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Antitrust in Japan

Antitrust in Japan

Eleanor M. Hadley
Copyright Date: 1970
Pages: 540
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  • Book Info
    Antitrust in Japan
    Book Description:

    Before and during World War II, Japan's economy was controlled by power economic concentrations, large family holdings that passed from one generation to another, calledzaibatsu. This book is a full assessment of the American postwar attempt to break up these powerful combines. Miss Hadley recounts both General Douglas MacArthur's efforts to implement the American occupation's antitrust policies and the Japanese government's resistance while it appeared to comply withzaibatsudissolution. As the Cold War developed, American defense thinkers began to emphasize recovery rather than reform, and conservative American businessmen supported the abandonment of antitrust policy in Japan. The second half of the book examines the consequences of the antitrust measures and reaches conclusions which challenge prevailing Japanese and American views.

    Originally published in 1970.

    ThePrinceton Legacy Libraryuses the latest print-on-demand technology to again make available previously out-of-print books from the distinguished backlist of Princeton University Press. These paperback editions preserve the original texts of these important books while presenting them in durable paperback editions. The goal of the Princeton Legacy Library is to vastly increase access to the rich scholarly heritage found in the thousands of books published by Princeton University Press since its founding in 1905.

    eISBN: 978-1-4008-7205-3
    Subjects: Law

Table of Contents

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  1. Front Matter
    (pp. [i]-[vi])
  2. Table of Contents
    (pp. [vii]-[viii])
  3. Preface
    (pp. [ix]-[xii])
    Eleanor M. Hadley
  4. Part I

    • 1. Japan’s Combines, Target of Occupation Reform
      (pp. 3-19)

      World War II differed radically from previous wars in the terms imposed by the victors on the defeated. Previously exactions had been limited to territorial changes, restrictions on the military establishment, and reparations. World War II, representing for the first time “total” warfare, extended to the peace conditions “total” peace, with demands for change in the political and economic structure of the defeated powers. In both Germany and Japan the victors attempted to revamp the social structure, to establish democracy. In the words of one descriptive title, the Germans and the Japanese were "forced to be free.”¹ In the Allied...

    • 2. Combine Enterprise in Japan
      (pp. 20-31)

      MacArthur’s instructions were to “‘dissolve’ large industrial and bankingcombines,” yet the agency of the Japanese government set up to carry out his orders was theHolding CompanyLiquidation Commission and the principal report which this agency issued was entitled,Japan’s Zaibatsu and their Dissolution (Nihon no Zaibatsu to Sono Kaitai).¹ It will be helpful to clarify the relationship between “combines” and “holding companies” and “zaibatsu.

      “Combine” refers to a complex of corporations displaying unified business strategy arising primarily out of an ownership base. The head organ of a combine will Hkely be a “holding company,” a corporation which exists...

    • 3. Japanese-developed Zaibatsu
      (pp. 32-60)

      Many factors contributed to the development of Japan’s giant business complexes, the largest of which controlled up to one-tenth of the incorporated and partnership business of the nation: the hierarchical value system of the nation; the peculiar role of the government in the economy; the cumulative power of capital; the effective lobbying for privilege.

      In the West it was the power of the bourgeoisie which upset the hierarchical value system that prevailed until the emergence of the bourgeoisie in the 17th and 18th centuries.¹ While there are democratic elements in Christian thought, democratic ideology did not translate into constitutions and...

    • 4. Combine Dissolution: Severing Ownership Ties
      (pp. 61-76)

      The Allied policy to dissolve the combines and remove the zaibatsu families from their positions of control amounted to a quite different attitude toward history and social change than the one prevailing in Japan, where a strong Marxian tradition tends to see business or industrial organization as beyond human reach. Marxists regard the stages of capitalist development as the product of “natural law,” which unfolds in its own ineluctable course. The “stages” progress with a logic unmodifiable by human hands, not something that can be changed by antitrust action, by separating banking from industry, or the like.

      This Japanese attitude,...

    • 5. Combine Dissolution: Severing Personnel Ties
      (pp. 77-106)

      A study of ownership holdings as presented in Chapter 4 indicates how inadequately ownership alone tells the story of Japanese combine structures. In some of the core subsidiaries the Mitsui, Mitsubishi, and Sumitomo top-holding companies held no more than 7, 13, and 17 percent, and the combine itself held no more than 17, 36, and 22 percent ownership, yet these were described as “almost perfecdy” under top-holding company control. To have “perfect” or “almost perfect” control of subsidiaries with low ownership holdings indicates the presence of other controls with unmistakable clearness. Among the most important of these other means of...

