Bid Rigging: Cases and Enforcement in Japan

Transcription

1 Bid Rigging: Cases and Enforcement in Japan Akinori Yamada Director of Management and Planning Division Investigation Bureau Japan Fair Trade Commission 1

2 Investigation Proceedings Beginning of Cases Preparation of Investigation Investigation - Report of Violation by the Public - Detection of Violation by the JFTC s own Authority - Submission by the Leniency Applicant Receiving 26 applications from January to March, and around 4 or 5 applications per month on average after April, Dawn Raids (On-the-spot Inspections) - Interrogation of the Suspects over 100 places by - Orders to Report mobilizing a total of over 400 staff in some cases 2

3 After Investigation Proceedings Prior Procedure Decision of Measures - Cease and Desist Order - Surcharge Payment Order - Criminal Accusation Hearing Procedures Lawsuit - Advance Notification of Draft Order - Opportunity to Present Views and Evidences to the JFTC about 8 through 10 months from the beginning of investigation. - Decision to Dismiss the Request - Decision to Revoke or Modify the Order 3

4 Case 1 The bid rigging for steel bridge construction projects (1) 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. MLIT Regional Bureaus Bids Club K Club A Coordinators allocation Coordinators Sales Managers Sales Managers Sales Managers Sales Managers 4

5 Case 1 The bid rigging for steel bridge construction projects (2) 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. JH Allocation Chart I M Sales Managers J Y Executive Former JH s s Executive Former JH s s staffs 5

6 Case 1 The bid rigging for steel bridge construction projects (3) Administrative Investigation This case is unprecedented scale Kansei Dango, where public officials assist or facilitate bid riggings. The JFTC carried out the following aggressive 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. 6

7 Case 1 The bid rigging for steel bridge construction projects (4) Violators (Corporation) Violators Surcharged (Corporation) Surcharge (Thousand Yen) JH ,122,750 MLIT ,787,730 Gross (Actual) Administrative Orders On November 18, 2005, issued Cease and Desist Orders. On March 24, 2006, ordered 44 participants to pay surcharges. 100(50 50) 86(44 44) 12,910,480 7

8 Case 1 The bid rigging for steel bridge construction projects (5) Criminal Accusation 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 6 companies and 7 individuals on June 29 and August 1 and 15, companies and 8 individuals on May 23 and June 15,

9 Case 1 The bid rigging for steel bridge construction projects (6) Legal Request against JH 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 approving a bid winner allocation chart directing division of constructions to be put out to bids to facilitating the bidwinner decisions leaking unpublished information about individual awarding matters 9

10 Case 1 The bid rigging for steel bridge construction projects (7) Cease 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 In order to remove the sales officers responsible for the violation during the illegal conduct from sales activities Specialty of this case 10

11 Case 2 Bid-rigging for tunnel ventilation construction (1) This bid rigging occurred over tunnel ventilation construction procured by the Metropolitan Expressway Public Corporation in companies had reached the following agreement by holding meetings, where staffs from sales department in each company attended; (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; (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. 11

12 Case 2 Bid-rigging for tunnel ventilation construction (2) First Case of Leniency Application On September 8, 2006, the JFTC revealed that three companies successfully enjoyed immunity from or reduction of surcharges by applying the new leniency program, where the first applicant (M) had been 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. 12

13 Case 2 Bid-rigging for tunnel ventilation construction (3) Leniency and Surcharges In this case, the JFTC has inspected more than a dozen premises since March 30, Leniency program guided us to short investigation period (under 6 months from the beginning of investigation to making orders). Amount of Surcharges (Order on Sept. 8, 2006) E 381,150 H 319,410 I 180,810 K 128,330 Total 1,009,700 (thousand yen) 13

14 Case 3 Bid-rigging for human waste disposal facilities construction First Case of Criminal Investigation Power 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. 14

15 Head Quarter APPENDIX 15

16 Prohibition of Bid Riggings 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. 16

17 Number of cases under legal measures and their recipients Number of Cases Price fixing and others 805 Bid- Rigging Number of recipients FY2001 FY2002 FY2003 FY2004 FY Number of Recipients 17

18 Trend in surcharge amount 18

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21 Leniency Application Procedure The JFTC s Leniency procedure has the following 4 features. 1. Prior consultation Anonymous 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 facsimile The 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. 21

22 Leniency Application Procedure 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 application If 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,

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25 The Number of Remedial Measures Fiscal Year Formal Action Warning Criminal Accusation (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. 25

26 Surcharge Payment Order 26

27 Other Public Deterrent Action Civil Compensation Damages for Breach of Contract (By the Contract Awarding Agencies) Damages for Illegal Conduct (By the Public) Disqualification to Bid Suspension of Designation for Bid: 3 12 months and more (By Cabinet Minister of MLIT / Governors of Prefectures) Supervising Disposition Suspension of Business License: days and more (By Cabinet Minister of MLIT / Governors of Prefectures) 27