Anticompetitive practices in japan their impact on the performance of foreign firms

Anticompetitive Practices in Japan Anticompetitive Practices in Japan Their Impact on the Performance of Foreign Firms Masaaki Kotabe Kent W Wheiler Westport, Connecticut London Library of Congress Cataloging-in-Publication Data Kotabe, Masaaki Anticompetitive practices in Japan : their impact on the performance of foreign firms / Masaaki Kotabe, Kent W Wheiler p cm Includes bibliographical references and index ISBN 0–275–95628–8 (alk paper) Restraint of trade—Japan Industrial policy—Japan Competition—Japan Corporations, Foreign—Japan Protectionism—Japan I Wheiler, Kent W II Title HD3616.J32K67 1996 338.6′048′0952—dc20 96–4847 British Library Cataloguing in Publication Data is available Copyright © 1996 by Masaaki Kotabe and Kent W Wheiler All rights reserved No portion of this book may be reproduced, by any process or technique, without the express written consent of the publisher Library of Congress Catalog Card Number: 96–4847 ISBN: 0–275–95628–8 First published in 1996 Praeger Publishers, 88 Post Road West, Westport, CT 06881 An imprint of Greenwood Publishing Group, Inc Printed in the United States of America The paper used in this book complies with the Permanent Paper Standard issued by the National Information Standards Organization (Z39.48–1984) 10 Contents Figures vii Tables ix Episodes xi Preface xiii Anticompetitive Behavior or Not: An Unsettling Issue Entry Barriers and Antitrust Enforcement in Japan Research Design and Methodology 105 Analyses and Results 127 Conclusions, Implications, and Recommendations 141 Appendix: Data Collection Questionnaire 17 149 vi Contents Bibliography 163 Index 183 Figures 1.1 U.S Trade Deficit with Japan, 1965–1995 2.1 Conceptual Framework 18 2.2 Price Trends in Japan, 1983–1995 75 Tables 2.1 2.2 Summary of Econometric Research Investigating Japan’s Pattern of International Trade 20 Takeshita Kogyo’s Business Transactions in 1995 Inside and Outside the Maekawa Keiretsu (in millions of dollars) 99 3.1 Method of Data Collection 112 3.2 Nationality of Respondents 113 3.3 Respondents’ Years of Experience with Company 113 3.4 Respondents’ Years of Experience Working in Japan 114 3.5 Industrial Classification of Responding Companies 115 3.6 Classification of Product Type 116 3.7 Total 1993 Worldwide Sales Revenue of Responding Companies 116 x 3.8 3.9 Tables Responding Companies’ Years of Operating Experience in Japan 116 Principal Components Factor Loadings for the Relative Occurrence of Anticompetitive Behavior 119 3.10 Principal Components Factor Loadings for the Impact of Anticompetitive Behavior 119 3.11 Varimax Rotated Factor Loadings for Characteristics of the Market 121 3.12 Varimax Rotated Factor Loadings for Characteristics of the Firm 122 3.13 Varimax Rotated Factor Loadings for Strategy 124 3.14 Principal Components Factor Loadings for Recent Three-Year Performance 125 3.15 Principal Components Factor Loadings for Expected Three-Year Performance 126 4.1 4.2 4.3 4.4 Relative Occurrence of Anticompetitive Behavior in Japan 128 Analysis of Covariance (ANCOVA) of Factors Influencing Recent Three-Year Performance (PERFORM) and Expected Three-Year Performance (PROSPECT) of U.S Businesses in Japan 134 The Impact of Anticompetitive Behavior in Japan on U.S Businesses 138 Industries in Which the Majority of Responding Executives Perceive Both the Occurrence of Anticompetitive Behavior and a Negative Impact on Performance 140 Episodes 1.1 Closed Market or Open Market?—The Flat Glass Industry Case 10 A Heated Trade Battle—The Market for Photographic Film 28 Bureaucratic Red Tape or Trade Barriers?