bid rigging: cases and enforcement in japan · 1 bid rigging: cases and enforcement in japan...

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Bid Rigging: Bid Rigging: Cases and Enforcement in JapanCases and Enforcement in Japan

Akinori YamadaAkinori YamadaDirector of Management and Planning DivisionDirector of Management and Planning Division

Investigation BureauInvestigation BureauJapan Fair Trade CommissionJapan Fair Trade Commission

22

Beginning of CasesBeginning of Cases

InvestigationInvestigation

- Report of Violation by the Public- Detection of Violation by the JFTC’s own Authority- Submission by the Leniency Applicant

- Dawn Raids (On-the-spot Inspections)- Interrogation of the Suspects- Orders to Report

Inve

stig

atio

n Pr

ocee

ding

sIn

vest

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ion

Proc

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over 100 places by mobilizing a total of over 400 staff in some cases

Receiving 26 applications from January to March, and around 4 or 5 applications per month on average after April, 2006.

Preparation of Preparation of InvestigationInvestigation

33

Decision of MeasuresDecision of Measures

Hearing ProceduresHearing Procedures- Decision to Dismiss the Request- Decision to Revoke or Modify the Order

- Cease and Desist Order- Surcharge Payment Order- Criminal Accusation

LawsuitLawsuit

about 8 through 10 months from the beginning of investigation.

Prior ProcedurePrior Procedure- Advance Notification of Draft Order- Opportunity to Present Views and Evidences to

the JFTC

Afte

r Inv

estig

atio

n A

fter I

nves

tigat

ion

Proc

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Proc

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44

The JFTC found that companies of steel bridge construction had colluded to designate in advance the winner of a tender for a steel bridge construction project ordered for competitive bids by 3 regional bureaus (Kanto, Tohoku and Hokuriku) of the Ministry of Land Infrastructure and Transportation (MLIT) and, effectively allowed them to receive the orders.

Case 1 Case 1 The bid rigging for steel bridge construction projects (1)The bid rigging for steel bridge construction projects (1)

MLITMLITRegionalRegionalBureausBureaus

Sales ManagersCoordinators

Sales Managers

Coordinators

Sales Managers

Sales Managers

ClubClubAA

ClubClubKK

BidsBids allocationallocation

55

II

YM J

At the same time, those companies colluded to rig bids offer by JH.This case is distinguished from normal bid riggings in that executives of the Japan Highway Public Cooperation (JH) facilitated for concerned enterprises to jointly rig a series of bids by approving a ‘’bid winner allocation chart” submitted by a concerned enterprise’s employee who was once an executive of the JH.


FormerFormerJHJH’’s staffss staffs

JHJH

ExecutiveExecutive

SalesSalesManagersManagers

FormerFormerJHJH’’s Executives Executive

……AllocationAllocation

ChartChart

66

This case is unprecedented scale “Kansei Dango”, where public officials assist or facilitate bid riggings.

The JFTC carried out the following aggressive investigation.

Administrative InvestigationAdministrative Investigation

• The JFTC inspected over 100 places.

• The number of record of statements was over 600.

• It took about 1 year from the beginning of Investigation to the making orders.


77

ViolatorsViolators(Corporation)(Corporation)

Violators Violators SurchargedSurcharged

(Corporation)(Corporation)

SurchargeSurcharge(Thousand Yen)(Thousand Yen)

JHJH 5050 4343 9,122,7509,122,750MLITMLIT 5050 4343 3,787,7303,787,730Gross Gross

(Actual)(Actual) 100100（（5050）） 8686（（4444）） 12,910,48012,910,480

• On November 18, 2005, issued Cease and Desist Orders.

• On March 24, 2006, ordered 44 participants to pay surcharges.

Administrative OrdersAdministrative Orders


88

• The JFTC filed accusations with the Public Prosecutor General against companies and individuals.

• The sales managers of big companies deeply participated in selecting the bid winners.

JH


MLIT

Criminal AccusationCriminal Accusation

6 companies and 7 individuals

on June 29 and August 1 and 15, 2005.

26 companies and 8 individuals

on May 23 and June 15, 2005.

99

• The JFTC requested remedial actions based on the Act Concerning Elimination and Prevention of Involvement in Bid rigging etc. to the president of the JH in connection with the bid rigging case.

• The executives and employees of the JH did the following things systematically since 2002.

Legal Request against JHLegal Request against JH

approving a “bid winner allocation chart”directing division of constructions to be put out to bids to facilitating the bid-winner decisionsleaking unpublished information about individual awarding matters


1010

Cease and Desist OrderCease and Desist Order

(1) Cease the conduct

(2) Future Forbearance

(3) Notification

(4) Compliance Program

(5) Compliance Audits

(6) In-house Punishment Rule

(7) In-house Reporting System

(8) Personnel Changes


Specialty of this caseSpecialty of this case

In order to remove the sales officers responsible for the violation during the illegal conduct from sales activities

1111

This bid rigging occurred over tunnel ventilation construction procured by the Metropolitan Expressway Public Corporation in 2004.

