Japanese Building Firms, U.S. Settle Bid-Rigging Case

A group of Japanese construction firms has agreed to pay the U.S. government $32.6 million to settle a dispute over alleged bid-rigging of projects at an American military base near Tokyo, U.S. officials said Thursday.

The U.S. side had threatened lawsuits both in Japan and the United States unless a settlement was reached.

Representatives from seven Japanese construction firms and American officials signed the memorandum of intent on behalf of 99 Japanese firms, the U.S. Justice Department said in a statement.

The memorandum stipulates that the payment be made by Dec. 20, according to the statement, which was released by the U.S. Embassy.

Officials from the Japanese companies involved in negotiations were not available for comment because of a national holiday in Japan.

The U.S. government alleges that 140 Japanese construction and related firms were involved in the bid rigging and the statement said the Justice Department would continue to seek damages from the 41 not covered by the memorandum.

Some executives among the 41 firms have said they should not have to pay compensation since they did not bid on the disputed sections of the project. The 41 firms are expected to hold separate talks with the U.S. side.

In the negotiations, the U.S. side demanded a total of $34.8 million in compensation from the 140 firms, which participated in construction projects at the U.S. Navy base at Yokosuka, southwest of Tokyo, between April, 1984, and September, 1987.

During the period, the U.S. Navy awarded 140 firms a combined total of $134.9 million worth of orders, including construction of a housing complex for military personnel.

The U.S. side claimed that there were improper charges and bid-rigging in connection with the construction at the base.

In December, Japan’s Fair Trade Commission issued warnings to 140 Japanese firms for their alleged prior consultations, or “dango,” in setting prices of projects undertaken at the base. The commission levied a collective fine of about $2 million (289 million yen) on 70 companies in the cartel. The Construction Ministry also imposed sanctions, suspending the rights of 104 of the companies to bid on public works contracts for one to two months.

At the time, critics in the U.S. construction industry dismissed the penalties as insufficient.

The dango system, long established in Japan’s construction industry, is considered an anti-competitive practice that prevents firms outside the group, including foreign firms, from getting contracts.

Major firms such as Taisei Corp., Shimizu Corp. and Sumitomo Construction Co. were among the companies that banded together in the mid-1980s as the “U.S. Military Construction Safety and Technology Assn.” in Yokosuka.

The association, which nicknamed itself the “Friends of the Stars”--a reference to the American flag--became a forum for fixing prices and assigning contracts under the guise of competitive bidding, according to Japan’s Fair Trade Commission.