikkan Kogyo Shimbun in the
"News" section of IAI's website.
[Summary of the Judgments]
A summary of the Court's decision in this case is as follows:
(1) The description of the expected lifetime of SMC's air cylinder in the Comparative Advertisement by IAI is not based on factual
information.
(2) The statement concerning the lifetime of SMC's air cylinder in the Comparative Advertisement should be considered false information.
(3) Considering that the Comparative Advertisement was posted on the website and was freely accessible by an unspecified number
of people, the extent to which the Comparative Advertisement harmed SMC's business and reputation was not insignificant.
(4) Damages of JPY 2 million should be awarded to SMC in view of the harm caused to their business and reputation by the Comparative Advertisement.

SMC's Code of Conduct stipulates that "we will adhere to a customer-first principle, strive to provide superior products/services", and "we will engage in fair competition".

In light of the above Code of Conduct, the most important reason for bringing this case to the Court was due to the our view that "IAI's comparative advertisement may harm the interests of our customers."

The decision of the Court admitted that IAI's Comparative Advertising was false and that it was an "act of unfair competition." Although IAI had already taken certain measures to remedy the situation, we believe that obtaining the Courts' decision in relation to unfair advertising and product labeling will contribute to fairness in product labeling practices in the mid and long term future, thereby protecting the interests of our customers and fostering a fair competitive environment. As mentioned above, a similar decision was made in China, where administrative authorities have ordered IAI China to pay fines regarding similar types of false advertisements.
We have been cooperating with the investigations conducted by such administrative authorities in China.

SMC will continue to adhere to the customer-first principle, and will continue to take resolute action, including taking legal action, against corporate activities which may be detrimental to the interests of our customers.

On October 3, 2022

SMC Corporation



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