Japan's antitrust watchdog on Thursday issued a warning to Nissan Motor Co. for illegally reducing payments to 36 subcontractors, with the underpayments totaling more than 3 billion yen ($20 million) for about two years.
Nissan's practice, considered as the abuse of its dominant position over smaller businesses, may date back several decades, according to sources familiar with the matter, although the Japan Fair Trade Commission only recognized cases between January 2021 and April 2023.
Still, the size of underpayments is the largest of its kind since the subcontract law took effect in 1956, said the FTC.
"It is extremely regrettable that a company at the top of the supply chain violated the law at a time when small and medium-sized firms are encouraged to raise wages" by passing rising costs onto ordering companies, an FTC official said at a press conference.
In an advisory issued Thursday, the commission recommended that Nissan strengthen governance, such as regular auditing for compliance and providing training for its executives and purchasing managers on the law.
"We will take this matter seriously and will do our utmost to improve compliance and prevent a recurrence," Nissan said in a statement.
The amount of payment to be reduced was determined through discussions between Nissan and the subcontractors, and memorandums of understanding were also signed, according to the FTC.
But the law prohibits reduction of transaction prices even if the parties agree, except for instances in which subcontractors have failed to meet their obligations.
Such illegal practices are prevalent in the auto industry, and the FTC will ask the Japan Automobile Manufacturers Association, a major industry group, to prevent them, the watchdog said.
