Wednesday, October 6, 2004
Japan raids 40 steel, engineering firms
Mariko Sanchanta / Tokyo October 06, 2004
Companies suspected for rigging bids for government projects.
Japan's Fair Trade Commission (FTC) searched the offices of 40 top steelmakers and heavy machinery companies for suspected bid-rigging, in one of the most high-profile raids conducted by the regulatory watchdog this year.
The FTC raided Mitsubishi Heavy, Nippon Steel, Ishikawajima-Harima Heavy Industries and others for suspected collusion regarding the construction of steel bridges for both the transport ministry and prefectural governments.
The agency said today that the group of companies jointly determined which firm would win an upcoming order. All of the other firms involved would then conspire to lodge intentionally higher bids.
Though instances of bid-rigging on public works projects, or dango, have become less prevalent compared with the construction-boom days of the bubble era, observers say the practice is still alive and well in Japan.
"Many say that since the public works budget has been drastically reduced, the competition for projects has become more intense," said one FTC official today.
Certain construction groups have claimed the dango is based on mutual benefit, enabling them to avoid excessive competition, maintain high prices and ensure all members can share jointly in the government's diminishing public works projects.
The FTC will issue warnings to the companies that are found to have participated in bid-rigging. If any firm opposes the decision, the case will move to a public hearing.
Companies that admit to being guilty will pay a fine, which is a maximum of 6 per cent of their total bidding revenue. The FTC said this particular case could take anywhere from six months to a year before a definitive conclusion is reached.
The crackdown comes as the FTC moves to strengthen Japan's anti-monopoly law, in what amounts to its most radical changes in more than 25 years.
The FTC's mandate is to toughen Japan's competition policy, which critics say has lagged behind international standards for years.
Competition policy in Japan has historically been subordinated to the advancement of private sector interests, a consequence of the country's rapid post-war industrialisation.
The FTC is proposing to amend the anti-monopoly law by increasing the fines imposed on companies that participate in collusive activities and bid-rigging. The bill also calls for a leniency policy granting immunity to the first company that withdraws from a bid-rigging scheme and reports it to the FTC.
Keidanren, Japan's most influential business lobby and a strong backer of the ruling Liberal Democratic party, has remained staunchly opposed to many of the proposals.
Legal wrangling between Keidanren, the FTC and the LDP has delayed the bill's submission to parliament until this autumn, though FTC officials are hoping that it will be submitted this month.