BID RIGGING RIGGED ACROSS THE BOARD
KEYWORDS: ANTITRUST, ANTIMONOPOLY, FTC, FAIR TRADE COMMISSION

The key activity of the Japanese Fair Trade Commission in 2004 was hitting at bid rigging in Japanese government contracts. Unfortunately, the practice has become so wide spread that it almost appears to be standard operating procedure. Moreover, in that sense it involves the cooperation of insiders from the government leaking information on the maximum price the government will pay for contracts. In an amazingly high percentage of such contracts it was revealed that almost all successful bids were at 97%-99% of the maximum price the government was willing to pay, utterly defeated entire purpose of competitive bidding. It appears that the leak goes out and the members of the relevant group of bidders not only set the price, they divide up who gets to win the contract. Again, the practice has become so widespread that it looks like standard operating procedure to completely defeat the whole purpose of competitive bidding. For example, the government announced that the Fair Trade Commission would be investigating over 5000 government contracts in which the winning bid matched exactly the maximum price the government was willing to pay. As the maximum bid was not public, to be held in the greatest trust, the figures smell to high heavens.

The major center of activity for the FTC was the Niigata municipal government bidding, and the Defense Agency. The FTC was less accusatory against the officials of that agency, but it was not as necessary as the number of bidders for its contracts were usually very few, permitting the group to more easily make arrangements among themselves. The FTC found that FDK Corp., Toshiba Battery Co., and Tokan corp had rigged bids on batteries for the agency. The Defense Agency, for the first time sued the companies to get back 700 million yen in illegal profits. The Fair Trade Commission also searched the offices of major tire makers, also accusing them of rigging bids on Defense Agency procurement bids. This came less than a year after the FTC had issued a warning to some of the major tire firms for price fixing on rubber for bridge girders. The Agency spends about 2 billion yen a year on tires. In 2004 the Tokyo High Court convicted nine executives of oil wholesalers after a 1999 investigation by the FTC found they had been rigging bids for jet fuels prices by the agency. The Tokyo High Court in the same case fined those oil wholesalers between 3 and 80 million yen.

The other scandal encompassing the Niigata Municipal Government even involved one of the government officials committing suicide. Following receiving papers from the Fair Trade Commission, prosecutors arrested several Niigata municipal officials and construction company executives. The FTC also issued warnings to 113 construction companies. They participated in Niigata municipal government projects totaling 60 billion yen from 1999 to 2003. The FTC raided the offices of 140 construction companies. According to the FTC investigation the winning bid in these Niigata contracts were 97% to 99% of the maximum government price.

Copyright 2005. All rights reserved Attorney Roderick H. Seeman

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