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Cease and Desist Orders and Surcharge Payment Orders against Participants in the Bidding for Electric Equipment Construction in Relation to Sewage Disposal Facilities Ordered by the City of Sapporo

October 29/2008
Japan Fair Trade Commission

The Japan Fair Trade Commission (JFTC)examined the participants in the bidding for designated electric equipment construction (Note) ordered by the City of Sapporo in accordance with the provisions of the Antimonopoly Act and found that the following companies were in violation of Article 3 of the Act (Prohibition of Unreasonable Restraint of Trade). The JFTC today issued cease and desist orders in accordance with the provision of Paragraph 2, Article 7 and surcharge payment orders in accordance with the provision of Paragraph 1, Article 7-2 of the Act as shown in item [I]below.
In addition, in relation to the above violations, involvement in bid rigging by employees of the City of Sapporo was discovered. Accordingly, the JFTC today issued a demand to the Mayor of Sapporo for improvement measures as shown in item [II] below in accordance with the provisions of the Act on Elimination and Prevention of Involvement in Bid Rigging, etc. and Punishments for Acts by Employees that Harm Fairness of Bidding, etc. (hereinafter referred to as the Bid Rigging Involvement Prevention Act”).

Note: Among the electrical equipment construction related to the sewage disposal facilities, including terminal disposal plant,
pump plant and sludge center, the installation construction involving design and manufacturing of major devices constituting the electrical equipment installed in these structures, renewal construction (replacement of the existing electrical equipment) as well as additional construction (addition of electrical equipment to the existing sewage disposal facilities) are called “designated electrical equipment construction.”

[I] Cease and Desist Order and Surcharge Payment Order
1. Number of Violating Entrepreneurs, Number of Entrepreneurs Subject to the Cease and Desist Order and the Surcharge Payment Order as well as their Surcharge Amounts (See the attached table for the names of the subject entrepreneurs and the surcharge amounts for each of them)

Number of violating companies Number of companies subject to the cease and desist order Number of companies subject to the surcharge payment order Surcharge amount
10 companies 8 companies 8 companies 425,300,000 yen

2. Outline of the Violation
These 10 companies substantially restrained competition in the field of the designated electrical equipment construction ordered by the City of Sapporo contrary to the public interest in order to prevent lowering of the order prices on and after April 1, 2003 at the latest (until September 30, 2003 for Fuji Denki Holdings and on and after October 1 of the same year for Fuji Denki Systems among them), by appointing a designated successful bidder appointed by an employee of the City of Sapporo as the designated contractor before bidding began for the planned electrical equipment construction ordered by the City of Sapporo and arranging for such designated contractor to receive the order.

3. Outline of the Cease and Desist Order
(1)The 8 companies shall respectively acknowledge that they have stopped taking the actions described in item 2 above and shall have resolutions adopted by their respective Board of Directors to the effect that they will not again take any actions
similar to the actions in item 2 above and that each of them will endeavor to independently receive orders in the future.
(2)Each of the 8 companies shall communicate the measures adopted in accordance with item (1) above to the other 7 companies and to the City of Sapporo and shall have the measures thoroughly disseminated to their employees.
(3) Each of the 8 companies shall not again take any action similar to that described in item 2 above among them, or in cooperation with other entrepreneurs in the future.
(4) The 8 companies shall respectively take necessary measures to perform the following matters in the future.
A. Revision of their behavior policies on observation of the Antimonopoly Act in relation to receiving orders from public offices
B. Periodic training courses for the sales staff in charge of the designated electric equipment construction ordered by the City of Sapporo and conduct periodic audits by their legal staff to assure observation of the Antimonopoly Act in relation to
receiving of orders from public offices.

4. Outline of the Surcharge Payment Order
(1) The 8 companies shall pay the total amount of 425,300,000 yen by January 30, 2009 (See the attached table).
(2)In accordance with Paragraph 2, Article 4 of the supplementary provisions of the Antimonopoly Act as amended (2005 Law No. 35), the rate of 6% is applied to the sales amount as the rate applied before the enforcement date of the Act (January 4,
2006) in calculation of the surcharge.

