Major electric power companies have been found to have struck shady deals to avoid encroaching on each others' turf and price competition.

Their cartel agreements represent an outrageous act of protecting profits at the expense of consumers that runs counter to the principles and objectives of power market liberalization.

The revelations have cast serious doubt about their commitment to fulfilling their responsibility as key public utilities.

The Fair Trade Commission has confirmed that four regional electric utilities made collusive agreements to unfairly restrict business transactions and decided to slap three of them with massive surcharges.

During the period from 2018 to 2020, Osaka-based Kansai Electric Power Co. struck one-on-one deals with Chugoku Electric, Chubu Electric and Kyushu Electric power companies to restrict their business operations to sell power to large corporate customers within the other’s jurisdiction.

These deals constitute violations of the anti-monopoly law, according to the Japanese antitrust watchdog.

But Kansai Electric will likely avoid the fine as it voluntarily reported the matter to the FTC before April 2021, when anti-monopoly authorities conducted an on-site inspection over the case.

The surcharge on Kyushu Electric has been reduced because the company also reported the allegedly illegal arrangement to the FTC.

Even so, the administrative fines to be imposed on the three firms will total some 100 billion yen, the largest-ever surcharges for any single antitrust case in Japan. This indicates the scope and extent of the scandal’s impact.

Chugoku Electric has expressed regret for entering into such an agreement, saying it had “aspects that could naturally be suspected to be a violation of the antimonopoly law.”

But Chubu Electric has claimed that it had not been involved in any agreement to restrict business operations and said it will file a lawsuit seeking to have the penalty annulled.

Major electric utilities are leading regional companies that have maintained high market shares in their regions despite the liberalization of the nation’s retail power market. Their backdoor deals to restrict competition to garner unfair profits are totally unacceptable.

In particular, Kansai Electric was facing the imperative to reform its compliance and governance systems after the 2019 revelation that its senior executives  received expensive gifts from a former deputy mayor in Takahama in Fukui Prefecture, where it operates a nuclear plant.

It has also emerged that the power supplier serving mainly areas around Osaka unlawfully obtained information about customers of its competitors and used it for its own sales operations.

In the latest cartel scandal, Kansai Electric’s vice president was involved in backroom negotiations with other utilities. Its decisions concerning the agreements were made at board meetings with the president in attendance.

These facts leave no doubt that the entire company was involved in the wrongdoings.

The company should clarify the management responsibility for the violation and develop a specific action plan to fundamentally change its corporate culture, which apparently makes light of the rules.

The other companies implicated in the scandal also need to make exhaustive and independent investigations into their alleged offenses and fulfill their responsibility to offer convincing explanations about their misbehavior.

Another key factor behind the antitrust case is the apparently cozy ties among these utilities that date to the era of their regional monopoly.

The FTC has found that the utilities often held talks over the cartel deals before and after meetings of the Federation of Electric Power Companies of Japan and called on the industry group to take remedial steps. The organization should redefine its mission in line with the era of a liberalized power market.

The revelations have also underscored some administrative and regulatory challenges. The Electricity and Gas Market Surveillance Commission failed to detect the cartel deals or Kansai Electric’s illegal access to customer information of competitors.

The system to monitor utilities for possible violations should be made more effective. The series of offenses clearly cry out for reviews of the market and regulatory systems to ensure a fair and competitive environment.

Many major power utilities have asked the Ministry of Economy, Trade and Industry to allow electricity rate hikes for households.

The ministry needs to make a careful analysis to determine whether their efforts to avoid competition have kept costs unreasonably high, even if a quantitative assessment is difficult.

The Asahi Shimbun, March 31