—The Case of Amorphous Metals 34 Bureaucratic Red Tape or Trade Barriers?—The Case of CNN 37 2.4 Renegade Retailers—Airline Tickets 39 2.5 Renegade Retailers—Gasoline 40 2.6 Exclusionary Relationships?—Keiretsu in Japan’s Paper Industry 46 2.1 2.2 2.3 Bibliography 175 Matsushita, Mitsuo (1993), International Trade and Competition Law in Japan, Oxford, England: Oxford University Press 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types of, 3, 81, 55, 61, 83, 117–18, 127– 28, 131, 138 Antimonopoly Law (AML), 11– 12, 55–56, 61–62, 64, 66–67, 70, 72, 86, 88, 106–7, 129, 131–32, 142; enforcement of, 62, 82, 84, 86, 90, 105–8, 146– 47; history of, 82, 130; penalties, 53–54, 78–82, 84 Antitrust Division, Justice Department, 79, 84–85 Antitrust laws, United States, 15, 17, 82–86, 110, 129, 142, 146 See also Antimonopoly Law Antitrust Procedures Act, 84 Apple Computer, 54 Asahi Breweries, 69–73 Asahi Glass, 8, 10–12 184 Asahi Shimbun, 56 Atogime See Deferred prices Attorneys in Japan, 63, 80–82 Australia, 48, 114, 128 Autonomy, 48, 94, 98, 122–24, 133–34, 136, 144 Banking, 57–58, 98, 148 Barriers, non-tariff, 6, 32–33, 64, 97, 105, 145 Bayer AG, 31 Beer, 69–73 Bid-rigging, 55–57, 60–63, 77–78, 83, 90, 118–19, 127–29, 131, 138, 140, 147 Boycott, 28, 36, 72, 83, 90 Britain, 11, 73 Bureaucrats, 6, 39–41, 44, 109 Bush, George, Cable News Network (CNN), 37– 38 Canada, 1, 3, 33, 114 Cartels, 26, 40–42, 53–55, 62–63, 71, 76, 79–84, 86, 117, 119, 128, 131, 137–38, 147 Caution, 76, 79 Cement industry, 12, 63, 80, 89 Central Glass, 10 Chukyo Moonstar, 144 Cinema See Movie industry Clayton Act, 82–83, 86, 97 Clinton, Bill, 4, 5, 7, 130 Coca Cola, 7, 27 Collusion, 4, 30, 44–45, 60, 64, 68, 84 Compact disc (CD) industry, 131– 33 Comparative advantage, 6–14, 19–23, 43, 50 Competition, 3–6, 11, 27, 30, 34, 38, 40–42, 44, 47, 55, 58, 61, 63–64, 66, 72, 83–84, 86–90, Index 97–98, 102, 111, 117, 131–32, 137, 139, 143, 145; price, 120– 21, 132 Computers, 43, 54, 98, 100, 105, 115, 140 Construction industry, 12, 61, 63, 148 Consumers Union of Japan, 71 Corruption, 12 Cosmetics industry, 65–69, 115, 131 Criminal penalties, 78, 80 Dai Nippon Printing, 77–78 Daiei, 39, 67, 69, 72–73 Dainippon Ink and Chemicals Inc., 55–56 Daiwa Securities, 59–60 Dango See Price fixing Deferred prices (Atogime), 47 Denki Kagaku Kogyo, 61 Department of Commerce, 73, 108 Department of Defense, 85 Department of Justice, 84 Department of State, 84 Deregulation, 38–39 Dexter Shoe Co., 143–44 Dumping, 28, 61, 68, 72 Eastman Kodak, 27–32 Economic performance, 43 Economic Strategy Institute, 22 Economies of scale, 22–23, 44– 45, 85, 92, 97, 101, 103, 114, 121–22, 133–34, 136, 144 Egawa Kikaku, 66–68 Electronics industry, 5, 53–54, 94–95, 98–100, 115 Entry theory, 44, 91, 120 Exclusive distribution, 44–45, 92 Export prices, 31 Export Trading Company Act, 97 Index Exports, 1, 6, 10, 14, 22, 33, 49, 74, 85, 97, 108 Exxon, 41 Factor endowment, 17–20; Heckscher-Ohlin theory, 19 Fair Trade Commission, Japan (JFTC), 11–13, 29, 40, 50, 53– 58, 60–63, 65–68, 70–72, 74, 76–81, 86, 88–90, 107, 117, 132, 141–42, 146–48 Fairchild, 27 Federal Trade Commission (FTC), 83; Act , 82 Fines, 63, 77–79, 108 Foreign direct investment: in Japan, 15, 25; in the United States, 9, 50 Foreign exchange rates, 8, 21, 46 France, 8, 11, 20–22, 32 Fuji Electric Corp., 56–57 Fuji Photo Film, 27–32, 129–30 Fujiki Honten, 65–68 Fujitsu, 185 64, 72–74, 82, 88, 96, 107–8, 132–33, 143 Industrial espionage, Ink industry, 56 Intercorporate shareholdings, 46, 95–97, 100, 103 Interlocking directorates, 46, 95– 97, 100, 103 International Business Machines (IBM) 7, 27, 100 International Telephone & Telegraph (ITT), 27 