News On Japan

Japan Beer Giants Raided Over Suspected Price-Fixing Cartel

TOKYO - Japan's four largest beer makers were subjected to simultaneous compulsory searches on October 7 over suspicions they coordinated wholesale prices for beer and other alcoholic beverages, in a rare cartel investigation that could lead to criminal charges.

The Japan Fair Trade Commission entered the Tokyo headquarters and other facilities of Asahi Breweries, Kirin Brewery, Suntory and Sapporo Breweries, which together account for almost the entire domestic beer market.

Investigators entered Asahi Breweries, Japan's largest brewer by market share, at around 9 a.m., with searches continuing later in the day. Searches were also conducted simultaneously at the other three major brewers.

The companies are suspected of coordinating the prices at which beer and other products were shipped to wholesalers over a period of several years, rather than independently setting prices as required under competition law.

Investigators are examining whether representatives of the four companies informally agreed on specific targets for the size of price increases.

The suspected coordination is believed to have taken place around meetings of the Brewers Association of Japan, an industry organization to which all four companies belong.

A regular gathering known as the Ichimokukai was generally held on the first Thursday of each month. Sales managers and other representatives from the four brewers are suspected of meeting before or after those sessions and discussing specific targets for price increases.

The Fair Trade Commission also conducted a compulsory search of the industry association.

Toshiya Onozato, a senior executive director of the Brewers Association of Japan, declined to comment on the allegations but said the organization would cooperate fully with the investigation.

The probe follows broad price increases by major beer makers in April last year, which prompted consumers to stock up before the higher prices took effect.

Some shoppers at the time said they had bought additional beer because prices were about to rise, while others complained that household expenses were increasing even though pension income was not keeping pace. Consumers also said they were reducing the amount of beer they purchased to manage rising living costs.

The suspected cartel has raised questions over whether consumers may have paid more because normal price competition between the country's biggest brewers had been restricted.

A supermarket operator expressed concern over the allegations, saying retailers were making efforts to reduce labor costs and keep selling prices as low as possible under normal competitive conditions.

Consumers also said brewers should compete independently on taste and price, allowing differences between brands to emerge through normal market competition.

Japan's beer market is highly concentrated, with Asahi, Kirin, Suntory and Sapporo accounting for nearly all domestic sales.

According to the National Tax Agency, the domestic beer market was worth about 1.15 trillion yen two years ago, meaning any widespread price coordination could have had a significant impact on consumers.

The investigation comes shortly after changes to Japan's alcohol tax system took effect on October 1, completing the unification of tax rates across beer-type beverages.

Under the changes, the tax on regular beer fell by about 9 yen, while taxes on low-malt happoshu and so-called third-category beer rose by about 7 yen.

Kirin Brewery President Hideki Horiguchi said in January that the tax changes would undoubtedly transform the market.

Asahi Breweries President Kazuo Matsuyama said in July that the company wanted to compete "not on price, but right at the heart of taste and brand."

All four companies said following the searches that they would cooperate fully with the authorities.

Cartels, in which multiple companies communicate and improperly agree on prices or other commercial conditions, are prohibited under Japan's Antimonopoly Act because they can eliminate competition and result in consumers paying unnecessarily high prices.

The latest action is being conducted as a criminal investigation under a special procedure used by the Fair Trade Commission when suspected violations are considered particularly serious and likely to have a broad impact on people's lives.

Under that procedure, investigators obtain warrants from a judge allowing them to search premises and seize evidence.

Authorities are believed to have concluded that the potential impact could be exceptionally large because the suspected coordination may have covered shipment prices for virtually all beer and related products, regardless of whether they were destined for retailers or restaurants.

The Fair Trade Commission is expected to investigate the full extent of the alleged arrangement while considering whether to file criminal accusations.

Source: TBS

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