(July 27, 2011)
The Fair Trade Commission searched the headquarters of four major bearing firms Tuesday on suspicion they had formed a price cartel, the FTC said.
The four companies are Tokyo-based NSK Ltd., Osaka-based NTN Corp., Toyama-based Nachi-Fujikoshi Corp. and Nagoya-based JTEKT Corp.
The FTC also searched about 20 other locations, including major sales offices and executives' homes. The companies are suspected to have unfairly restrained trade in bearings used for vehicle axles and steering wheels in violation of the Antimonopoly Law.
The domestic bearing market exceeds 400 billion yen annually, according to industry sources. The four companies hold nearly 90 percent of the bearing market.
The FTC plans to file a criminal accusation against the companies with police because price-fixing unfairly impacts on people's daily life by keeping prices high, investigation sources said.
Tuesday's searches were the first connected with a price cartel in 3-1/2 years. In 2008, the FTC made searches as part of an investigation into a price cartel involving coated steel sheets.
According to investigation sources, the four bearing manufacturers are suspected to have decided on price-hike ranges and when to raise prices in two sales routes: one for major industrial consumers such as major automakers and machinery manufacturers that are sold directly, and the other for retailers to be sold via wholesalers.
The cartel was formed in 2004 at the latest, the sources said.
Price increases and their timing were decided at meetings among executives and other high-ranking officials.
After the executive decisions, the price hikes were implemented at the firms' sales offices around the country, the sources said. Sometimes the offices mutually confirmed the price hike ranges, the FTC suspects.
The price increases were decided along with hikes in base material prices, such as stainless steel and bearing steel.
However, even after prices of these materials plunged after the 2008 "Lehman shock," the firms kept their prices at inflated levels.
Spokesmen of the companies said the firms will cooperate with the FTC, and acknowledged they were being investigated by the monopoly watchdog.
In 1973, the four companies were given punishments by the FTC for forming a similar price cartel.
More than 100 different bearings are used in one vehicle, such as for axles, gears and steering wheels. They are also used for railway carriages, household appliances, wind power plants and space exploration vehicles.
Bearings have more than 1,000 product standards based on their types and sizes.
In a free market, the prices of products with the same specifications would be expected to differ between manufacturers. However, industry sources said product prices were almost the same for all the companies, according to product price schedules they issued to wholesalers each year.
The FTC suspects the companies negotiated every year on the prices to decide on how much prices should be raised.
In addition, the FTC reportedly suspects they decided on the range of price hikes for large-lot consumers such as major automakers.
In the 1973 case, the FTC found that NSK, Koyo Seiko Co. (currently JTEKT), Nachi-Fujikoshi and a sales arm company of NTN Toyo Bearing Co. (current NTN), formed a cartel and that the companies' executives in charge of sales held secret meetings.
They decided at these meetings to raise prices for large-lot consumers by more than 7 percent and prices for wholesalers by 15 percent to 25 percent--clear violations of the Antimonopoly Law.
The FTC believes the latest alleged wrongdoing is almost identical to the 1973 case. Although the companies were probed by the FTC in the past, they apparently could not resist the temptation of forming a price cartel.
Steel prices started to rise around 2004 on the coattails of the construction boom in China ahead of the 2008 Beijing Olympics.
Until 2008, when the Lehman shock also hit the bearing market, the companies had explained increases in raw material costs were behind the price hikes.
However, the firms did not cut their prices in and after 2009 even though raw material prices nosedived that year.
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