Keiretsu and U.S. Antitrust

By Davidow, Joel | Law and Policy in International Business, Summer 1993 | Go to article overview

Keiretsu and U.S. Antitrust


Davidow, Joel, Law and Policy in International Business


Prior to 1989, keiretsu was not a familiar word or concept to most Americans. Yet in the last two years, hundreds of U.S. newspaper and magazine articles have dealt with keiretsu issues in the United States and Japan. Americans have come to understand that the term keiretsu refers to traditional groupings of Japanese companies that tend to deal primarily or preferably with each other, and that often are affiliated by means of minority shareholding, membership in common organizations or regularly renewed contractual dealings.

Certain critics of Japanese commercial conduct and some members of Congress have charged that keiretsu groupings are "cartels" that restrain U.S. sales or exports and that could be controlled by more vigorous enforcement of U.S. antitrust laws.(1) In a Senate hearing in 1991, Senator Max Baucus stated that "despite increased efforts to enforce the Japanese Anti-Monopoly Act, collusive groupings of Japanese companies--keiretsus--block U.S. exports in many sectors."(2) The U.S. Federal Trade Commission (FTC) has already conducted a first state keiretsu antitrust investigation, but with no resulting prosecutions.(3) However, the matter remains alive at the FTC and at the justice Department's Antitrust Division, which has announced a plan to study foreign practices that limit U.S. exports.(4) Despite this appearance of concern and enforcement activity, very little keiretsu antitrust litigation has occurred. This article will explain the two primary reasons for this state of affairs: first, because keiretsu arrangements normally fall outside of U.S. antitrust rules, and second, because offshore enforcement is seldom feasible.

The notoriety of the term "keiretsu" developed mainly in three contexts: the semiconductor dispute, the Structural Impediments Initiative (SII) and the automotive parts dispute. With regard to semiconductor trade, U.S. producers alleged in a 1985 trade (section 301) petition to the President that many Japanese firms declined to purchase U.S. semiconductors because of patterns of reciprocal dealing, or keiretsu relationships.(5) The semiconductor case led not only to the adoption of purchase goals by Japanese firms but also to calls for tougher enforcement of Japanese antitrust law.

The semiconductor issue and other trade pressures led the U.S. to argue at the SII talks in 1989 that keiretsu relationships were an impediment to U.S. trade and investment in Japan, and that Japanese antimonopoly laws should be more actively targeted against such practices.(6) The new Japanese Fair Trade Commission (JFTC) guidelines on distribution practices refer to keiretsu type issues frequently. Moreover, JFTC has promulgated rules to reform restrictive practices that could arise out of keiretsu relationships.(7) In addition, both the Ministry of International Trade and Industry (MITI) and Keidanren (japanese Federation of Economic Organizations) have drafted purchasing guidelines for Japanese companies that emphasize buying goods or services based on price and quality rather than on nationality or traditional supplier relationships.(8)

The automotive parts issue continues to trouble U.S.-Japanese trade relations. Automobiles and auto parts make up the majority of America's trade deficit with Japan.(9) The U.S. auto parts industry has been lobbying for years in favor of any type of measure that might shift this trade imbalance. Auto parts were a major subject of negotiation between the two countries under the market-oriented sector-selective (MOSS) talks(10) long before keiretsu was an SII issue or an antitrust issue. A market-oriented cooperation program (MOCP) already exists to facilitate U.S. auto parts sales in Japan. In january 1992, President Bush's trip to Tokyo elicited pledges that Japan would facilitate the purchase of U.S. parts by Japanese automobile companies.(11)

In the last few years, the automotive keiretsu issue has had a Japanese and a U. …

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