scandal

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Major firms raided on suspicion of bid-rigging for floodgate projects

The Fair Trade Commission on March 28 searched the offices of more than 20 machinery makers on the suspicion of bid-rigging in contracts with the Ministry of Land, Infrastructure and Transport and local governments for the construction of dams and other public floodgates. Bid-rigging is against the Antimonopoly Law.

The companies raided by the FTC include Mitsui Engineering & Shipbuilding Co., Mitsubishi Heavy Industries Ltd., Ishikawajima-Harima Heavy Industries Co., Sumitomo Heavy Industries Ltd., JFE Engineering Corp., Komai Tekko Inc., Takada Kiko Co., and Hitachi Zosen Corp. The Tokyo head office of the Japan Association of Dam & Weir Equipment Engineering, a floodgate makers' group, and other related industry associations were also searched for their suspicious involvement in bid-rigging schemes.

Mitsubishi Heavy Industries and four other steel makers have already been indicted on charges of bid-rigging for bridge construction projects for the government and the former Japan Highway Public Corporation.

These makers and industrial groups are suspected of determining the winners of the contract and the monetary amount of orders received ahead of the bidding process.

In December 1979, the Fair Trade Commission banned 37 firms from participating in bids for floodgate projects because of their violation of the Antimonopoly Law. Most of the firms recently searched overlap these 37 firms. Japan's large floodgate market size is estimated at between 60 billion yen and 70 billion yen annually.

The Institute for the Study of Construction Policy Executive Director Tsujimura Sadatsugu commented on the commission investigation as follows:

"This bid rigging affair shows the great extent to which Japan's leading firms that include executive board member companies of the Japan Business Federation (Nippon Keidanren), are addicted to bid-rigging.

This is due to the fact that violators of the Antimonopoly Law are subject to up to three years in prison or a fine of up to 5 million yen, which is more lenient than in Western countries. They must be punished more severely and their operations be stopped temporarily so that bid-rigging can be controlled effectively.

Present regulations on bid-rigging have been insufficient to control the corrupt practices of politicians and government agencies. The Koizumi Cabinet, which has pushed ahead with market-first deregulation, is to blame for supporting such dirty relations between bureaucrats and corporations.

Investigation into the floodgate scandal must not be ended with a minor change in the bidding system. A thorough investigation into the politician-bureaucrat-corporate collusion is necessary."
- Akahata, March 29, 2006