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Fujifilm's views on Kodak's procedure under the section 301 petition

Submission to USTR Confirms Kodak's Wide Availability and Ability to Compete on Price

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ELMSFORD, NY, April 29, 1996--Dismissing a recent survey of the Japanese film market by Eastman Kodak Company as "a combination of cooked numbers and non sequiturs," Fuji Photo Film today filed with the U.S. Trade Representative a detailed rebuttal of Kodak's survey that confirms the open and competitive nature of the Japanese market.

"The most important thing about Kodak's new submission is what it does not include. Specifically, Kodak has not even tried to challenge the survey of Fujifilm's distributors' customers," said Fujifilm lawyer Bill Barringer, referring to Fujifilm's December 1995 survey that showed that almost 90 percent of Fujifilm distributors' customers either buy Kodak film already or have ready access to it. "Kodak claims that it cannot succeed in Japan without access to Fujifilm's distributors, but our survey shows that Kodak is already carried by the overwhelming majority of the distributors' customers. By failing to rebut those survey results, Kodak has tacitly conceded that its whole 'distribution bottleneck' theory is baseless."

Barringer said that Kodak's tacit acceptance of the Fujifilm survey results renders irrelevant a host of other allegations concerning Fujifilm's distributors. These allegations, which have been proven by Fujifilm to be totally baseless, including the use of rebates, guarantee deposits, and bank lending relationships.

"In raising all of these issues about the distributors, Kodak attempted to show that Fujifilm exerts indirect 'control' over these 'essential facilities,'" Barringer said. "Since Fujifilm has demonstrated, and Kodak has implicitly conceded, that the distributors are not an 'essential facility,' whether or not Fujifilm 'controls' them is no longer relevant to Kodak's access to the Japanese retail store shelf."

Barringer said that Kodak's survey results regarding both retail availability and price competition are undermined by "fatal methodological flaws." Chief among these errors is Kodak's failure to account for differences in relative sales volume within a given retail outlet type. For example, despite the fact that sales volume at photo shops can vary by factor of 1,000 or more, Kodak's survey counts all photo shops equally regardless of size. Barringer called this a "crucial omission that completely undermines the validity of Kodak's figures."

"The failure of Kodak's survey to take account of relative sales volume within a given outlet type yields a distorted and unreliable picture of the Japanese marketplace," Barringer said. "Although Kodak has twisted the numbers cleverly, in the end this attempt to document its claims cannot withstand close scrutiny."

Barringer noted that Fujifilm released its own survey of nearly 2,000 randomly selected retail outlets in December 1995. Interestingly, the raw data of the Kodak and Fujifilm survey are very similar, but Fujifilm then weighted the data based on the sales volume of each surveyed outlet. Avoiding Kodak's methodological error, the survey showed that Kodak is available in outlets accounting for between 56.4 and 77.4 percent of total sales volume, depending on the region. "Thus, contrary to its claims, Kodak has succeeded in winning shelf space in those outlets that account for healthy majority of film sales in Japan," Barringer said.

The methodological errors contained in the Kodak survey also compromise Kodak's allegations that vertical and horizontal price fixing in Japan are hindering its sales efforts, according to Barringer.

"Kodak has not provided any documentation of a single real-life example of a retailer that has been asked to lower excessive markups but has refused," said Barringer, noting that, for the past decade, Kodak's manufacturer's suggested retail prices have been identical to or higher than Fujifilm's. "Indeed, the evidence is overwhelming that -- at least until recently -- Kodak has not even been trying to gain share by underselling Fujifilm."

"Once again, Kodak's 'evidence' in support of its allegations turns out to be much less than meets the eye," concluded Barringer. "Fujifilm is confident that any neutral, objective review of the facts will vindicate its position that the Japanese consumer photographic market is open and competitive."

A complete copy of Fujifilm's submission to USTR is available on request.

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Thomas H. Shay
Fuji Photo Film U.S.A., Inc.

Matt Wagner
Edelman Public Relations
(202) 326-1751