Examples of bid rigging in Japan For the

Examples of bid rigging in Japan -For the local training program aimed towards JICA Serbia competition June 13 th, 2018 (Wednesday), authoritiesfrom 13: 00 Takaaki Saito Senior Investigator, Management and Planning Division, Investigation Bureau, The Japan Fair Trade Commission　　　　 1

Outline ◎Examples of bid rigging in Japan (1)Example: Bid rigging in the construction machines and facilities for snow melting on Shinkansen (bullet train) Railway (2)※Regarding the Act on Elimination and of equipment, the Hokuriku Prevention of Involvement in Bid Rigging, etc. and Punishments for Acts by Employees that Harm Fairness of Bidding, etc. 　 (Involvement Prevention Act) （3）Example: Bid rigging in pavement reconstruction works （4）Example: Bid rigging in fire-fighting emergency digital radio equipment （5）Example: Order adjustment for electronic devices for safe communication 2

Bid rigging in the construction of equipment, machines and facilities for snow melting on the Hokuriku Shinkansen (bullet train) Railway（2017） ●Outline of the illegal activities: ・The companies in question： 11 Japanese companies ・The target：The construction of equipment, machines and facilities for snow melting on the Hokuriku Shinkansen (bullet train) Railway ・The contents of the agreement：It was agreed that the companies would cooperate when deciding on the planned order receiver and making the receiver be able to receive orders concerning the construction of equipment, machines and facilities for snow melting on the Hokuriku Shinkansen (bullet train) Railway 3

Lines targeted for the construction of equipment, machines and facilities for snow melting on the Hokuriku Shinkansen Railway ＜Target＞Sections which were planned to be opened at the end of Niigata the 2014 fiscal year Hakusan synthesis Kuroberailroad vehicle Unazukionsen storehouse Fukui station section Jouetsumyoukou Shinconstructed at Takaoka Iiyama February 2009 Itoigawa Komatsu Kanazawa Toyama Nagano Kagaonsen Ueda Awaraonsen Fukui Sakudaira Karuizawa Operation section Nanetsu Annakaharuna Planning to start the Tsuruga operation by 2014 Takasaki Planning to start the Obama operation by 2025 Oomiya Route is not yet Shinofficially announced Kobe Tokyo Shinyokohama Nagoya Kyoto Shizuoka Osaka 世話人 4

The construction of equipment, machines and facilities for snow melting on the Hokuriku Shinkansen (bullet train) Railway 〇Equipment for melting snow using water sprinklers 世話人 Hot water is sprinkled from the sprinklers on the side of the railroad track. It was mounted on the <Nagano – Kanazawa> line of the Hokuriku Shinkansen (bullet train) Railway. 〇Melting snow using panels with hot water Snow is removed from the track onto the panels on the side of the track using snowplows, and the snow is melted by making hot water circulate inside the panels. It was mounted on the <Nagano – Kanazawa> line of the Hokuriku Shinkansen (bullet train) Railway. 5

3 companies (DAI-DAN Co. , Ltd. , Takasago Thermal Engineering Co. , Ltd. , Shin Nippon Air Technologies Co. , Ltd. ) At the assembly of 11 companies A mediator ・Planned order adjustment; calling for participation in the assembly Company A, B, C. . . H; 8 companies in total 3 companies ・Proposing to begin with adjusting the orders ・Showing the proposal for the order of planned order receivers 11 companies agreed to 1. decide on the order in which those 11 companies will become planned order receivers 2. change the aforementioned order only through negotiations of all companies concerned 3. cooperate with companies other than planned order receivers so that planned order receivers can receive their orders regarding snow melting equipment. 11 companies cooperated so that planned order receivers could receive orders concerning the entirety of the construction of equipment, machines and facilities for snow melting on the Hokuriku Shinkansen (bullet train) Railway, and each planned order received orders for each construction work concerning the construction of equipment, machines and facilities for snow melting on the Hokuriku Shinkansen (bullet train) Railway. 6

Criminal prosecutions, cease and desist orders and surcharge payment order（in 2014 and 2015） Ø　　Criminal prosecutions were pressed as they are deemed to have committed serious and malicious violations of law (March 2014) ① Businesses operating in the entire country, including listed businesses, were involved ② It was connected to the improvement of public social infrastructure ③ A part of the employees were guilty of past rigging incidents ⇒　Everyone was found guilty (from September to November, 2014) 　　　　8 companies：Penalties ranging from ¥ 120 million to ¥ 180 million. 　　　　11 employees：Sentenced to prison terms ranging from 1 year and 2 months to 1 year and 6 months Ø 　Employees of transport and railroad agencies, who placed the orders, revealed the planned prices, which were information not to be revealed before the bid, to particular companies who were participating in the bid. 　　 ＝ Involvement in bid rigging　（so-called rigging government involved) 　 ⇒　Improvement measures were demanded to railroad and transport agencies from JFTC. 　 Ø （March 2014）　　　　　　 　Cease and desist orders were filed to 11 companies　（October 2015） Surcharge payment orders were filed to 7 companies（1 was immunity, 3 received a 30% reduction and 2 a 50% addition）：A total of over ¥ 1 billion. 7

