Photo/Illutration The website of Rakuten’s online shopping mall (Captured from the internet)

The Fair Trade Commission (FTC) has warned online giant Rakuten Inc. that the company’s new free shipping policy could violate the Anti-Monopoly Law as it may constitute "abuse" of its sellers, according to sources.

The e-commerce retailer has announced a plan to start free shipping on all orders of 3,980 yen ($36) or more, including tax, starting in mid-March next year.

For shipping addresses in Okinawa Prefecture or remote islands, the minimum purchase to qualify for free shipping will be 9,800 yen, Rakuten said in October.

However, the company now needs to overhaul the plan.

Rakuten’s policy was apparently prompted by increased competition from other e-commerce companies, particularly chief rival Amazon Japan.

Under the new plan, merchants on the Rakuten online shopping mall would shoulder the shipping costs.

Hiroshi Mikitani, chairman and CEO of the company, said in a news conference in August, “Not everyone is happy (about the free shipping), but almost all the sellers will enjoy an increase in distribution volume.”

At the same time, Rakuten consulted the FTC to see if the new policy would not violate the law.

By December, the FTC informed the company verbally that it “possibly violates the law,” sources said.

The FTC apparently raised concerns over the possibility that the company could force merchants to bear the brunt of shipping fees, saying the policy could be considered "abuse of a dominant bargaining position."

Rakuten officials have explained to the sellers that free shipping will make it easier for customers to grasp the final sales price, pull in more traffic to the sites and lead to increased sales.

Rakuten has also implied that the sellers should tack on the shipping costs to the sales prices. But some merchants who strongly opposed the plan said it would force them to eat those costs.

“It is difficult to estimate shipping costs without knowing the shipping address and add them to the sales price,” one seller said.

“Once we raise the sales price, the item will drop in an online search ranking,” another said. “Then we won’t be able to compete against major sellers who can shoulder shipping costs without raising their sales prices.”

Because it is unclear if the free-shipping policy would boost sales, the FTC apparently concluded that the policy could impose an enormous burden on sellers if there is no increase in sales.

The central government has tightened regulations against giant IT companies called "platformers" such as Rakuten, which brings together merchants and customers in a marketplace.

The FTC published a report in October in which the authority raised concerns over a practice in which platformers arbitrarily change agreements with sellers, among other issues.

Based on the report, the FTC has more closely scrutinized these companies. Warning Rakuten over its free shipping policy is believed to be an example of the FTC’s stance on the issue.

A Rakuten official admitted that the company has received such a notification from the FTC.

“Free shipping is one of the Rakuten shopping mall’s major policies. We are discussing ways to do it legally,” the official said.