On December 21, 1995, Fujifilm submitted survey data that demonstrated the absence of what Kodak calls a "distribution bottleneck" in Japan's photographic materials market. Today, we submit a paper that demonstrates the invalidity of Kodak's price fixing conspiracy theory.
One major part of rebutting Kodak's price fixing theory is disproving the allegation that prices in Japan are twice as high as prices in the United States. Kodak claims that this supposed price disparity is evidence that the Japanese market for film is closed to competition -- at least outside the admittedly competitive "shark tanks" of Tokyo and Osaka. Kodak has produced a nice soundbite with its "twice as high" allegation; the problem is that, if one undertakes proper comparisons, the allegation just isn't true.
In this submission, Fujifilm provides several pieces of new information that confirm that retail film prices in Japan are comparable to prices in the United States; moreover, we show that this phenomenon is true throughout Japan. Specifically, we demonstrate that:
Fujifilm and Kodak have little argument over the accuracy of the pricing data we both use. Upon analyzing the data Kodak uses, notwithstanding its obvious limitations, it becomes clear that Kodak's sources, Fujifilm's sources, and other independent sources basically confirm one another.
Although the prices Kodak cites are not necessarily inaccurate, they are woefully unrepresentative of the two markets. Kodak compares high price photo shop data in Japan to low price discount store data in the United States. Even if these are the largest store types in each market, comparisons across store types inevitably distort the result. This is because both markets are divided into distinct market segments: outlets that cater to service-conscious consumers, and those that attract price-conscious bargain hunters. Of course Kodak's analysis shows higher prices in Japan -- Kodak has rigged its comparisons of prices in different market segments precisely for that purpose.
Kodak has been disingenuous about other elements of its price comparisons. It compares Japanese data that specifically exclude promotional prices to U.S. data that include such discounted prices. It compares the leading brand in Japan to a discount brand in the United States. Finally, Kodak compares after-tax prices in Japan to tax-free prices in the United States. Every time we turn around, Kodak has found a way to skew the data -- dishonestly -- in its favor.
Kodak analyzes only single rolls of ISO 100 speed film, but in doing so conveniently ignores market conditions that make such a choice invalid. As Kodak knows, Fujifilm has been promoting its ISO 400 speed film more aggressively than ISO 100 for many years; ISO 400 sales now top ISO 100 sales in Japan. Meanwhile, discounted multipack sales have risen dramatically in popularity: by 1994, multipacks accounted for roughly 40 percent of total film sales in Japan. Therefore, Kodak limits its comparisons to a product/packaging combination that is quickly losing ground to more aggressively priced film.
Kodak claims that the Nippon Research data used by Fujifilm in its October 24, 1995 submission are geographically unrepresentative of the Japanese market because they cover only the competitive "shark tanks" of Tokyo and Osaka. Upon closer scrutiny, however, Kodak is again proven wrong. While the specific storefronts Nippon Research surveys are located primarily in the Tokyo and Osaka areas, several are members of large retail chains with outlets covering practically the entire country. Given that these chains sell at basically the same prices throughout Japan, it is simply not true that the Nippon Research data are only representative of Japan's "shark tanks." Indeed, the data Kodak uses confirm this reality.
Other survey results confirm that prices outside Tokyo and Osaka are similar to prices inside those cities. A Fujifilm survey demonstrates that film prices in 10 representative cities are similar to Tokyo and Osaka prices; another independent survey by Marketing Intelligence Corporation ("MIC") shows that prices around Japan at retail chains represented in the Nippon Research data do not vary significantly from Tokyo and Osaka levels.
The similarity in film prices all over Japan can only mean one thing: the competition that Kodak concedes exists in Tokyo and Osaka is alive and well all over Japan. This is small wonder. Evidence shows that store selling low-priced film are located throughout Japan and that low priced multipack film and private or dual brand film are available in stores all over the country as well.
Finally, Kodak's claim that film prices in Japan are "extraordinarily stable" suffers from the same kinds of failings that exist in its price comparisons. Kodak focuses on the least aggressively priced product/packaging combination sold in the highest priced outlets and finds stable prices. Big deal. An analysis of price trends in this case is valid only if it incorporates a full picture of market conditions, including: the rising popularity of aggressively priced ISO 400 film; the surging market share for multipack film; the increasing popularity of discount stores; and the explosive growth of private and dual brand film.
The bottom line is that Kodak's analysis lacks credibility. Proper price comparisons and stability analyses prove Kodak wrong. USTR needs to realize this before relying on Kodak's half-baked "facts."
TABLE OF CONTENTS
A. Fujifilm's Pricing Data Are Verifiable And, When Compared Appropriately, Are Similar To The Data Kodak Uses
B. The Pricing Data Used By Kodak Are Not Representative Of The Japanese Or U.S. Markets For Film And Its Comparisons Based On Those Data Are Therefore Misleading
The Japanese prices Kodak uses cover only photo shops with relatively high prices
Kodak fails to compare leading brand to leading brand
Kodak compares pre-tax prices in the U.S. with post-tax prices in Japan
Kodak's choice of film speed and packaging fails to tell the whole story
C. Price Data From All Over Japan Confirms The Accuracy Of Fujifilm's Pricing Analysis
The Nippon Research data are representative of prices all over Japan, not just Tokyo and Osaka
a. The outlets and chains included in the Nippon Research surveys cover most of Japan
b. Prices throughout Japan are similar to prices in Tokyo and Osaka
Price competition is vigorous outside Tokyo and Osaka
a. Bargain priced multipacks are available throughout Japan
b. Private brand and dual brand film is available throughout Japan
D. Kodak's Analysis Of Price Trends Suffers The Same Flaws As Its Analysis Of Price Levels