Intra-firm trade, 49 Intra-industry trade, 20, 22, 27, 49, 103 Italy, 20–21, 104 Itochu Corp., 13 Hills, Carla, 10 Hitachi Information Systems Ltd., 77 Hitachi Ltd., 53, 56 Hitachi-Borden Chemical Products, 62 Japan Cable Television Ltd., 37 Japan Criminal Code, 78 Japan Fair Trade Commission (JFTC) See Fair Trade Commission, Japan Japan Paper Association, 8, 47 Japan Phonograph Record Association, 132 Japan Pulp & Paper Co., Ltd (JPP), 47 Japan Record Retailers Association, 132 Japan Research & Development Corp (JRDC), 35 Japan Satellite Broadcasting Inc (JSB), 38 Japan Sewage Works Agency, 56– 57 Japanese Chamber of Commerce and Industry, 142 Judges in Japan, 66, 77–78, 80–82 Jusco Co., 67, 69, 72 Imports, 8–10, 14–15, 17, 19–24, 27, 30, 32–34, 39, 46, 49, 54, Kanare Beikoku, 41–42 Kanebo, 67, 69 Gasoline Sales Law, 41–42 General Electric, 35 Germany, 3, 8, 20–23, 74, 146 Glass industry, 10–13, 98 Glass-Steagall Act, 97 Guardian Japan Ltd., 13 Gunze, 62 186 Kao, 66–68 Kawachiya, 66–69, 72 Kawasaki Steel Corp., 52, 60 Keidanren, 9, 38–39, 51, 61, 142, 144 Keiretsu, 10–12, 15, 33, 45–53, 94–103, 140 Kerosene prices, 79 Kimmon Mfg Co., 56 Largo Entertainment, 136 Law enforcement, 15, 106–7 Leather and Footwear industries, 143 Litigation, 79, 81–82, 84 Market: allocation, 55, 117, 119, 127–28, 131, 138, 140, 147; conditions, 94, 137 Martin Marietta International, 139 Matsushita Electric Industrial Co., 53–54 McDonald’s, Merck, 27 Mergers and acquisitions, 5, 84, 86, 101, 103 Ministry of Finance, 57–59, 74 Ministry of Foreign Affairs, 50 Ministry of International Trade and Industry (MITI), 11–13, 26, 29–30, 36, 40–45, 60, 73– 74, 76, 86, 88, 97 Ministry of Posts and Telecommunications, 37 Mitsubishi Electric Corp., 56 Mitsubishi Group, 50, 57, 97 Mitsubishi Motors Corp., 52 Mitsubishi Plastics Industries, 61 Mitsui Group, 35, 50, 57, 97 Mitsui Toatsu Chemicals, 61–62 Monopolization, 78, 80, 90 Index Monopoly, 11, 45, 78, 80, 83–84, 86, 89–90, 96–97, 136 Motorola, 27 Movie industry, 135–36 National Association of Commercial Broadcasters, 38 National Liaison Committee of Consumers Organizations, 71 Nestlé, 27 Network capitalism, New Oji Paper Co., 47 NHK, 37–38 Nihon Jumbo Co., 31 Nikkei index, 58 Nikko Securities, 59 Nippon Amorphous Metals Company Ltd (NAMCO), 35 Nippon Carbine Industries, 61–62 Nippon Columbia Corp., 132 Nippon Oil, 41 Nippon Paint Co., 55 Nippon Sheet Glass, 10 Nippon Steel, 35 Nomura Research Institute, 46 Nomura Securities, 59 Noncapitalist market economy, Obstruction: of advertising, 53, 117, 119; of distribution, 117, 119, 128, 137–38 OKK Corp., 56 Omnibus Trade Act, 105 Paint manufacturers, 55–56 Paper manufacturers, 11, 28–29, 46–48, 140 Parallel pricing, 89 Patent infringement, Patents, 35–37, 93 Per se violations, 79, 83 Performance, 15, 18–19, 27, 43, 51, 90–94, 106–11, 118, 120, Index 122, 124–26, 133–38, 140–42, 144, 147–48 Photographic film industry, 28– 32 Plastic food wrap manufacturers, 61–63 PPG Industries Inc., 13 Predatory pricing, Price fixing (Dango), 28, 55, 61, 63, 67, 76–77, 83, 89–90, 117– 19, 127–28, 131, 137–38, 140, 147 Price leaders, 58 Price trends, 15 Prices: consumer, 64; retail, 28, 31, 54, 64–74, 132, 143; wholesale, 31, 74, 133 Protectionism, 21, 23 RCA, 27 Rebates, 28, 54, 68, 90, 129 Refusal to deal, 117, 119, 128, 138, 140 Refusal to supply, 117, 119, 128, 131, 138, 140, 147 Resale price maintenance, 64–69, 86, 90, 117, 119, 128, 131–32, 137–38, Restraint of trade, 78, 80, 83, 90 Revisionist school of thought, Riken Vinyl Industry, 62 Robinson Patman Act, 82 Royal Dutch/Shell, 41 Sakae Travel Service Co., 39 Sankyo Shoji Trading Co., 133 Satellites, 37–38, 105, 139 Securities