Business Economics

Case Analysis: Kodak Antidumping Disputes with Fuji

In August 1993, the Eastman Kodak Company of Rochester, New York, charged that the Fuji
Photo Film company of Japan had violated U.S. federal law by selling paper and chemicals for
color-film processing in the United States at less than one-third of the price that it charges in
Japan and that this had materially injured Kodak. Specifically, Kodak charged that Fuji used its
excessive profits from its near monopoly in photographic supplies in Japan to dump
photographic supplies in the United States in order to undermine the competitive position of
Kodak and other U.S. competitors. By 1993, Fuji had captured more than 10 percent of the U.S.
photographic supply market, mostly from Kodak, Kodak asked the U.S. Commerce Department
to impose stiff tariffs on Fuji’s imports of these products into the United States. In August 1994,
Fuji signed a five-year agreement under which it agreed to sell color paper and chemical
components at or above a fair price determined quarterly by the U.S. Department of Commerce
from Fuji cost of production figures in Japan and the Netherlands, where Fuji produces the
photographic supplies exported to the United States. This “fair” price was about 50 percent
higher than the pre-agreement price that Fuji charged in the United States. The immediate
effect of the agreement was higher prices for photographic supplies for U.S. consumers.

In the face of continued loss of U.S. market share, Kodak again accused Fuji in 1995 of unfairly
restricting its access to the Japanese market and again demanded the imposition of stiff tariffs
on Fuji photographic exports to the United States. However, the World Trade Organization (the
institution created in 1993 to regulate international trade and adjudicate trade disputes among
its member nations) dismissed the case in 1997. Although Kodak retains nearly 70 percent of
the U.S. photographic market (compared to Fuji’s 19 percent), it has been steadily losing
market share to Fuji over the past decade because of the latter’s low-price policy. In the
meantime, Fuji has spent over $1 billion on new plants to produce photographic supplies in the
United States, which makes Fuji a domestic supplier and, to a large extent, no longer subject to
U.S. antidumping rules. Kodak, on the other hand, has gone through a deep restructuring that
cut its costs by $1 billion by eliminating 20,000 jobs or about 20 percent of its world-wide labor
force and shifting to higher-end products (such as the Advanced Photo System cameras, which
offer easier loading, panoramic shots, and other features) in which Fuji hasn’t launched a price
war, providing opportunities for higher profits.

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