Fujitsu Offers Apology for Cutthroat Contract Bids

A 1-yen coin, a slice of aluminum 3/4 of an inch wide and so light that it floats on a postage scale, has gotten the Gargantuan computer company Fujitsu Ltd. into an embarrassing predicament and threatens to become the latest flash point of U.S.-Japan economic friction.

Fujitsu’s president, Takuma Yamamoto, swallowed his pride on Wednesday and called a news conference to apologize for his company’s ethically dubious bidding on public works projects.

The problem emerged last week when it was announced that Fujitsu had won a competitive contract to design a waterworks mapping system for the city of Hiroshima with an unbeatable bid of 1 yen--about 0.7 cent at current exchange rates. City authorities estimated the contract was worth more than $70,000.

It hardly sounds like material for an international incident, but the Hiroshima contract turned out to be the third successful 1-yen tender for Fujitsu. The bidding practice is being denounced here as an attempt by financially powerful Fujitsu to muscle its way into new fields of business, and the Japan Fair Trade Commission is looking into allegations of dumping and unfair restraint of trade.

The disclosures follow criticism in the United States that Japan’s aggressive supercomputer manufacturers, among which Fujitsu is a leader, have bought their way into a dominant position in the industry with questionable discounting practices in sales to universities and research institutes.

U.S. officials have also raised concerns that public works bidding practices in Japan frequently abuse the principle of free and fair competition and can effectively shut out foreign companies from the market, especially in the construction industry. The issue is on the agenda in pending bilateral consultations on “structural impediments” to fair trade.

The 1-yen Hiroshima bid crossed the line of “common sense in society,” Yamamoto conceded, because Fujitsu officials had counted on recouping the cost of the preliminary design work by winning a subsequent bid for the computer hardware involved in the project.

“We apologize for causing trouble to all those concerned,” Yamamoto said. “Competition in the computer industry is getting incredibly intense lately, but this sort of act damages commercial morality and should never be excused. From now on, we will take strict precautions against our misconduct.”

Yamamoto said Fujitsu had also won a recent public works contract to design a library computer system for Nagano Prefecture, or state, with a 1-yen bid. It was selected over NEC Corp., another top supercomputer maker, which also submitted a tender of 1 yen, according to documents published in news reports Wednesday.

Additionally, Fujitsu landed a contract to do computer design work for Wakayama Prefecture two years ago, again for 1 yen. That time, however, Yamamoto said Fujitsu lost out after failing to win the subsequent competition for hardware.

Fujitsu has notified Hiroshima and Nagano Prefecture that it now wishes to withdraw its bids. But Hiroshima authorities have rejected the gesture, claiming that the contract remains legally binding.

“We’ll wait and see the result of the Fair Trade Commission’s investigation before deciding what to do,” said Koji Fukuba, a spokesman for the city.