2003 JAPAN LAW: FAIR TRADE COMMISSION ACTIVITIES.
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Copyright 2004. All rights reserved Attorney Roderick H. Seeman
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BID RIGGING
The Fair Trade Commission has been fairly active. In one sense its hand was strengthened by legislation taking effect in 2003 prohibiting government officials from cooperating with business interests in bid-rigging on government contracts. Nevertheless, it’s a pretty sad state of affairs when government officials cooperate with business interests to scam the government and tax payers on government contracts. The FTC did indeed utilize the new legislation in going after violators. In January, 2003,  the FTC issued instructions to the City of Iwasmisawa to cease cooperating in bidding with the bidders. It also ordered 126 firms making such bids to cease such activities. Former city employees presently working for construction industry associations in the city apparently were coordinating their bids. The city banned the firms from future bidding on city projects. In February the FTC searched the offices of nearly 20  utility meter makers on suspicions of bid rigging on orders for the Tokyo Metropolitan Government in violation of the Antimonopoly Law. Criminal charges wer filed against the executives of four of the companies. Among the  makers was Kimmon Mfg, which had been hit by the FTC with criminal charges in 1997. In that case of bid rigging as well, 25 firms were hit with criminal charges from the FTC and ended up paying fines of 5-9 million yen.  In July, 2003 another dozen firms were searched by the FTC for suspected bid rigging on sewage pumps orders by Tokyo and Osaka city governments, among others. In this case, such major firms as Hitachi, Mitsubishi Heavy Industries and Kubota were investigated. Tokyo alone in 2002 placed orders of nearly 7 billion yen for sewage pumps. Likewise, in October over 100 firms were searched by FTC investigators in Niigata City where suspicion was strong that city officials were illegally involved in the bid rigging. Similar warnings were issued to 45 companies in Nagano prefecture to cease their bid rigging for measuring devices and construction consulting. In December 2003 the FTC searched the offices of 20 construction companies suspected in bid rigging on pre-stressed concrete for highway and other projects. In November prosecutors arrested the chief of the Nagoya City Water Works Bureau and the chief of the Nagoya City Road Works Bureau for conspiring to rig the bids for the projects under their supervision. The officials allegedly guided the construction companies in preparing their bids and apparently had done so for years.

In  proposed new legislation one of the key new elements is to assist new firms to enter markets characterized by “essential facilities” usually under the control of entrenched giants. An example of this problem can by illustrated by the FTC’s moves against the NTT East, a subsidiary of the NTT holding company, which dominates the telecommunications industry, and certainly telecommunications facilities in Japan. In July, 2003 the FTC raided the head office of NTT East as well as other offices on suspicions that the company was blocking competitors from entering the high speed internet business using its lines. NTT East is required by law to open its communications facilities to other telecommunications firms permitting access to circuits linked to households and those connecting phone relay stations.

This was the third time the FTC had gone after NTT. The first warning was in 2000 and another in 2001.

Finally, in December 2003, following the two above warnings, the FTC issued a ceased and desist administrative order against NTT. The FTC claimed that NTT was blocking the entry of competitors. Basically it noted that it charged its competitors fees averaging on the level of 5000 yen per month per household customer for optical fiber service, while NTT East itself charged its retail customers fees on the level of 4000 yen per month. With this strategy NTT East had achieved a 90% market share. The FTC was also alleging  that NTT East was using its subcontractors to lure customers away from its competitors. With this FTC order the company is ordered to stop such  violating activity and if such activities are repeated, etc or there are other methods of bad faith, the FTC can seek criminal charges. Originally NTT East had charged 9000 yen per month,  The price reduction plan was announced as part of improvement measures following administrative orders from the Ministry of Public Management, Home Affairs, Posts and Telecommunications, which has jurisdiction over the company.

NTT East rejected the cease and desist order of the FTC and declared it would fight it out at the administrative hearing. The Ministry of Public Management, Home Affairs, Posts and Telecommunications, also expressed displeasure at the FTC’s interference in its sphere of influence.