    • 6. The Deconcentration Law and the Antimonopoly Law
      (pp. 107-124)

      Because certain of the operating companies of the combines were of such giant size as to deter entry, it was believed important that the HCLC be given the power to reorganize them. But the HCLC, while possessing the power to dissolve companies it designated as holding companies, had no such authority.¹ The Enterprise Reconstruction and Reorganization Law, which provided authority to reorganize corporations in circumstances of insolvency or near-insolvency (a circumstance in which virtually all major corporations found themselves following cancellation of government indemnities in 1946), did not contain standards for reorganization from an antitrust point of view, nor was...

    • 7. The Public Debate: FEC 230 and All That
      (pp. 125-146)

      The Deconcentration and Antimonopoly Laws, as well as other aspects of the deconcentration program, were influenced by recommendations by the State-War Mission on Japanese Combines, which was in Japan for about nine weeks in early 1946. Later that spring, the mission report, submitted to the two departments, was placed before the State, War, Navy Coordinating Committee for adoption as United States policy. (On November 4, 1947 the State, War, Navy Coordinating Committee, commonly abbreviated SWINCC, became the State, Army, Navy, Air Coordinating Committee [SANACC]. For convenience, the committee, throughout this book will be referred to as SWINCC.) Finally when the...

    • 8. The Dissolution of Two Trading Giants; Financial Institutions Untouched
      (pp. 147-165)

      The effort to get authority for the HCLC to reorganize operating companies created a host of critics of the deconcentration effort in the United States and resulted in a dramatic reversal of U.S. policy, but the dissolution of the two trading giants, clearly the most drastic action taken in the whole deconcentration program, occasioned no criticism at all! By the stroke of his pen, July 3, 1947, MacArthur caused Mitsui Trading and Mitsubishi Trading to be dissolved. Was the absence of criticism to be explained by ignorance of the event; endorsement of dissolution over reorganization; disapproval of trading companies; or...

    • 9. The United States Reorients Its Economic Policy in Japan
      (pp. 166-180)

      Following the withdrawal of U.S. support for FEC 230 on March 12, 1948, together with the Report of the Draper-Johnston Mission later that month, MacArthur realized that the 325 companies designated under the Deconcentration Law were excessive and set about to effect large-scale releases. He now believed that only those concerns which were “interfering seriously with economic recovery” should be reorganized under the Deconcentration Law. A rather balder statement of the change in policy is to be found in a Headquarters memorandum of mid-April 1948 in which the new policy was summarized:

      (1) no banks were to be considered as...

    • 10. The Sale of Securities and Other Deconcentration Developments
      (pp. 181-202)

      The various programs for dissolving combine ownership ties and reducing other forms of concentration in the economy added up to a tremendous stock-disposal program. By any count—and there were several—the disposal of securities from holding companies,zaibatsufamily members, and, far lesserly, of cross ties under the HCLC program, amounted to a huge undertaking. The combined HCLC program was the largest of the securities transfer programs under the Occupation’s “surgical procedures,” but there were three other programs involving sale of securities. Under the capital levy tax¹ of October 1946, payment of the extraordinary tax was permitted in kind....

  5. PART II

    • 11. Zaibatsu Yesterday, Business “Groupings” Today—Is There a Difference?
      (pp. 205-256)

      In the preceding chapters the logic of the Allied experiment in antitrust and the steps taken (some reversed) have been outlined. Now let us look at the situation today, nearly 20 years after the peace treaty with Japan, to determine the extent to which “the most ambitious antitrust action in history” has taken hold or been rejected, the extent to which thezaibatsuhave returned, or if they have not returned, how much they have been replaced by similar concentrations of business power.

      In both Japan and the U.S. the press has been reporting a steady series of recombinations. The...

    • 12. Other “Headless” Combines and Financial Groupings
      (pp. 257-290)

      Japanese newspapers, magazines, and journals abound with references to business groupings, groupings resting on multiple ties such as was characteristic of the formerzaibatsu(keiretsu), those resting on credit sources (kinyu keiretsu), on raw material supplier and/or product finisher (kigyo keiretsu), and groupings resting on technologically related products where the output of one company’s plant is the raw material for another, and where transportation costs range from high to prohibitive (kombinato). Typically the Japanese see considerable significance to these groupings. We have explored in detail the present-day form of the Mitsubishi, Mitsui, and Sumitomo groupings which, as successor to the...

    • 13. Still More Groupings: Subsidiaries and Kombinato
      (pp. 291-315)

      An examination of “plain”keiretsugroupings and financialkeiretsugroupings reveals a situation in which ties are tenuous and unclear, yet a study of subsidiary groupings indicates a quite different picture. The Fair Trade Commission calls subsidiary groupings “capital [shihon]keiretsu.” In the case of capitalkeiretsu,parent-company ownership is high, management interlocks are numerous, and credit extension is frequent. Although Article 9 of the Antimonopoly Law forbids holding companies, and Articles 10 and 13 forbid intercorporate stockholding and interlocking directorates where the effect is “substantially to restrain competition,” these provisions have not impeded the buildup of subsidiary complexes of...

