International Business: Japan
Can Japanese Consumers Stand Up and Fight
They need to get tough
It's tough being an aggrieved consumer in Big Business-oriented Japan. Just ask Chikara Minami. In the early 1990s, Minami brought one of Japan's first product-liability lawsuits, against Mitsubishi Motors Corp. Minami claimed $50,000 for injuries he and three friends sustained in an accident involving a six-month-old Mitsubishi Pajero. All four testified that the steering wheel suddenly froze and the vehicle veered off the road in normal driving conditions. Experts testified that it appeared to be missing a component. The court, however, sided with Mitsubishi, Japan's fourth-largest auto maker, which insisted the vehicle was mechanically sound. Minami appealed, only to lose again when the judge ruled he had failed to provide sufficient evidence.
Now, it turns out the Pajero may not have been so sound after all. It is one of the models listed in the recall of 620,000 Mitsubishi cars and trucks sold in Japan and overseas over the past 10 years. While Minami's problem is not among the defects listed as reasons for the recall, which include faulty brake hoses and defective clutches, product liability lawyers maintain that Mitsubishi is only owning up to part of the problem. After all, Mitsubishi appears to have deliberately hidden consumer complaints in a company locker rather than turning them over to the government.
Such corporate misconduct in Japan is finally drawing the ire of the markets. Shareholders are angry about Mitsubishi's coverup and poor quality control. Concern about the effect on sales has pushed the company's stock price down 30% since the recall in mid-August. The same is true for Japan's biggest tiremaker, Bridgestone Corp., which has seen its shares plummet 40% since early August. That company is accused of poor crisis- management and public-relations skills. Following allegations that faulty tires from its U.S. division, Bridgestone/Firestone, caused accidents, Bridgestone's president has all but disappeared. With the exception of a news conference to announce the recall, the company has been mum.
The best thing that could come out of these scandals is a new appreciation in Japan for the rights of consumers. But any gains will be slow and hard won, since institutional resistance to honoring consumer rights is deeply embedded.NEW LAW, BUT... There has been some progress. A 1995 Product Liability Law gives Japanese citizens enhanced rights to sue corporate scofflaws. Since the law was passed, consumers have filed close to 100 lawsuits. But even with the new law, most judges tend to reinforce the notion that the system matters more than the individual. Out of 37 court judgments in the past five years, only six favored the consumer, and in all cases the liability was less than $50,000. "The Japanese judiciary believes it must preserve the social structure, and that means protecting big companies, not individuals," says former judge Junzo Tajima, who now specializes in consumer suits.
Since companies have little reason to fear litigation, they have paid small heed to consumers' complaints. "Japan has double standards," says Mie Asaoka, the consumer-rights lawyer who represented Minami. "It's a place where companies can get away with actions that would never be tolerated in the U.S. or Europe."
Anyone who doubts this has only to survey the events of the past year. Last September, workers at a uranium-reprocessing facility north of Tokyo set off a nuclear reaction that resulted in two deaths and the exposure of 439 people to radiation. It turned out the company was under pressure to cut costs and that the government had failed to conduct adequate inspections.
In late June, some 14,500 people fell ill after drinking tainted milk sold by Snow Brand Milk Products Co., Japan's largest dairy. The company failed to notify the public of the problem for two days. Health authorities even declared Snow Brand products safe for consumption before establishing the cause of the poisoning.
Then in July, Mitsubishi recalled 532,000 vehicles. No more was revealed until Aug. 22, when the company's president, Katsuhiko Kawasoe, dropped a bombshell. The recall would be expanded to 620,000 vehicles, pushing up Mitsubishi's costs to $70 million. More shocking was his confession that over the past 30 years, Mitsubishi had failed to pass on to regulators--as required-- thousands of complaints. Mitsubishi denies a coverup, but the fact remains that reports were never turned over. "[That] would result in costly recalls," explains Chris Calderwood, chief economist at Jardine Fleming Securities Ltd. in Tokyo. "The problem is, they 'fessed up because they were caught and not because they felt any remorse."
One of the reasons it's still hard for Japanese consumers to get a hearing is that the Product Liability Law lacks muscle. Activist lawyers are lobbying for new measures to help the legal profession go after companies. Atsushi Tanaka, an Osaka attorney who helped draft the 1995 law, says the courts need a U.S.-style "discovery" system that would force defendants in product-liability cases to turn over relevant documents, which is not the case now. "Japanese companies aren't afraid of the law, so we need to beef it up," he says.A SLAP. Other measures Tanaka and his colleagues are advocating are tougher penalties for offenders. Snow Brand, which blamed incorrect procedures for the contamination, is likely to get off with a mere slap on the wrist. Some senior officials at Mitsubishi Motors could face criminal charges, but they are likely to get suspended sentences. Any fine would amount to no more than $40,000.
Perhaps the most urgent need is for judicial reform. Japan suffers from a serious shortage of both lawyers and judges, who regularly handle 200 to 300 cases at a time. And Asaoka says the Mitsubishi revelations strengthen activists' belief that many people involved in fatal vehicle accidents were wrongly accused of negligence when in fact the car was defective. In almost all such accidents, the manufacturer--not an independent party--inspects the cars. "The consumer has no one to turn to in situations like this," says Asaoka.
But consumers need to raise their hackles if change is to come. Some are starting to: Since the Snow milk-poisoning scandal, health authorities have been swamped with complaints about insects and lizards in canned food and drinks. Japan has only 7,000 health inspectors to protect its 100 million people--and they routinely call in advance before inspecting a food factory. Feistier inspectors and higher standards could help. But corporations must improve quality--and heed the complaints of those who keep them in business.By Irene M. Kunii in TokyoReturn to top