TOKYO - Japan's largest convenience store chain, Seven-Eleven, said it may appeal a finding by the country's anti-monopolgy watchdog that it had illegally pressured franchise stores not to cut the prices of food items.

Japan's Fair Trade Commission said in a statement on Monday that Seven-Eleven Japan, a unit of Seven & I Holdings, had forced stores to stop discounting food items by implying it would terminate the contracts of those that did not comply.

The FTC ordered the retailer to halt such practices, the culmination of an investigation that had been widely reported by media and a factor impacting Seven & I's stock price.

Convenience stores in Japan have so far largely avoided cut-throat price competition with consumers willing to accept price gaps with supermarkets in return for convenient locations and long operating hours.

But some stores have tried to cut prices of items close to the end of their shelf-life to minimise inventory losses.

Seven-Eleven, which competes with Lawson Inc and FamilyMart Co Ltd, says it has been advising such stores against markdowns, explaining they could trigger price competition and hurt overall sales in the end.

Under Japanese competition law, advising stores about pricing strategy is not illegal.

Ryuichi Isaka, Seven-Eleven Japan president, said while there may have been exessive advising by the chain's field officers on some franchisees, the company has not restricted stores' pricing decisions.

We would like to carefully study (the FTC's order) and decide whether to accept or not, Isaka said.

A Seven-Eleven Japan spokesman said the company may appeal the FTC's decision.

Isaka said the vast majority of the chain's franchisees were against dicounting prices on food items close to expiration date for fear of triggering a price war, and therefore it was unlikely such discounting would become prevalent at its 12,000 stores.

Prior to the announcement shares of Seven & I Holdings closed down 0.4 percent at 2,315 yen. The benchmark Nikkei average .N225 rose 0.4 percent. (Reporting by Taiga Uranaka; Editing by Dan Lalor)