and Exchange Law, 59 Seiyu Corp., 72 Semiconductors, 5, 43–44, 84, 98, 102 187 Service, 24, 38, 58, 62, 80, 93, 102, 114, 121–22, 133–35, 137, 144, 148 Sherman Antitrust Act, 82–83, 86 Shin-Etsu Polymer, 61 Shiseido, 65–69 Shochiku Co., 136 Shoe industry, 143–44 Siemens, 27 Social Insurance Agency, 77–78 Sogo shosha, 49 Sony Corp., 53 South Korea, 6, 22, 52 Soviet Union, 84, 96 Standardization of marketing strategy, 94 Steel, 5, 34–37, 52–53, 60, 84, 98 Step, 54 Strategy, 18, 27, 51, 54, 92–94, 103, 122–24, 137, 144 Structural Impediments Initiative (SII), 44, 55–57, 63, 145 Sumitomo Group, 50, 57–58, 97 Surcharges, 80, 89–90, 108 Taiwan, Television industry, 37, 53, 84 Texas Instruments, 27 Tied financing, 117, 119, 128, 131, 138, 140, 147 Toho Co., 136 Tokyo District Court, 65 Tokyo Electric Power Company (TEPCO), 35–36 Tokyo High Court, 63, 76–77 Tokyo Stock Exchange, 56, 58– 59, 62 Toppan Moore Co., 77–78 Toshiba Corp., 53, 56 Trade: bilateral, 4, 14; disputes, 1, 3, 84; flow, 1, 14, 19–20, 32– 33, 49; imbalance, 3, 8–9, 139, 145; international, 17, 19–22, 188 43, 137; patterns, 20–22, 43; services, 8, 110; unfair, 4–7, 36, 53, 56, 80, 110; U.S.-Japan, 1, 28, 112, 137, 142 See also Barriers, non-tariff; Intraindustry trade Trade barriers, 10–11, 14, 17, 21, 23–24, 29, 34, 37, 51, 55, 145 Transport Ministry, 39 Twentieth Century Fox, 136 Tying arrangements, 83 Unfair trade practices See Trade, unfair U.S Department of Commerce, 28, 73, 108 U.S Dollar, 8, 19, 46, 58, 74 Index U.S occupation of Japan, 86, 96, 146 U.S Trade Representative, 5, 10, 28, 36, 46, 130 Vertical integration, 44–45, 47, 92, 103 Video cameras, 53, 73 Water meter manufacturers, 56 Yamaichi Securities, 59–60 Yeltsin, Boris, 131 Yen, 8, 27, 46, 52, 55, 58, 65–67, 74, 79 Zaibatsu, 94–96, 103 Zenith, 27 About the Authors MASAAKI KOTABE is Professor of Marketing and International Business, Ambassador Edward Clark Centennial Fellow in Business, and also Director of Research at the Center for International Business Education and Research at the University of Texas at Austin He is recognized by the Journal of International Business Studies as one of the most productive contributors to scholarly publications in international business in the past 25 years He is also the author of Global Sourcing Strategy: R&D, Manufacturing, Marketing Interfaces (Quorum, 1992), Japanese Distribution System (1993), and Marketing Management (1996) KENT W WHEILER is Senior Analyst for Weyerhaeuser Company’s pulp and paper complex in Longview, Washington After completing his Ph.D program in marketing at the University of Texas at Austin in 1987, he joined the market research group at Weyerhaeuser’s Engineered Wood Products Division From 1988 to 1994 he lived in Tokyo, Japan, as the Director of Finance and Administration for Weyerhaeuser Far East, Ltd., working throughout Asia supporting Weyerhaeuser’s $1 billion-plus business in the region Prior to his doctoral studies, he worked for Arthur Andersen & Co as an auditor, where he qualified as a certified public accountant (CPA) in 1983 .. .Anticompetitive Practices in Japan Their Impact on the Performance of Foreign Firms Masaaki Kotabe Kent W Wheiler Westport, Connecticut London Library of Congress Cataloging -in- Publication... Expected Three-Year Performance (PROSPECT) of U.S Businesses in Japan 134 The Impact of Anticompetitive Behavior in Japan on U.S Businesses 138 Industries in Which the Majority of Responding Executives... coherence of the ideas of their imagination” (p 107) An example of the different views and opinions regarding the openness of a market in Japan is provided in episode See if the reader can easily conclude