Japan Scolds 2nd Firm for Cutthroat Bidding

Japan’s powerful Trade Ministry summoned the president of computer giant NEC Corp. today to reprimand him for cutthroat bidding, just one day after giving a similar dressing-down to rival Fujitsu.

Japanese officials said they worried that 1-yen (less than 1-cent) bids made by the two companies for major computer software contracts inside Japan would give fresh ammunition to U.S. critics of Japanese business practices.

“The United States has pointed out the behavior of Japanese firms as a problem,” Kyodo News Agency quoted Minister of International Trade and Industry Hikaru Matsunaga as telling reporters.

“I think 1-yen bids damage confidence in Japanese companies and will have a negative effect on the talks,” he said, referring to U.S.-Japan talks in Washington next week on structural barriers to trade.

A senior ministry official told NEC President Tadahiro Sekimoto and Fujitsu President Takuma Yamamoto that rock-bottom bids showed a lack of common sense and raised questions about Japanese business ethics, said Tetsuo Matsui, deputy director of the ministry’s electronics policy bureau. The ministry has told both firms to make sure such bids are not repeated and has instructed other computer firms to check that they do not do the same thing, Matsui said.

Fujitsu made a 1-yen bid for a contract to write software for a computerized waterworks mapping system in Hiroshima, saying it wanted to gain experience in the field. It announced it was withdrawing the bid on Tuesday.

U.S. critics have said such bidding is akin to predatory pricing, in which large companies seek to drive smaller competitors out of business with cutthroat markdowns.

Now some domestic critics are echoing that view.

“If a large company, using its financial power, repeatedly sells under cost, puts other companies out of business and then raises prices, the ones who suffer are the consumers,” said an editorial in the daily Asahi Shimbun.

“Why must (Japanese companies) engage in competition so intense that it becomes a joke?” the newspaper said.