[II] Demand for Improvement Measures to the Mayor of Sapporo
1. Outline of the Bid Rigging Involvement Action
In relation to the violation described in section 2 of item [I] above, the person in the post of the Director General of the Construction Department or the Director of the Facilities Construction Division of the Construction Department in the Sewage Bureau of the City of Sapporo (the Director General of the Sewage Construction Department or the Director of the Facilities Construction Division of the Sewage Construction Department in the Construction Bureau of the City of Sapporo after the organizational change on April 1, 2005) communicated his/her selection of the designated successful construction bidder to that designated successful bidder before the bidding on the
construction for almost all the designated electric equipment construction ordered by the City of Sapporo, and thereby had the participants in the bidding arrange the bid rigging on and after April 1, 2003 at the latest.

2. Applicable Provisions of the Law and the Demand for Improvement Measures The action described in section 1 above by the staff of the City of Sapporo falls under the provisions of Items 1 and 2, Paragraph 5, Article 2 under the Bid Rigging
Involvement Prevention Act. It is recognized as a bid rigging involvement action as provided in the Bid Rigging Involvement Prevention Act.
Therefore,the JFTC demanded that the Mayor of Sapporo immediately take necessary improvement measures in order to assure exclusion of the applicable bid rigging involvement action in relation to the designated electric equipment construction ordered by the City of Sapporo, so that any action similar to that in section 1 above will not be taken in the future in accordance with the provision of Paragraph 2, Article 3 of the Bid Rigging Involvement Prevention Act. Further, the JFTC demanded that based on the provision of Paragraph 6 of the Article, the Mayor communicate the results of the investigation conducted and the contents of the improvement measures taken by the Mayor corresponding to such demand in accordance with the provision of Paragraph 4 of the Article.
In addition, the JFTC provided notice to the Board of Audit of Japan from the viewpoint of making doubly sure to exclude and prevent any future involvement in bid rigging.

Attached Table

No. Entrepreneur Principal Office Cease and Desist Order Surcharge Payment Order (Unit: 10,000 yen)
1 Mitsubishi Electric Corporation 7-3, Marunouchi 2-chome, Chiyoda-ku, Tokyo 12,549
2 Hitachi, Ltd. 6-6, Marunouchi 1-chome, Chiyoda-ku, Tokyo 10,906
3 Meidensha Corporation 1-1, Osaki 2-chome, Shinagawa-ku, Tokyo 9,544
4 Toyo Electric Mfg. Co., Ltd. 9-2, Kyobashi 2-chome, Chuo-ku, Tokyo 4,658
5 Nissin Electric Co., Ltd. 47, Umezu-Takasecho, Ukyo-ku, Kyoto 2,000
6 Yaskawa Electric Corporation 2-1, Kurosaki-Shiroishi, Yahata-nishi-ku, Kitakyushu 1,364
7 Fuji Electric Systems Co., Ltd. 11-2, Osaki 1-chome, Shinagawa-ku, Tokyo 1,285
8 Shinko Electric Co., Ltd. 1-30, Shibadaimon 1-chome, Minato-ku, Tokyo 224
9 Toshiba Corporation 1-1, Shibaura 1-chome, Minato-ku, Tokyo
10 Fuji Electric Holdings Co., Ltd. 11-2, Osaki 1-chome, Shinagawa-ku, Tokyo
Total 8 companies 42,530

Note 1 "○" in the table indicates the entrepreneur to which the cease and desist order is addressed.
Note 2 "-" in the table indicates the violating entrepreneur to which the cease and desist/surcharge payment order is not addressed.
Note 3 Fuji Electric Systems Co., Ltd. succeeded the business of electric constructions by corporate division on October 1,
2003 from Fuji Electric Co., Ltd. engaged in such business in the Sapporo City area and Fuji Electric Co., Ltd. changed its name to Fuji Electric Holdings Co., Ltd. Fuji Electric Co., Ltd. has not been engaged in this business since then.

*Every announcement is tentative translation. Please refer to the original text written in Japanese.



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