JAPANESE INDUSTRIAL COLLUSION AND TRADE By Jon Woronoff It is out of the question to understand how Japanese companies behave in Japan-or abroad-without some grasp of the antitrust situation. Yet, this aspect has rarely received careful or systematic attention although, now and then, it is realized that it is the missing link in the explanations we seek to certain phenomena. Probably the most relevant point to raise, and this at the very outset, is that there is no hardy indigenous antitrust tradition of combating oligopolies, cartels, or other combinations. Nor is there much sign of public concern. Japanese society is characterized by special relations, connections, and cooperation in myriad forms and this, for many people, is simply regarded as just another.1 More seriously, the Government has shown an exceptional tolerance of such combinations. Indeed, it was sometimes the Government that sponsored, encouraged or, indeed, imposed them. Obviously, the emergence of what are generally regarded as restraints of trade has had far-reaching effects on every aspect of the domestic economy. It has conditioned the production system, the distribution networks, the manner in which products and parts are traded between companies, pricing and so on. In certain ways, it contributed to the imbalance between big and small companies and influenced the management system. In other ways, it created a strikingly different business philosophy as manifested by a strong concern for market share and a relative disconcern for profits. Reaching yet further, it has repeatedly affected relations with other countries. It is a key to the difficulties foreign companies faced when they wanted to export goods to Japan or enter the market through joint ventures or their own operation. It has also pushed Japanese companies toward more active, frequently even aggressive, attempts to penetrate foreign markets. Finally, it helps explain why they have so often been successful at this. HISTORICAL BACKGROUND It is hard to comprehend the present situation without knowing something about the past. From the most cursory study of how the Japanese economy arose and was shaped it immediately becomes clear that it was not rooted solely in free enterprise, no matter how highly it is praised. Shortly after being forced open by foreign intervention, the Government of the new Meiji state began constructing a strong industry which it regarded as vital for the nation's safety and independence. When some of its ventures failed, they were sold to private businessmen. Subsequently, the Govern 1 See Chie Nakane, Japanese Society, New York, Penguin Books, 1981. ment proceeded to support favored individuals and companies in crucial sectors. Under this system, a small number of particularly dynamic groups were formed and gradually consolidated into zaibatsu.2 They consisted of firms in a broad array of sectors which were brought under a holding company with much of the control in the hand's of the group's founding family. The largest of these were Mitsui, Mitsubishi, Sumitomo, and Yasuda. Such groups were especially active in modern fields like banking, trading, shipping, mining, and manufacturing. And they had links with smaller firms which often depended on them for work or finance. It is quite impossible to exaggerate the importance of the zaibatsu when one considers that the Big Four held 25 percent of Japan's industrial and financial capital. 3 Since they were accused of collaborating with the military clique in launching the colonial and wartime adventures, the zaibatsu were slated for elimination by the Occupation authorities. SCAP ordered the liquidation of the holding companies and split some of the component firms in 1945.4 But it did not break up the banks and, as of 1952, the sister companies began regrouping and some units actually assumed the same prewar name.5 Now known as keiretsu, they were not as tightly organized as the zaibatsu, but they were uncommonly large and invasive. Also under pressure from SCAP, an Antimonopoly Law was adopted in 1947. Initially, it was very strict, more so than the American laws on which it was modeled. Cartels were forbidden, overlapping shareholding was prohibited, mergers required prior approval, and monopoly power per se was illegal. But this legislation was promptly revised in 1949, and then again in 1953, in both cases to weaken it and permit the Government to reassert its influence while making it easier for companies to act as they wished." Due to an abuse of power by certain companies at the time of the 1973 oil crisis, the Antimonopoly Law was tightened up again in 1977. But it was never made as strong as before. This legislation was supervised and action taken to ensure its enforcement by a Fair Trade Commmission. The FTC has been reasonably busy and, on occasion, took legal action against companies that violated the law. However, more often, it applied administrative measures like recommendations or consent decrees. It also proposed that the effort be spread to more sectors and argued in favor of free enterprise and an end to unfair business practices in general. Still, it had much less clout than the other bureaucracies it had to contend with. Worse, it was not truly independent in one sense. Its Chairman was appointed by the Ministry of Finance and, 2 See William W. Lockwood, The Economic Development of Japan, Princeton, Princeton University Press, 1954. 3 Lockwood, "Japan's New Capitalism," in William Lockwood (ed.), The State and Economic Enterprise in Japan, Princeton, Princeton University Press, 1965, p. 495. See T.A. Bisson, Zaibatsu Dissolution in Japan, Berkeley, University of California Press, 1954. 5 See Lockwood, op. cit., pp. 495-497. 6 See Eleanor Hadley, Antitrust in Japan, Princeton, Princeton University Press, 1970, and Hiroshi Iyori, Antimonopoly Legislation in Japan, New York, Federal Legal Publications, 1969. 7 Japan Economic Journal, June 15, 1982. even at present, some of its relatively small staff is seconded from other bureaucracies. This would not be so serious if the Ministry of Finance and especially the Ministry of International Trade and Industry were not staunchly interventionist. They resumed the old tradition of government direction and guidance of the economy which goes back to Meiji days and also, yet more directly, the controlled wartime economy. During the postwar years, MITI managed to enhance its power and obtained, through the 1953 revision, the possibility of establishing "rationalization" and "recession" cartels. It also championed mergers of smaller companies to create powerful Japanese entities. MOF, lest it be forgotten, also regulated its sector rather firmly, exercising close supervision over the banks, insurance companies, securities houses, and so on. Meanwhile, the business community was also regrouping and reasserting its old position. It gained considerable sway over the ruling Liberal Democratic Party due to huge contributions to political campaigns. It exerted great influence over the bureaucracy as well since it hired retired officials. The 1947 revision of the Antimonopoly Law allowed it to reconstitute trade assocations which brought together all members of the industry, competitors in normal circumstances who cooperated in joint activities and engaged in some market regulation. This was all topped by the prestigious Japan Federation of Economic Organizations (Keidanren).9 Perhaps more significant than the visible actions of the business community was the general attitude. Japanese managers had worked under close government supervision and engaged in considerable cooperation (and collusion) before and during the war. There was a brief interlude of relative laissez-faire under the Occupation and until the SCAP laws could be revised. As even an FTC member had to admit, "businessmen with a long tradition of cartels and trade associations can understand regulations arrived at after discussion among the competitors much more readily than they can the bizarre notion that concerted action constitutes an unreasonable restraint of trade." 10 They therefore regretted and criticized the anitrust legislation and did their best to weaken or evade it. The Fair Trade Commission, which was a gadfly more than a watchdog, could not always prevent this. MULTIPLE COMBINATIONS Since Japanese companies and managers have a different background and work under differnt circumstances, it is not surprising to find that they do not always behave in the same manner as their American or European counterparts. Some of their practices would clearly run afoul of the antitrust legislation in the United States and are rather dubious, if not always strictly illegal, under the Japanese dispensation. Nothing is more symbolic of this than 8 See Chalmers Johnson, MITI and the Japanese Miracle, Stanford, Stanford University Press, 1982. 9 See Dan Fenno Henderson, Foreign Enterprise in Japan, Tokyo, Tuttle, 1973, pp. 128-154. 10 Quoted in Henderson, op. cit., p. 145. 56-609 0 - 86 - 1 |