7 companies had reached the following agreement by holding meetings, where staffs from sales department in each company attended;

Case 2Case 2 BidBid--rigging for tunnel ventilation construction (1)rigging for tunnel ventilation construction (1)

(2) Each prearranged winner decided its winning price for each bid, and other participants cooperated for the prearranged winner to win the bid with the arranged price successfully.

(1) Considering each company’s request, past record of bid winning, and so on, 7 companies had prearranged the winner for each bid for tunnel ventilation construction in Shinjuku highway line;

1212

On September 8, 2006, the JFTC revealed that three companies successfully enjoyed immunity from or reduction of surcharges byapplying the new leniency program, where the first applicant (M) hadbeen afforded 100% immunity and the other two applicants (I and K) had enjoyed 30% reduction of surcharge respectively.

In this case, the JFTC received leniency application before investigation start date.


First Case of Leniency ApplicationFirst Case of Leniency Application

1313


In this case, the JFTC has inspected more than a dozen premises since March 30, 2006.Leniency program guided us to short investigation period (under 6 months from the beginning of investigation to making orders).

EE 381,150381,150HH 319,410319,410

KK 128,330128,330TotalTotal 1,009,7001,009,700

II 180,810180,810

Leniency and SurchargesLeniency and Surcharges

Amount of Surcharges(Order on Sept. 8, 2006)

(thousand yen)

1414

The JFTC originally started this case using administrative investigation power. In the process of investigation, however, it was revealed that the violation had wide spread influence on people’s living, and the JFTC, therefore, decided to use the criminal investigation power and engaged in raids with search warrant in order to seek criminal accusation.

The effect of the power was found to be quite useful in gathering relevant evidence, and as a result, the JFTC successfully brought this tacit hard core cartel into daylight.

Case 3 Case 3 BidBid--rigging for human waste disposal facilities constructionrigging for human waste disposal facilities construction

First Case of Criminal Investigation PowerFirst Case of Criminal Investigation Power

1515

Head Quarter

APPENDIXAPPENDIX

1616

“Bid rigging” means that several companies participating in bidding for e.g. public works of the central and local governments consult with each other in advance to determine the bid winners and contract prices, and is prohibited as one of the unreasonable restraint trades.

Prohibition of Bid RiggingsProhibition of Bid Riggings

1717

Number of cases under legal measures and their recipientsNumber of cases under legal measures and their recipients

33 3014

2213

5 7

11

13

6

492472405

805928

0

10

20

30

40

50

60

FY2001 FY2002 FY2003 FY2004 FY2005Number ofCases

01002003004005006007008009001000

Number ofRecipients

Price fixing and others

Bid- Rigging

Number of recipients

38 3725 35

19

1818

Trend in surcharge amountTrend in surcharge amount

2121

Leniency Application ProcedureLeniency Application Procedure

The JFTC’s Leniency procedure has the following 4 features.

1. Prior consultation1. Prior consultationAnonymous prior consultation is available.

An company will be instructed the expected order (the availability of marker) of leniency application in case where it would report to the JFTC for application of a leniency program.

2. Submission of reports by facsimile2. Submission of reports by facsimileThe JFTC will secure (i) local companies’ convenience in reporting, and (ii) transparency of determining the order of leniency application by preventing more than one written report from reaching the JFTC at the same moment.

2222

Leniency Application ProcedureLeniency Application Procedure

3. Priority of the first party (marker)3. Priority of the first party (marker)Before an investigation has begun, the JFTC will give a priority to the company who submitted the initial report (no need to describe in detail) for application of a leniency program by facsimile earlier than other companies.

4. Oral application4. Oral applicationIf the discovery procedure of other countries is at issue, a company may substitute an oral report for the entries on the report in substantial parts of the matters on Forms No.2 and No.3.

Receiving 26 leniency applications from January to March,2006, and around 4 or 5 applications per month on average after April, 2006.

2525

(Source: the JFTC's annual reports)

Note1: "Formal action" includes cease and desist orders and surcharge payment orders issued without cease and desist orders.

Note2: "Warning" is a kind of administrative guidance.

Fiscal Year 1998 1999 2000 2001 2002 2003 2004 2005

Formal Action 27 27 18 38 37 25 35 19

Warning 17 20 17 15 17 13 9 7

Criminal Accusation 1 1 0 0 0 1 0 2

The Number of Remedial MeasuresThe Number of Remedial Measures

2626

Surcharge Payment OrderSurcharge Payment Order

2727

Suspension of Business License: 15–30 days and more(By Cabinet Minister of MLIT ／ Governors of Prefectures)

Damages for Breach of Contract (By the Contract Awarding Agencies)Damages for Illegal Conduct (By the Public)

Suspension of Designation for Bid: 3–12 months and more(By Cabinet Minister of MLIT ／ Governors of Prefectures)

Supervising DispositionSupervising Disposition

Disqualification to BidDisqualification to Bid

Civil CompensationCivil Compensation

Other Public Deterrent ActionOther Public Deterrent Action

bid rigging: cases and enforcement in japan · 1 bid rigging: cases and enforcement in japan...

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