Steel price-fixing talks continued during FTC probe
Written by Writer on Thursday, November 13th, 2008
Steel price-fixing talks continued during FTC probe
The Yomiuri Shimbun
Nippon Steel Corp. and Sumitomo Metal Industries Ltd. were advised by the Fair Trade Commission to admit to having formed a cartel to fix prices on galvanized sheet steel when the companies underwent FTC screening ahead of a planned merger of their subsidiaries, according to sources.
The companies failed to conduct thorough internal investigations and the price-fixing talks continued during the screening process, the sources said.
The FTC filed criminal complaints Tuesday with the public prosecutor general against three steelmakers on suspicion of violating the Antimonopoly Law by having formed a cartel on galvanized sheet steel. The three companies–Nippon Steel and Sumikin Coated Sheet Corp., Nisshin Steel Co. and Yodogawa Steel Works Ltd.–are suspected to have agreed between April and June 2006 to raise prices of sheet steel by 10 yen per kilogram beginning with shipments in July of that year.
Investigators from the Tokyo District Public Prosecutors Office searched the head offices of Nippon Steel and Sumikin Coated Sheet and Nisshin Steel on Wednesday.
According to the sources, in late February 2006, Nippon Steel and Sumitomo Metal Industries filed a plan with the FTC to merge their subsidiaries.
Galvanized sheet steel is categorized into two groups: “Colored” sheet steel, which is coated to boost durability and water resistance for use outdoors or for manufacturing exterior parts; and uncoated sheet steel, which is used indoors or for interior parts.
Because about 30 percent of the colored sheet steel market was held by the Nippon Steel subsidiary and about 10 percent held by the Sumitomo Metal Industries subsidiary, the FTC was concerned about the effect of the merger and launched an antimonopoly examination.
At that time, FTC officials reportedly told legal affairs personnel at the two companies that in Europe, firms sometimes confess irregularities at the time of the merger and acquisition process. The FTC asked the companies whether they had any corporate governance problems, the sources said.
According to the sources, the FTC’s division in charge of bid-rigging and cartel investigation suspected the existence of the sheet steel cartel, but it did not have enough evidence to warrant a search of the companies.
Meanwhile, the revised Antimonopoly Law took effect in January that year, introducing a system under which the FTC will not file criminal complaints with prosecutors if the companies declare their own irregularities ahead of the authorities’ investigation.
That is why the FTC thought the companies could be persuaded to come clean about the cartel, the sources said.
But Nippon Steel did not conduct a full-scale in-house investigation and only instructed employees not to engage in such a practice in the future.
Sumitomo Metal Industries questioned employees in its sheet steel division, but its investigation was not thorough, sources said.
In the end, the parent companies did not admit they were involved in the cartel, and the FTC completed the examination and approved the merger in October that year. The new company, Nippon Steel and Sumikin Coated Sheet, was established on Dec. 1.
(Nov. 13, 2008)
