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By Rill, James F. | Law and Policy in International Business, Summer 1993 | Go to article overview

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Rill, James F., Law and Policy in International Business


Let me apologize to the other discussants, because I am going to use up the next fifty minutes. With apologies to Bette Davis, fasten your seat belts; it's going to be a bumpy ride. I am going to necessarily be a bit sketchy in my response because of the comprehensive and provocative papers by our principal speakers, both of whom presented very excellent overviews tying into the topic of today's program: the opportunities for convergence and elimination of frictions in international business transactions.

At the outset let me take the point that Joel Davidow made and totally disagree with it; that is, that antitrust is neutral in trade. Antitrust is not neutral in trade. Competition policy promotes trade and promotes open markets. The convergence and harmonization of competition policy and the elimination of structural impediments to open markets can only enhance international exchange and promote greater production and greater wealth throughout the world.

The two papers presented today provide excellent examples of areas in which there can be (and indeed there have been) steps taken towards the harmonization of competition policy. The kereitsu issue represents part of the broader issue of convergence and acknowledgement of differences in antitrust enforcement in the U.S. and in Japan. This illustrates the potential for convergence of overall objectives and greater transparency to promote greater conflict avoidance. In Joe Griffin's excellent paper on the U.S.-EC agreement, which he describes as a strong evolutionary step in international competition policy convergence, he outlines, I think, the important major elements of that agreement and suggests some areas where further steps can be taken in the direction of bringing us together, at least in terms of process and procedure on competition policy.

The Davidow article is comprehensive on the history of kereitsu. If nothing else, it demonstrates how incomplete our knowledge is of this particular phenomenon. In the academic literature, kereitsu has now taken on a life of its own, but I have not been able to find the word kereitsu in the Sherman Act, or in the 1947 Antimonopoly Act of Japan. There is too much focus on the chivalrous factor of kereitsu, and not nearly enough focus either here or in Japan on the conduct, on the ties, on the relationships that develop out of kereitsu. Even Joel Davidow, I submit, is vacillating between two sentences. In his first paragraph on market allocation, he states that "it is not usually asserted that kereitsu equals market allocation among competitors." In another sentence, he states that business is allocated on the basis of complex connections but he finds "no direct agreement appearing to be involved." As I know there has not yet been (with the exception of what may be underway at the JFTC right now) any intensive analysis of possible horizontal agreements among manufacturers, suppliers, and distributors and the respective kereitsu in which they operate. Various studies have been conducted by the Brookings Institution and the Federal Trade Commission, but at most these studies cite a failure of proof. A full-scale Sherman Act-based or Antimonopoly Act-based examination of circumstantial and direct evidence that may identify collusion or coordinated behavior has not been undertaken and cries out to be undertaken in the kereitsu context.

Let me give you some thoughts on what form such studies might take. First, what examination has been made of the context and topics of meetings among manufacturing competitors in the same industries, but belonging to different kereitsu? What examination has been made of governmental persuasion (not compulsion) toward sole sourcing and exclusive distribution? What examination has been made as to the imposition of exclusivity? Does it make sense for an individual firm if in an entire industry all firms do not agree to it? What examination has been made as to the absence of business justification for exclusive ties within vertical kereitsu relationships? …

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