Summary of Facts

The defendants in this case are Snow Brand Products Co., Inc. (Snow Brand), Hokkaido Butter Co., Inc. (Hokkaido Butter), Norin Chukin Credit Bank (Norin Chukin), and Hokkaido Credit Agriculture Cooperative (Hokushinren). Dairy producers Snow Brand and Hokkaido Butter, produce 80% of the total amount of milk produced in Hokkaido, 50% and 30% respectively. The two parties have always paced each other in determining such things as amounts to be produced and price.

The business of Norin Chukin was mainly to provide funds to groups engaged in agriculture or fisheries, while Hokushinren aimed at financing members of the cooperative. In addition, Hokushinren acted substantially as a conduit for Norin Chukin insofar as Hokushinren's guarantee was required in order for agricultural cooperatives to be provided with funds by Norin Chukin. Conventionally Hokushinren was in charge of investigating thee credit rating for the cooperatives on behalf of Norin Chukin so that Norin Chukin's decision to finance a cooperative often depended on the option of Hokushinren.

Norin Chukin, holding about 4% of Snow Brand's stock and 2% of Hokkaido Butter's stock, had supplied a tremendous amount of money to both parties. On the other hand, Hokushinren held about 2% of Hokkaido Butter's stock; the chairman of the board at Hokushinren also acted as a director of Snow Brand and, until recently, its Vice Chairman was managing director of Hokkaido Butter.

In 1953, Snow Brand and Hokkaido Butter conceived a pan to help the farmers operating near their facilities to acquire extra milk cows and, with the help of Norin Chukin and Hokushinren, were able to have Norin Chukin lend one billion yen over three year period to farmers so they could acquire about ten thousand milk cows. This plain of being able to borrow money to acquire additional cows was so attractive to the farmers that it provided a powerful incentive to keep them operating in close proximity to the facilities of the dairies.

While Norin Chukin was the only institution in Hokkaido at that time large enough to provide so much funding for the acquisition of extra milk cows, after August 1953, Norin Chukin and Hokushinren, with the complete knowledge of Snow Bank and Hokkaido Butter, decided to provide funds for the acquisition of milk cows under the following conditions:

1. Norin Chukin would only provide money to cooperative or a cooperative member on the guarantee that the party would supply their milk only to Snow Bank and/or Hokkaido Butter and to no other dairy,
2. the financial guarantee of another dairy would not be accepted,
3. funds should especially be targeted for areas where the strength of Snow Brand and Hokkaido Bitter is encroached or threatened by other dairies (competitive districts),
4. Snow Brand will specifically invite those farmers now dealing with other dairies to participate in this financing scheme, and
5. sales representatives of Norin Chukin and Hokushinren would create anxiety among the farmers by implying that those dealing with dairies other than Snow Brand or Hokkaido Butter might encounter funding difficulties not only regarding money to acquire more milk cows but for other fund as well.

As a result of the plan, those dairies other than Snow Brand and Hokkaido Butter suffered great losses which, if they recur annually, will drive them out of business. The Fair Trade Commission commenced this investigation of the defendants activities as violative of the Antitrust Law and reached the decision given below.

Gist

1) Defendants Snow Brand and Hokkaido Butter, with the complete cooperation of defendants Norin Chukin and Hokushinren, conceived and put into action a plan to have the later provide about one billion yen over three years to those farmers who supply milk to the former. This action was a powerful means of limiting the marketing network of those who availed themselves of these funds as well as the guarantors and cooperatives, as they were forced to sell their milk to the defendant dairies, inhibiting the ability of other dairies to get milk, particular in the so-called competitive districts. Because this ensured that the defendant dairies would maintain their Hokkaido region market share of approximately 80%, the conduct of the defendant dairies is in violation of the first half of Article 3 of the Antitrust Law (prohibiting the creation of a private monopoly).

2) In addition to this, Norin Chukin's refusal to provide funds to those parties who undertook transactions with dairies other than Snow Brand or Hokkaido Butter comes under the rubric of unfair trade practices (unfair rejection of a transaction) and, Norin Chukin's direct encouragement of those parties it did fund to provide their milk to Snow Brand and Hokkaido Butter, is also an unfair trade practice (unfair restraint of trade).

(translation by Vicki L. Beyer)

Temple University Japan