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Case marks first claim under Japanese Anti-Monopoly Act

WASHINGTON, D.C. -- The Department of Justice announced today that it has filed a civil lawsuit against a large Japanese electronics company, Kyowa Exeo, alleging that the company participated in a major conspiracy that resulted in rigged bids on all contracts for operations and maintenance of United States military telecommunications systems in Japan from 1981 to 1988. The case marks the first time the Department has filed a claim under the Japanese Anti-Monopoly Act (AMA).

According to Acting Assistant Attorney General for the Civil Division, David W. Ogden, the suit was filed today in the Tokyo High Court and identifies more than 25 telecommunications contracts where there is specific evidence of collusion and claims damages totaling 2 billion yen, or about $19 million.

The contracts were entered into by the U.S. Air Force Pacific Contracting Office at Yokota Air Base near Tokyo. While the Air Force contracting office had called for competitive bids on the contracts, an investigation conducted by the Air Force Office of Special Investigations revealed the conspiracy.Over the past 10 years, the Department of Justice has recovered more than $72 million in bid-rigging cases in Japan.

Today's lawsuit relies upon earlier findings of the Japanese Fair Trade Commission (JFTC), the agency charged with enforcing Japan's antitrust laws, that Kyowa participated in rigging the contracts as one of 12 members of an organization named the "Kabuto Kai." In 1991, the JFTC issued penalty orders against the three Kabuto Kai members who were winning bidders on the U.S. contracts, including Kyowa. The JFTC penalty orders were based upon the fact that the conspiracy violated Japanese anti-monopoly law.

Only Kyowa refused to pay its penalty order. Kyowa litigated the issue for several years until, in 1994, the JFTC issued a formal decision against the company, affirming the penalty. Kyowa appealed the JFTC's decision, but the penalty was upheld by the Tokyo High Court in 1996.

"Kyowa's liability for its participation in the bid-rigging conspiracy has been clearly established," said Ogden. "This case reflects the Department's commitment to the recovery of funds defrauded from the government and the taxpayers wherever it occurs."

Ogden said the other companies that participated in the rigging of bids on these contracts previously reached settlements with the U.S. NEC Corporation paid $34 million as a result of a settlement reached in 1991, and 10 Japanese electronics companies reached a settlement of $2.7 million in February 1992.

In addition to those settlements, the Department collected $34 million in out-of-court settlements with about 140 Japanese companies relating to bid-rigging at the Yokosuka Naval Base and more than $1.5 million in settlements for claims against numerous Japanese construction companies relating to bid-rigging on Navy contracts at the Atsugi Naval Air Facility in the 1980's -- for a combined total of more than $72 million in recoveries. The Atsugi case is proceeding in Tokyo District Court against 30 companies.

While the Atsugi bid-rigging case was filed as a fraud claim under Japanese law, today's suit against Kyowa marks the first time the Department has filed a claim under the AMA. Under the AMA, once a JFTC penalty order has become final, as it has against Kyowa, a party is deemed to be liable for the damage arising from its anti-competitive conduct.

This case was developed with the assistance of the Antitrust Division.

"Today's lawsuit demonstrates the Department's commitment to ensure that companies who engage in anticompetitive activities that harm the U.S. government and American taxpayers are held accountable for their actions," said Joel I. Klein, Assistant Attorney General in charge of the Department's Antitrust Division.