Case Study in Law & Econ

Case Study in Law & Econ

 Government: Who wants to build Tokyo Bridge?

 Company 1+2+3: Our “Club” decided that

Company 3 will build it for $10,000. Company 1+2 will help as a sub-contractor.

 Government: Of course. Company 3 gets the bid.

 Antitrust enforcement agency v.

construction industry (line 3-4)

 Violation of Antimonopoly Act (line 6)

 They escaped… because the Japan Fair Trade Commission decided not to bring criminal charges (line 7)

 Citizens sued for damages (line 1-2)

 +80 citizen cases (line 3)

 This case heightened public awareness (line 3-4)

 Created in 1972

 By _________ Construction (line 5)

 Membership risen to ____ companies by 1991 (line 5-6)

 In 1991, bid-rigging scheme was discovered by the __________ (last line)

 Saitama used “designated” competitive bidding (line 1-2)

 Rather than competing with each other, companies decided in the club who would get the project at what _______ (last line)

 Disgruntled club members tipped off the Commission (line 4)

 Bid-rigging song composed at the 15^th birthday of the club (line 5)

 In 1991, Japan Fair Trade Commission

raided 66 offices including the envelopes indicating which projects they were

interested in (last 3 lines)

 The Saitama cases seemed an ideal _______

for the Japan Fair Trade Commission’s criminal prosecution (line 1-2)

 America complained that _____ Japanese antitrust enforcement was hampering

American access to Japanese market (line 5- 6)

 1) Cartels and bid-rigging that have wide impact on people’s lives (para. 1, line 1-2)

 2) Repeat offenders  Kajima Construction??

(para. 3, line 4-5)

 Initially, Commission moved in the direction of criminal prosecution (para. 4, line 1) 

 Commission did not file any criminal accusation (last line)

 (Line 1) Commission decided to handle the case only administratively

 Administrative penalty is a surcharge  fixed percentage (1.5%) of profit (para. 2, line 2-3)

 Only companies with profit paid the penalty

 only 43 out of 66 companies paid penalty (para. 3, last 2 lines)

 Harsh criticism from media & public opinion (line 2)

 Why did the Japan Fair Trade Commission not bring criminal charges? Lack of _________

(para. 3, line 3)

 Kajima Construction  passed sizeable sum of money to politician Nakamura 

pressure the Japan Trade Commission into dropping criminal charges (para. 2)

 Prosecution was dropped not because of political pressure but because of

misalignment between the Commission and the _________ Office? (para. 2, last 5 lines)

 Nakamura  1 year and half in _________

(para. 3, last line)