(Provisional Translation)

7th Report of Market Access Ombudsman Council (March 18, 2002)

2-(1) Setting recycling fees based on the home appliance recycling law

1. Complainant: South Korean Embassy

2. Ministry concerned: Ministry of Economy, Trade and Industry: Fair Trade Commission

3. Background:

(1) The Designated Household Appliance Recycling Law (home appliance recycling law) that went into effect on April 1, 2001 stipulates that manufacturers and importers may charge fees (hereinafter to be referred to as "recycling fee") for the activities related to the recycling, etc. of designated household appliance waste products on those who asked to take back such waste. (Article 19)
* "Designated household appliance" refers to 1] air conditioners, 2] cathode-ray tube TVs, 3] refrigerators, and 4] washing machines.

(2) Under the home appliance recycling law, manufacturers can set recycling fees on their own (Article 20) and when a recycling fee set by a manufacturer "markedly exceeds a reasonable cost," the state may recommend or order correction measures." (Article 21)

(3) For example, the refrigerator recycling fees set by manufacturers range from 4,600 yen to 5,600 yen (as of January 22, 2002).

4. Complaint:

The recycling fees for air conditioners, TVs, refrigerators, and washing machines are uniformly set by item. In the case of refrigerators, for example, the recycling fee set by major Japanese home appliance makers is 4,600 yen, regardless of size and manufacturer.
Meanwhile, South Korean home appliance makers produce and sell mainly small, low-priced products. If uniform recycling fees are applied to their products, it means imposing the same amount of recycled-appliance processing costs on South Korean products that are less value-added than Japanese products, necessitating South Korean appliance makers to pass the costs on to consumers. This has eventually led to a weakening of the price competitiveness of South Korean companies.
Moreover, 1] even if a South Korean company wants to set a lower recycling fee for its small refrigerator, for example, the company is virtually unable to set the fee at lower than the processing fees charged by the recycled-appliance processing plants operated jointly by major Japanese appliance manufacturers (hereinafter to be referred to as "joint facility"), as the disposal fees are based on the uniform recycling fees set by major Japanese appliance manufacturers (note), and 2] it is unreasonable to set uniform fees disregarding the conventional wisdom that the cost required for recycling a smaller product should be lower. For the reasons above, the Japanese government should not dismiss the setting of recycling fees in question as a private-level problem. The state (the Ministry of Economy, Trade and Industry) should correct the unreasonableness by establishing a fee-setting standard that takes the size of products into account.

(Note) Since it is difficult for South Korean and other foreign home appliance makers to operate a recycled-appliance processing plant of their own in Japan, they have no choice but to entrust the recycling of used appliances to the joint plant.

With regard to this, the Ministry of Economy, Trade and Industry says that it is difficult intervene in the fee-setting practice, since recycling fees are set by major Japanese home appliance makers independently based on competitive forces. However, 1] The fact that major Japanese home appliance makers set uniform recycling fees for the household appliances in question is tantamount to a kind of collusive pricing practice by taking advantage of market power and runs counter to free competition. 2] A price-setting practice such as this hampers market access for South Korean makers that produce and sell energy-saving small home electric appliances. 3] This, in the end, will raise the selling prices of the home appliances in question and may produce results that are counter to Home Appliance Recycle Law's original purposes of prevention of environmental pollution, energy savings, and environmental improvement.
In short, setting uniform recycling fees regardless of the size of products runs counter to the principle of free competition, deviates from the purposes of the home appliance recycling law, and results in increasing burdens on consumers. The government, therefore, should actively intervene in the situation and provide guidance and correction measures based on Article 21 of the home appliance recycling law.
The Japanese government should provide guidance and correction measures so that Japanese home appliance makers will set different recycling fees depending on the size of the household appliances covered by the law (TVs, refrigerators, air conditioners, and washing machines) in accordance with their recycling costs.

5. Results of deliberation:

(1) The home appliance recycling system is a new system that went into effect on April 1, 2001 and is still in the "start-up" stage.

The accumulation of data on recycling costs after the law took effect is still insufficient and the costs may fluctuate in the future depending on the diversification of products and corporate efforts.
Recycling fees should properly reflect recycling costs and transparency must be ensured in setting the fees.
Based on the above, the ministry concerned should ensure the transparency of recycling costs by publicizing information on reasonable costs and see to it that recycling fees reflect the changes of recycling costs caused by the diversification of products and corporate efforts in the future.

(2) Establishment of a recycling system will create a recycling market and increase new trading opportunities in the recycling market.

However, the complainant contends that the current practice of setting recycling fees is tantamount to "a kind of collusive pricing practice that takes advantage of market power."
If the complainant thinks the practice violates the Anti-Monopoly Law, he should bring the case to the Fair Trade Commission.
The Fair Trade Commission, for its part, should keep a close watch so that competition in the final market and the recycling market will not be restricted by the home appliance makers' practice of jointly determine the specific amounts of recycling fees or by unreasonable restrictions imposed by the establishment of a new recycling system.

Government decision (March 20, 2002)

2-(1) Setting recycling fees based on the home appliance recycling law

The following measures will be taken regarding setting recycling fees based on the home appliance recycling law.

A. The ministry concerned will ensure the transparency of recycling costs by publicizing information on reasonable costs and see to it that recycling fees reflect the changes of recycling costs caused by the diversification of products and corporate efforts in the future.

B. The Fair Trade Commission will monitor closely so that competition in the final market and the recycling market will not be restricted by the home appliance makers' practice of jointly determine the specific amounts of recycling fees or by unreasonable restrictions imposed by the establishment of a new recycling system.