On 7 October 2009, the Japanese Fair Trade Commission (JFTC) fined five companies a total of 3.3 billion yen (EUR25.4 million) for fixing the price of television cathode ray tubes (CRTs). All five companies were foreign entities. Although the JFTC has issued 'cease and desist' orders against foreign companies in the past, this is the first time that the JFTC has fined a non-Japanese company in connection with a cartel. The case is noteworthy because the foreign companies had not even sold CRTs directly into Japan.
The CRT cartel
The investigation was launched simultaneously with the foreign competition authorities including the US Department of Justice and the European Commission in November 2007. According to the JFTC's findings, the cartel participants agreed to meet regularly and set a minimum target price for the forthcoming quarter. Although it was South Asian customers that were directly affected by the cartel, the JFTC concluded that the cartel had influenced the Japanese market because those South Asian customers had Japanese parent companies (who were in fact procuring CRTs through their South Asian subsidiaries). In addition, the CRT supply contract had been negotiated directly between the suppliers (i.e. the cartel participants) and those Japanese parent companies.
Evolution of enforcement in Japan
The JFTC's approach to foreign cartel participants appears to be evolving. In Marine Hose (an international cartel formed by European and Japanese companies involving market sharing and price fixing), the JFTC issued a cease and desist order against a number of foreign companies but did not go as far as to impose fines on those foreign companies. The outcome in Marine House appeared to reflect the fact that these foreign companies concerned had not made any sales into Japan as per the illegal market sharing agreement. Statements of the JFTC appear to confirm this.
The JFTC's approach contrasts with that of the European Commission where, in a global cartel, an absence of sales into Europe does not preclude the possibility of a fine (see for example, Gas Insulated Switchgear and Power Transformers).
The CRT decision
The JFTC's enforcement approach in the CRT case seems to differ to that taken in Marine Hose. Although foreign companies were implicated in both cartels without having made sales into Japan, the JFTC only imposed fines in the CRT case, in recognition of the cartel's influence on Japanese market conditions.
The factors below may explain the JFTC's reasoning as to why the Japanese market was affected:
- The Japanese television manufacturers negotiated the CRT contracts directly with the cartel participants. In reality, the purchasers of the relevant CRTs were the Japanese television manufacturers (who exercised substantial control over their own respective South Asian subsidiaries).
- The majority of the CRTs purchased by the South Asian subsidiaries of the Japanese television manufacturers were subsequently sold to their parent companies. The value of sales forming the basis of the fine reflected only the CRTs purchased by these Japanese television manufacturers through their subsidiaries.
In short, even though the cartelists had not sold products into the Japanese territory or even to a Japanese company, the JFTC identified "Japanese sales" - on the basis that: (a) CRT supply contracts were negotiated with the Japanese companies; and (b) the contracted goods were destined for Japan.
By taking a flexible approach to the notion of "Japanese sales" - the JFTC may be extending its jurisdictional reach beyond the conventional cases where the cartelists actually sell into Japan.
The JFTC has sent a clear signal to foreign companies that they can be pursued for anticompetitive conduct having an effect on the Japanese market. This case therefore serves as a reminder of the JFTC's preparedness to tackle international cartels.
It also shows that the JFTC is prepared to intervene in circumstances where a cartel affects the Japanese market only indirectly.