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Dango, cartel in Japan's construction sector!


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Dango, cartel in Japan's construction sector!

  1. 1. LOGOCar tel in Japaneseconstr uctionindustr yPrepared By: Tao Xiaoming Situ Pradhan JushShreshta Pishen UmirbekovS.M.Arifuzzaman
  2. 2. • People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. Adam Smith
  3. 3. Introduction What is collusion?-Limit open competition-Gaining an unfair advantage What is Dango??-Consultation-Few companies controlling the industry in Japan-Main winners in tenders for public construction work-Related with bribery and networking with official bodies How they work???-Government officials leak information-BIG GUYS (YAKUZA)-Share profit among the AMIGOES
  4. 4. Ethic Issues in CartelDango violated the nature of market competition in the way of practicing economics of collusion. Against antitrust law with dishonest business practice Increase the level of corruption Gangsters are used to enforce the collusive agreement Play with tax money results in welfare loss for the public Inefficient in economy
  5. 5. Why cartel still in practice in Japan and other countries?Officials Support of Government, officials and PoliticiansGangster Controlled by Gangsters People are scared to file a Fear case Mutual benefit for all partiesBenefit involved
  6. 6. The Various Stakeholders Involved Illegal under Antimonopoly Act Ceiling price is leaked to the biddersMotivated by simple bureaucratic caution Government/ New Public-safety rationale policy Policies entrants Prevents foreign firms and Law Price inflation TaxTax money wasted payers largest single source Political corruption Parties
  7. 7. The Various Stakeholders InvolvedDango Specialists: Only few managers involved. Divorced from the direct companyGangsters “Yakuzas”: Relations with the power holders Immediate means of Dango enforcement
  8. 8. Ethical Dilemmas Japanese long tradition of gift giving has Dimension turned into the form of offering kickbacks 1 which is against their own cultural norms Dimension The gift giving culture actually competes with Japanese own legal system 2 In Business relations networking became so important that without it no deal is settled. Dimension Members in network expect & enjoy benefits which cause huge social welfare loss as well 3 as social value loss.
  9. 9. Analysis of Business Practice
  10. 10. Theoretical Comparison Motivated by their own interest and setEgoist Theory ethical standards accordingly Unlike other culture gift giving is pretty common in building business relations. Cultural But it spread broadly & took the shape of kickback Relativism which is against their cultural norms They are highly profit centric and they want to achieve it Immoral taking advantage of legal system or anythingManagement
  11. 11. Recommendations Strict legal actions for people involved in bribery Penalize Govt. officials for leaking information Allocate optimum fund for construction Overseas companies should be allowed to bid Govt. should explore other domestic bidders
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