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Sharp, Hitach suspected by Japanese regulator of price fixing

Sharp and Hitachi are best known around consumer electronic circles for their high-end LCD high-definition televisions. Both Japanese electronics companies also manufacture small, low-resolution LCD screens for the wildly popular Nintendo DS.

Making the displays for Nintendo’s handheld is apparently serious business, as both Sharp and Hitachi are now under investigation by Japan’s antitrust regulator.

The Fair Trade Commission raided and searched the offices and outlets of Sharp and Hitachi on the suspicion that the companies were price fixing their display devices, according to Bloomberg and Kyodo News.

Japanese fair trade law states that any manufacturer guilty of price fixing will be fined up to 10 percent of the illegal gains.

Sharp and Hitachi supply display technology to the most popular gaming handheld in the world today. To date, Nintendo has sold more than 17.6 million Nintendo DS in the U.S., nearly 8.5 million of which were in 2007.

Overall, the LCD business is expecting a banner year in 2008, particularly in the area of televisions. Sharp expects to increase its capital spending $1.85 billion in anticipation of demand.

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RE: I hope I'm interpreting this wrong...
By mmntech on 2/28/2008 9:18:43 AM , Rating: 5
Not necessarily. The 10% is taken from revenue, not profit. Profit is what's left over after expenses (payroll, manufacturing costs, etc) are paid. Depending their margins, they may indeed loose a big chunk of profit with a 10% revenue loss. Profit margins for hardware are generally not very high.

Overall, the LCD business is expecting a banner year in 2008, particularly in the area of televisions.

Isn't that because Best Buy keeps telling people they absolutely need an HDTV for the DTV switch-over?

By AgentPromo on 2/28/2008 9:26:34 AM , Rating: 2
I agree there. It is enough to keep most companies from thinking about price fixing or being anti-competitive while at the same time not giving the regulators so much power as to potentially bankrupt a company.

By Master Kenobi on 2/28/2008 9:27:05 AM , Rating: 2
I wouldn't doubt it.

By bunnyfubbles on 2/28/2008 9:34:50 AM , Rating: 2
Isn't that because Best Buy keeps telling people they absolutely need an HDTV for the DTV switch-over?

har har...

I think it has to do with the fact that LCD TV production is going to be leading the industry. If you want a TV you simply won't have as many alternatives.

By Etsp on 2/28/2008 9:37:17 AM , Rating: 2
Thanks, that makes a lot more sense now.

By eye smite on 2/28/2008 9:54:28 AM , Rating: 4
I would also be willing to wager that's an initial fine the 10%, and would probably increase a good amount with any subsequent offense. That's probably why company's when fined try not to screw up again or get caught. I could be wrong though.

RE: I hope I'm interpreting this wrong...
By masher2 on 2/28/2008 10:46:42 AM , Rating: 2
Correct. The fine is called kachokin, and is calculated based on total sales, not profits. It also increases by 50% if there's a subsequent violation within 10 years.

Furthermore, this is an administrative fine only, and doesn't preclude an additional criminal fine.

RE: I hope I'm interpreting this wrong...
By jhinoz on 2/28/2008 11:18:57 AM , Rating: 2
So if you're engaging in price fixing, you wanna include at least a 10% margin to cover the fine...

By masher2 on 2/28/2008 12:39:44 PM , Rating: 2
The criminal portion is essentially unlimited, so it's still a very risky strategy.

The two-fold penalty structure makes sense. The criminal fine is under prosecutorial discretion, which assures that a billion-dollar company that employs hundreds of thousands of people probably won't be bankrupted because one low-level manager overstepped his bounds. And the fixed administrative fine assures that, no matter how low the transgression occurs, the company is probably not going to profit from it.

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