Employees of Japanese auto parts makers behind bars in U.S.

Updated : 15.03.2017

In the past six years, 64 employees from 39 Japanese auto parts markers were indicted for suspected violations of U.S. antitrust laws, and many of them remain behind bars across the United States, according to a Sentaku investigation.

These cases received scant media attention because many of the companies, including Denso Corporation, Furukawa Electric Co. and Bridgestone Corporation, generally do not publicize legal cases in the United States.

Falling into the "leniency" trap

The U.S. Department of Justice indicted the Japanese employees for law violations stemming not from their conduct in the United States, but for actions in Japan that, it deemed, infringed on the principle of free competition, in what is known as an extraterritorial application of the law.

Indeed, there were suspicions that many auto parts makers discussed pricing in violation of the Japanese Antimonopoly Act in the early 2000s, when they were under relentless pressure to cut costs from automakers facing ever-intensifying competition in the global market. But the Japan Fair Trade Commission (FTC) has since concluded there was no "malicious intent" in the automakers' talks about pricing.

Despite the fact the FTC judged the Japanese companies had not violated the law, the Department of Justice indicted them to U.S. courts one after another.

"U.S. antitrust laws are very strict," said a source familiar with the laws. "Differences in business practices between Japan and the United States are behind [the indictment of many Japanese employees]. In Japan, there is no problem if top executives from companies in the same industry get together for casual talks, but such a meeting could be considered problematic in the United States."

Many Japanese industry insiders and experts are scratching their heads over the U.S. decision to resort to exterritorial application of antitrust laws to indict Japanese employees after the FTC concluded they had not done anything wrong.

The Department of Justice views the cases differently, however. It deems it a violation of the principle of fair competition when parts--whose prices were reduced after discussions among top executives in the industry--were used in Japanese cars, which are being sold more cheaply than other cars in the United States.

Some of the Japanese employees are in prison after being sentenced to between 366 days and 2 years, while others have been released after serving their sentences. Many cases are still pending in court.

One common factor in the 64 cases is that the companies pleaded guilty to the charges, apparently because they sought to take advantage of the leniency program, a unique U.S. system that allows companies and individuals who report their cartel activity and cooperate in the department's investigations to avoid criminal conviction.

Japanese companies, which unsurprisingly dread having their top executives sent to jails in the United States, have apparently opted to enroll in the leniency program, experts say.

Some of the employees received a prison term of one year and one day. Under the U.S. system, well-behaved inmates sentenced to more than one year in prison are entitled to have their terms shortened. In most cases, such a prison term is given to a defendant who cooperated with an investigation and quickly acknowledged the allegations were true.

Another factor may be the cost of legal cases. In the United States, company employees are not allowed to receive money from their company to cover legal costs when they are prosecuted. If a company is found to have provided financial support to the accused, it could result in a heavier term for the defendant. Individuals, therefore, must pay attorney fees from their own pocket, a position that restricts their financial means to engage in a court battle.

More indictments to come under Trump administration?

The 64 cases were prosecuted during the Obama administration, which was regarded as rather moderate. Under the leadership of President Donald Trump, who loudly proclaims an "America First" philosophy, however, the United States may well indict more Japanese companies suspected of violating antitrust laws through their actions in Japan.

As the Trump administration pushes ahead with the "Make America great again" policy, many Japanese companies increasingly fear their workers, who are working diligently for their company, could end up in U.S. prisons.

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This is a translation of an article from the March 2017 issue of Sentaku. The original article can be found here.