1 Price Cartel of Paper Phenol Copper Clad Laminates (Toshiba Chemical Case) Kaoru SEKIBA HARADA Deputy Director, International Affairs Division Fair Trade Commission of Japan (JFTC) OECD-Korea RCC, Regional Cartel Workshop April 7, 2006

2 1.Background 2.Tacit agreement among members? – court ruling 3.Argument by Toshiba Chemical

3 1. Background

4 Product characteristics Component of household electronic appliances (TV, tape recorders, etc.) Mass-produced Not product-differentiated Paper Phenol Copper Clad Laminates

5 Three major companies Toshiba Chemical and 4 other companies 3 major companies

6 Trade Association All 8 companies were members Frequent meetings Strong relationship among members The Japan Thermosetting Plastics Industry Association

7 2. Tacit agreement among members? – court ruling

8 Tacit agreement among 8 companies? 07/01/1987~07/15/1987 Price-raising by 3 major companies 08/21/1987~09/01/1987 Price-raising by 5 other companies Explicit agreement Tacit agreement ?

9 Points of the Tokyo High Court Ruling for the Toshiba Chemical Case A)Is explicit agreement necessary to prove the existence of a cartel? Is tacit agreement sufficient? B)If tacit agreement is sufficient, how can it be proven?

10 A)Is explicit agreement necessary to prove the existence of a cartel? Is tacit agreement sufficient? Proof of explicit agreement is not necessary Showing a tacit agreement is sufficient

11 Tokyo High Court ruling noted… By nature of a cartel agreement, companies usually try to avoid making a cartel agreement explicitly known to the public If we interpreted that explicit agreement is necessary to prove a cartel, the companies could easily hide the existence of a cartel. Why is proof of tacit agreement sufficient?

12 No! : intention of collaboration is necessary Is passive acceptance of price-raising by another company also sufficient enough to prove a cartel? “The said “liaison of intention” means that an entrepreneur recognizes or predicts implementation of the same or similar kind of price-raising among entrepreneurs, and accordingly intends to collaborate with such price-raising. In order to prove “liaison of intention,” "it is not sufficient to show the recognition or acceptance of an entrepreneur’s price-raising by another entrepreneur. “

13 B) If tacit agreement is sufficient, how can it be proven? Holistic approach (look at all the evidence!) “We should consider recognition and intention of the entrepreneurs by examining various circumstances before and after the price- raising, and then evaluate whether there is a mutual recognition or acceptance among entrepreneurs regarding the price-raising or not. “

14 a.Existence of previous exchange of their information and opinions b.Information and opinions which had been exchanged were related to the price-raising of the relevant products c.Concerted act as a result Three criteria to prove a tacit agreement In Toshiba Chemical Case

15 Members exchanged their opinions regarding the price of the product concerned at the meetings of the trade association. a. Existence of previous exchange of their information and opinions Evidence Statement of participants in the meetings The trade association meeting’s participants list

16 Three major companies expressed their intention to raise the price. Three major companies requested that the other five companies follow their price-raising. No objection by the other five companies was made at the meeting. b. Information and opinions which had been exchanged were related to the price-raising of the relevant products Evidence Statements of participants in the meetings

17 All the eight companies gave instructions in their office to raise the price. All the eight companies announced and carried out the price-raising for users. c. Concerted act as a result Evidence Statements of persons involved Press release of price-raising Notice of price-raising sent to their customers

18 3. Argument made by Toshiba Chemical

19 A)Participants from Toshiba Chemical made an objection to a concerted price-raising at the meeting of the trade association. Points of argument by Toshiba Chemical Court Ruling: According to the other participants’ statements, nobody remembered such a remark being made by Toshiba Chemical.

20 B) Because of several reasons (plan to list the stock, violation of a COCOM regulation by Toshiba group), Toshiba Chemical tried to ensure compliance with the Antimonopoly Law at that time. Points of argument by Toshiba Chemical Court Ruling: To list the stock, Toshiba Chemical had to achieve a rapid earnings recovery at that time. Price-raising was necessary. If Toshiba Chemical had sincerely wanted to avoid taking part in collusion, it should not have participated in meetings where the companies exchange opinions and information relating to price.

21 C) The actual price-raising by eight companies was disorganized. Points of argument by Toshiba Chemical Court Ruling: It is natural that price-raising may not necessarily be carried out as planned because of the power balance between manufacturers and users, worldwide price trends, etc. Regardless of the subsequent circumstances, we can presume that the companies collaborated to raise the price if there was a concerted act.

22 Explicit agreement is not necessary to prove the existence of a cartel agreement. A tacit agreement is sufficient. Passive acceptance is not enough. Intention of collaboration is necessary. In order to prove that there was a tacit agreement, you should take a holistic approach. Conclusion