the Act on Elimination and Prevention of Involvement in Bid Rigging, etc. and Punishments for Acts by Employees that Harm Fairness of Bidding, etc. 　 (Involvement Prevention Act) (Act No. 101 of 2002) ○　When the Fair Trade Commission discovers that an employee of an agency placing the order is involved, improvement measures are demanded to the minister of each department and the head of the local public body. ○　They publish investigation results and improvement measures and notify the Fair Trade Commission. ○　The Fair Trade Commission may express an opinion regarding these results and measures. ○ The disturbance of bids by an employee was also added as a violation of law (put into effect in 2007). 8

Bid rigging by bid participants regarding pavement reconstruction works after the Tohoku earthquake and tsunami ordered by the Tohoku branch of the East Nippon Expressway Company, Ltd. （2016） ●Outline of the illegal activities ・The companies in question： 20 Japanese companies ・The target：Pavement reconstruction works after the Tohoku earthquake and tsunami ・The contents of the agreement： It was agreed that the companies would cooperate when deciding on the planned order receiver and making the receiver be able to receive orders concerning pavement reconstruction works after the Tohoku earthquake and tsunami.

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Criminal prosecutions, cease and desist orders and surcharge payment order （in 2016） Ø　　 Criminal prosecutions were pressed as they are deemed to have committed serious and malicious violations of law （February 2016）　 ① Businesses operating in the entire country, including listed businesses, were involved ② It was connected to the improvement of public social infrastructure ⇒　 Everyone was found guilty （From September to November, 2016） 　　　10 companies：Penalties ranging from ¥ 120 million to ¥ 180 million. 　　　 11 employees：Sentenced to prison terms ranging from 1 year and 2 months to 1 year and 6 months 　　　　　　 　 Ø 　Cease and desist orders were filed to 20 companies　（September 2016） Surcharge payment order were filed to 11 companies （1 was immunity，2 received a 30% reduction and 3 a 50% addition）： A total of over ¥ 1 billion 400 million. 11

Bid rigging in fire-fighting emergency digital radio equipment （2017） ●Outline of the illegal activities ・The companies in question： 5 Japanese companies ・Target：The supply method for fire-fighting emergency digital radio equipment ordered by city office, town office, etc. ・The contents of the agreement： It was agreed that the companies would cooperate when deciding on the manufacturer planned for delivery and making the manufacturer planned for delivery be able to deliver the goods concerning fire-fighting emergency digital radio equipment 12

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Cease and desist orders and surcharge payment orders in February, 2017 The rate of immunity and reduction Immunity 14

Order adjustment for electronic devices for safe communication by its manufacturer and seller for orders placed by TEPCO (2016) ●Outline of the illegal activities ・The companies in question： 3 Japanese companies ・Target：The delivery of electronic devices for safe communication ・The contents of the agreement：It was agreed that the companies would cooperate when deciding on the manufacturer planned for delivery and making the manufacturer planned for delivery be able to deliver the goods concerning the competition estimate for electronic devices for safe communication 15

3 manufacturers TEPCO Implementation of order adjustment Orders for electronic devices placed ①A manufacturer with sufficient technological capacity is chosen and an estimate is requested ②Estimated prices are presented and the manufacturer for order placement is chosen ③Price negotiations with the manufacturer ④The contract concluded is Ⅰ　 Beside choosing manufacturers planned for delivery among those whose estimated price was the lowest so far, they are also chosen depending on their delivery area or whether the manufacturer conducted contract for the devices in question before. Ⅱ　The estimated price which the manufacturer presents is set to be the lowest possible, and the manufacturer becomes able to deliver. 　 ※Some manufacturers made their own distributor present their estimated prices. Let’s make the delivery numbers for each company uniform… Manufacturer I wouldn’t want the delivery price to fall… 16

Cease and desist orders and orders for payment of surcharge in July 2016 The company in question Cease and desist orders Surcharge amounts Fujitsu, Ltd. ● Approx. ¥ 285 million ● Approx. ¥ 117 million reduction 30％ allowance ― ― Exemption Immunity 2 companies Approx. ¥ 402 million Oi Electric Co. , Ltd. NEC Corp Total Rate The rate of of immunity and allowances reduction exemptions 30％ allowance reduction 17

Thank you for your attention. 18