Marketcraft by Vogel Steven K.;

Author:Vogel, Steven K.;
Language: eng
Format: epub
Publisher: Oxford University Press USA - OSO
Published: 2018-08-15T00:00:00+00:00

Antitrust Reform

The Japanese government has gradually strengthened antitrust enforcement since the 1990s, but this has not substantially impaired firms’ ability to coordinate through industry associations, standards-setting bodies, or research consortia. Nevertheless, Japan’s distinctive pattern of long-term relationships among firms has evolved in the wake of the financial crisis of the 1990s, as firms reduced levels of cross-shareholdings and manufacturers rationalized their supply networks.

In the late 1980s, the US government pressured Japan for stronger antitrust enforcement under the bilateral Structural Impediments Initiative (SII) talks. American negotiators charged that Japanese private-sector practices, such as dealership networks and vertical supply chains, constituted discriminatory practices that shut out US competitors. Keidanren was ambivalent about antitrust and regulatory reform, reflecting the divisions within its own ranks. Many competitive manufacturers favored reform because it could lower prices (for utilities or distribution, for example) and reduce trade friction with the United States, but less competitive manufacturers and service-sector firms resisted. MITI gradually grew more favorable toward reform, as some officials became less wedded to traditional industrial policy goals and more amenable to competition as a means to enhance international competitiveness.79

The biggest single change in antitrust policy, the removal of the ban on holding companies in 1997, did not promote competition but rather permitted further consolidation. The US Occupation forces had enacted the ban when they broke up the prewar industrial groups (zaibatsu). By the 1990s, company executives began to feel that holding companies could help them with financial management by allowing them to hedge the risk of any single business line. They could reduce labor costs by differentiating wages and benefits across companies; reorganize internally by turning divisions into separate companies; or merge with other companies more easily by using a holding company structure. Few firms formed holding companies immediately after the reform passed in 1997, in part because they could not fully take advantage of this structure until the government introduced a consolidated tax system in 2003.80 Yet the government used holding companies to resolve tricky policy problems in key sectors. In telecommunications, for example, it reorganized Nippon Telegraph & Telephone (NTT), preserving some integration with a holding company while breaking up NTT into two regional local telephone companies, a long-distance and international carrier, wireless communications, and data services. MOF officials had explored the holding company option for financial-sector desegmentation in the late 1980s, but they ruled it out because they judged that it was not feasible politically. But once the ban was lifted, they allowed commercial banks, securities houses, and insurance companies to enter each other’s lines of business via a holding company structure.

In the early 2000s, the government prepared legislation to strengthen antitrust policy by expanding the JFTC’s investigative powers, doubling penalties for price-fixing to 12% of sales obtained from anti-competitive practices, and offering leniency to firms that blow the whistle on their partners in collusion.81 Keidanren strongly opposed these measures, however, arguing that the government was acting too quickly; that the penalty increase was unreasonable; that the penalties were unconstitutional because they could

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