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Cartel in Japanese construction industry

Prepared By: Tao Xiaoming Situ Pradhan Jush Shreshta

Pishen Umirbekov

S.M.Arifuzzaman

• People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice.

Adam Smith

Introduction

-Limit open competition-Gaining an unfair advantage

-Consultation-Few companies controlling the industry in Japan-Main winners in tenders for public construction work-Related with bribery and networking with official bodies

-Government officials leak information -BIG GUYS (YAKUZA)-Share profit among the AMIGOES

What is collusion?

What is Dango??

How they work???

Ethic Issues in Cartel

Against antitrust law with dishonest business practice

Increase the level of corruption

Gangsters are used to enforce the collusive agreement

Play with tax money results in welfare loss for the public

Inefficient in economy

Dango violated the nature of market competition in the way of practicing economics of collusion.

Why cartel still in practice in Japan and other countries?

Officials

Gangster

Fear

Support of Government, officials and Politicians

Controlled by Gangsters

People are scared to file a case

BenefitMutual benefit for all parties involved

Price inflationTax money wasted largest single source

corruption

Public-safety rationale policyPrevents foreign firms

Illegal under Antimonopoly ActCeiling price is leaked to the bidders

Motivated by simple bureaucratic caution

The Various Stakeholders Involved

Government/ Policies and Law

Tax payers

Political Parties

New entrants

The Various Stakeholders Involved

Dango Specialists: Only few managers involved. Divorced from the direct company

Gangsters “Yakuzas”: Relations with the

power holders Immediate means of

Dango enforcement

Ethical Dilemmas

Japanese long tradition of gift giving has turned into the form of offering kickbacks which is against their own cultural norms

The gift giving culture actually competes with Japanese own legal system

In Business relations networking became so important that without it no deal is settled. Members in network expect & enjoy benefits which cause huge social welfare loss as well as social value loss.

Dimension 1

Dimension

2

Dimension

3

Analysis of Business Practice

Theoretical Comparison

Egoist TheoryMotivated by their own interest and set ethical standards accordingly

Cultural Relativism

Immoral Management

Unlike other culture gift giving is pretty common in building business relations.

But it spread broadly & took the shape of kickback which is against their cultural norms

They are highly profit centric and they want to achieve it taking advantage of legal system or anything

Recommendations

Strict legal actions for people involved in bribery

Penalize Govt. officials for leaking information

Allocate optimum fund for construction

Overseas companies should be allowed to bid

Govt. should explore other domestic bidders

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