The was centered around the use of

bid-rigging Bid rigging is a fraudulent scheme in a procurement action which enables companies to submit non-competitive bids. It can be performed by corrupt officials, by firms in an orchestrated act of collusion, or by officials and firms acting together. ...

between 47 colluding Japanese firms and

Japan Highway Public Corporation , or JH, was a public company established after World War II to construct and manage highway networks in Japan Japan is an island country in East Asia. Located in the Pacific Ocean off the northeast coast of the Asia, Asian mainland, it i ...

(JH) in the granting of contracts to build steel bridges in violation of

Japanese competition law Japanese competition law consists of the , officially the , and several other statutory laws. The AMA was introduced during the postwar United States-led-and-controlled Allied occupation. President Harry S. Truman, on 6 September 1945, issued a ...

. It was the biggest such scandal in the history of the nation up to that point, with an estimated 23.5 billion

Japanese yen The is the official currency of Japan. It is the third-most traded currency in the foreign exchange market, after the United States dollar and the euro. It is also widely used as a third reserve currency after the US dollar and the euro. Th ...

of unfair gains over fiscal years 2003 and 2004.

Background and history

The scandal is one example of the long-time practice of ''

dango is a Japanese dumpling made with regular rice flour and glutinous rice flour. They are usually made in round shapes, and three to five pieces are served on a skewer, which is called . The pieces are eaten with sugar, syrup, red bean paste, a ...

'', where construction companies and bureaucrats exchange favors and kickbacks for a mutually beneficial outcome, causing less competition and increased costs for public infrastructure. In this case, former executives of JH had been given jobs in private firms in exchange for unreleased information about JH construction projects, part of a tradition known as . This had an effect on the public purse: an example is where contracts for bridges in

Shizuoka Prefecture is a Prefectures of Japan, prefecture of Japan located in the Chūbu region of Honshu. Shizuoka Prefecture has a population of 3,555,818 and has a geographic area of . Shizuoka Prefecture borders Kanagawa Prefecture to the east, Yamanashi Pref ...

unfairly awarded in May 2004 increased JH's expenses by 45.7 million yen (). The parties involved included major steel companies such as

Kobe Steel Kobe Steel, Ltd. (株式会社神戸製鋼所, ''Kabushiki gaisha Kōbe Seikō-sho'') is a major Japanese steel manufacturer headquartered in Chūō-ku, Kobe. Kobelco is the unified brand name of the Kobe Steel Group. Kobe Steel has the low ...

and

Nippon Steel (previously known as Nippon Steel & Sumitomo Metal until 2019) is Japan's largest steelmaker, headquartered in Marunouchi, Chiyoda, Tokyo. The company has four business segments, which are steelmaking, engineering, chemicals, and systems solu ...

, as well as conglomerates such as

Nippon Sharyo , formed in 1896, is a major rolling stock, Heavy equipment, heavy equipment, Diesel generator, generator, Special-purpose entity, special purpose vehicle and bridge manufacturer based in Nagoya, Japan. In 1996, it abbreviated its ...

and Kawasaki. They were represented by two bodies: A-kai (A association) and K-Kai (K-association), which have reportedly existed since 1960. Businesses in both organizations had successfully netted most of the infrastructure orders between FY2002 and FY2004 put forward by regional bureaus of the

Ministry of Land, Infrastructure, Transport and Tourism The , abbreviated MLIT, is a ministry of the Japanese government.国土交通省設置法

(MLIT).

Investigation

On 22 May 2005, prosecutors raided the offices of the 47 firms involved, with eight in particular being focused on. Four days later, employees of 11 companies, including the eight previously scrutinized, were arrested. The then-vice president of JH, Michio Usida, was taken into custody on 25 July and fired from his position on 22 August. On 24 March 2006, the Fair Trade Commission of Japan ordered 44 companies to pay over 12.9 billion yen in surcharges to JH and the MLIT.

Aftermath

The

Japanese government The Government of Japan is the central government of Japan. It consists of legislative, executive and judiciary branches and functions under the framework established by the Constitution of Japan. Japan is a unitary state, containing forty- ...

amended and strengthened anti-bid-rigging laws in light of the scandal as well others around the same time. By 2009, it was determined that many of these measures worked, with a substantial decrease in noncompetitive bidding.

References

{{reflist 2005 in Japan Anti-competitive practices 2005 scandals Corruption in Japan