    • 14. Concentration Without Monopoly
      (pp. 316-356)

      Neither before nor after World War II were observers able to agree on the nature of concentration in the Japanese economy. Economists such as G. C. Allen argue that Japan's economy was and is highly competitive. Professor Allen said of the prewar economy: “At first sight it seems perhaps surprising that competitive conditions should flourish in a country where the large scale trades are dominated by a few groups and where the State has had historically a large role; yet if the true nature of Japan’s political and economic system is appreciated the apparent inconsistency disappears.”¹ In 1965 he observed,...

    • 15. Cartels
      (pp. 357-389)

      In English, “cartel” refers to a treaty-like arrangement among firms within a market, with the typical objective of enhancing profits.¹ The restrictive devices for accomplishing this objective, or attempting to accomplish it, may differ. They may take the form of an agreed upon price; centralized selling to assure that no slip-ups occur with respect to the pricing; restriction of production and division of markets; limitation on new investment, control over new technology; or other arrangements. In English usage,cartelrefers only to form. Nothing is implied about the degree of resulting market power. Cartel strength depends on a variety of...

    • 16. Government in the Economy
      (pp. 390-407)

      Invariably outsiders are astonished at the omnipresence of the Japanese government in the economy. In addition to such “macro” responsibilities as the governments of all free-enterprise economies have come to assume—growth, full employment, stable prices, and a viable balance-of-payments position—and as part of and in addition to its own particular form of “planification indicativ,” the Japanese government directly supports particular industries, enters into the terms of technological agreements, advises on desirable prices, promotes changes in firm size and encourages cartelization. Few Japanese businessmen regard this as an infringement of their rights.

      Japanese government officials believe business to be...

    • 17. The Postwar Performance of the Economy
      (pp. 408-438)

      In contrast to the dour predictions Mitsui and other formerzaibatsuspokesmen made for Japan’s future following the Occupation reforms, and in contrast to the dim view taken by many American government spokesmen, as well as international agency officials, Japan’s economy has prospered as never before. As Orville J. McDiarmid has commented: “As late as 1952, Secretary of State Dulles observed, perhaps in a rare humorous vein, that suicide was not an illogical step for anyone concerned about Japan’s economic future. To spread the laurels of prescience further, the World Bank, in 1955 and even later, was appraising Japan’s total...

    • 18. Assessment
      (pp. 439-454)

      The effort to create competitive enterprise in the capital-intensive sector of Japan’s economy has been described as the “most ambitious antitrust action in history.” Twenty-four years have gone by since the program was begun, and some 20 years since the end of the reform phase of the Occupation. As one looks back with the advantage of hindsight, was the American program in Japan good public policy or was it simply misguided?

      It is necessary to ask both whether the program has promoted the objectives of the United States and whether it has promoted the interests of the Japanese people. The...

  6. Appendices

    • Appendix I Excerpts from President Roosevelt’s Message to the Congress, calling for an investigation of concentrated economic power in the United States, April 29, 1938.
      (pp. 455-456)
    • Appendix II Additional Notes to Tables 3-1, 3-2, and 3-3 in Chapter 3, Showing the Position of the Zaibatsu in the Economy
      (pp. 457-459)
    • Appendix III The Yasuda Plan and MacArthur’s Response
      (pp. 460-463)
    • Appendix IV 83 Designated Holding Companies, Alphabetically Arranged by Date of Designation
      (pp. 464-465)
    • Appendix V Designated Zaibatsu Family Members
      (pp. 466-467)
    • Appendix VI A comparison of companies listed by the HCLC as subsidiaries of the 10 designated Zaibatsu combines, by the Ministry of Finance as “restricted concerns,” and by the HCLC as subsidiaries of the 10 Zaibatsu family groups
      (pp. 468-471)
    • Appendix VII Personnel Interlocks Among the Principal Companies of the Mitsui, Mitsubishi, Sumitomo, and Yasuda Combines, 1945 and 1937
      (pp. 472-487)
    • Appendix VIII Companies Designated under Paragraph 11 of Appendix I of Cabinet and Home Affairs Ministry Ordinance No. 1 of 1947, Promulgated January 4, 1947
      (pp. 488-494)
    • Appendix IX
      (pp. 495-514)
    • Appendix X Record of HCLC Action on the 83 Designated Holding Companies
      (pp. 515-518)
  7. Index
    (pp. 519-528)