U.S. Expected to Back Kodak in Fuji Fight : Trade: Film giant accuses Japan of helping rival maintain 70% share of domestic market. Fuji calls complaint meritless.
Japan’s trade practices take center stage again Monday when the Clinton Administration is expected to announce it will pursue a complaint by Eastman Kodak Co. accusing Fuji Photo Film Co. of using strong-arm tactics and other illegal measures to monopolize the Japanese film market.
The Office of the U.S. Trade Representative said an announcement will be made Monday morning on the Kodak complaint. The Rochester, N.Y., film giant accuses the Japanese government of helping Fuji maintain a 70% share of its home market.
Kodak’s complaint says Fuji manipulates prices, inhibits competition and maintains tight control over the country’s four main film distributors, in effect buying their loyalty by paying under-the-table rebates.
Top U.S. trade officials have publicly voiced support for Kodak’s position, and Japan experts expect the government to pursue the complaint under Section 301 of U.S. trade law. Under that statute, the Administration has a year to negotiate a solution before some type of penalty is imposed.
“This case is extremely well documented and seems to be very convincing,” said Clyde Prestowitz, a former U.S. government trade negotiator and president of the Economic Strategy Institute in Washington.
Japanese government officials and Fuji executives have denied the accusations. Fuji spokesman Tom Shay said the company is preparing a “comprehensive” rebuttal that will prove Kodak’s complaints are “totally without merit.”
The Kodak case keeps the heat on the U.S.-Japan relationship just days after the nations emerged from a bruising battle over U.S. access to the Japanese auto market. And top U.S. and Japanese officials are meeting next week to try to resolve an aviation dispute over Japan’s refusal to approve route expansions for cargo carrier Federal Express.
Kodak spokesman Charles Smith said this week’s last-minute settlement of the auto dispute helped “establish a climate that will be more productive” for negotiations on the Kodak case.
“It also demonstrates that our two governments can work together to solve some very tough problems,” he said.
But in filing its claim, Kodak has attacked several fundamental areas of Japan’s economy, including the government’s involvement in managing its industrial base and the complex network of corporate relationships that have frustrated foreigners trying to break into the retail distribution system.
In the mid-1980s, Kodak formed a distribution company in Japan and invested more than $750 million in marketing its cameras, film and other products. But while the company was able to carve out a double-digit share of the Japanese market for industrial and medical film, it was only able to get 9% of the country’s lucrative consumer film and paper sales.
Kodak claims it was frozen out of most of Japan’s retail outlets by Fuji’s strong-arm tactics, including unofficial rebates to distributors to keep their loyalty and threats to storekeepers who sold Kodak products. The stores willing to carry Kodak products have been newcomers and Western-style stores.
“There have been instances in the past when a distributor that carried our product was told [by Fuji] that they’d better make a choice or else,” Smith said.
But Shay said Kodak is drawing a distorted picture of the Japanese distribution system, which utilizes a handful of major companies to distribute the products to larger retailers and secondary wholesalers. He said Fuji has developed a close relationship with its distributors over its 60 years of operation but does not require that they carry only Fuji film.
“It’s not even possible for a company to do the kinds of things Kodak claims Fuji does,” he said.
Shay attributed Fuji’s dominance of the Japanese market to its attention to the needs of the quality-conscious Japanese consumer. For example, he said Kodak spent lots of money developing and marketing the 126- and 110-cartridge cameras and disc camera, which were never popular in Japan.
Shay also pointed out that Kodak controls the lion’s share of the U.S. market while Fuji has just 12% of U.S. film sales. Kodak argues the issue is not market share but access to retailers.
* TRADE SHOWDOWN
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