Kodak vs. Fuji: Portrait of a Trade Tiff

World's biggest filmmakers draw their governments into a home market-share feud

KODAK versus Fuji, the latest trade fight between the United States and Japan, is fast-developing into a war between lawyers.

A month after settling a dispute over US access to Japan's auto market, the desk of US Trade Representative Mickey Kantor is piled high with telephone-book-sized briefs, glossy and colorful, supplied by attorneys for the world's top two photographic companies.

After a year's preparation, Rochester-based Eastman Kodak Company petitioned the USTR last month, accusing Tokyo-based Fuji Photo Film Company of colluding with the Japanese government to prevent Kodak and other foreign products from getting to Japanese consumers.

Kodak has picked a politically propitious moment to bring its case. The Clinton administration has made prying open stubborn markets - even if it means butting heads with a key trade partner - a cornerstone of its commerce policy. This latest dispute comes on the heels of a transpacific showdown over Japanese luxury car imports and US auto-parts access

In this duel, Kodak contends that, through financial controls and incentives, Fuji keeps a tight rein on Japan's four largest distributors of photographic materials and forbids them to market competing brands.

''This is not just a spat between two companies,'' says Kodak's counsel, Alan Wolff, one of Washington's top trade lawyers. ''There is illegal activity taking place - it is not an industry-to-industry matter but a US government concern over whether the government of Japan is behaving properly, reasonably.''

Fuji protests that it is the real victim, citing contracts between Kodak and major US retailers designed specifically to exclude competitors. Kodak has elbowed Fuji out of coveted display space at check-out lines in American stores, claims the Japanese firm.

Both companies have roughly the same share of their home markets: about 70 percent.

Fuji staged a rebuttal to the Kodak charges at the National Press Club on July 31, where it carefully checked journalists' credentials to screen out any Kodak interlopers.

After the Fuji presentation, Kodak representatives stood outside the briefing room's door, handing out their prepared response to Fuji's counterassault. ''How tacky can you get!'' sniffed one of the lawyers on the Fuji team.

Mr. Wolff dismisses Fuji's ''victim'' position as a diversionary tactic. ''Twenty-five years ago the government of Japan created a monopoly in order to block foreign access. Fuji claims that it faces the same situation in the US, but the fact is, in 1890 we enacted antitrust laws that broke up cartels, monopolies and rooted out anticompetitive practices.''

Kodak chairman George Fisher, who took the company's helm some 18 months ago, is most familiar with Japan's monopolies. He brings to Kodak a successful record of penetrating Japan's closed market during his years as chief executive officer of Motorola Inc.

''Motorola was the primary and most successful proponent of using US government two-by-fours'' to pry open the Japanese market, observes John Yochelson, senior vice president, international business and economics, at the Center for Strategic and International Studies in Washington. ''Kodak is taking chapters out of the Motorola strategy book.''

Wolff says Mr. Fisher has the gusto to go at it again, especially after ''he examined how Kodak is performing in Japan, and found the results appallingly bad.''

But lawyers for Fuji say Kodak should have lodged its complaints with the Japanese Fair Trade Commission rather than using Section 301 of US trade law. ''The Japanese government has taken the position that it will not negotiate with the gun of 301 at its head,'' says William Barringer, Fuji's senior counsel on the case.

A decision to ride the Clinton administration's wave of market-opening efforts in Japan carries the threat of sanctions, and adds stress to an already troubled US-Japan trade relationship. That's risky, adds Sam Inoue, president of Fuji Photo Film U.S.A. Inc.

Wolff rejects the notion that the JFTC can help. ''One major reason is that they are part of the system Kodak is trying to beat,'' counters Wolff. In cooperation with Japan's photographic industry, he says, the JFTC devised a council whose sole purpose was to keep competitors out and prices up. ''Imagine going to the Justice Department and saying 'prices are too low. We want your help in forming a council to form rules to prevent too much price competition.'''

Kodak lawyer Wolff says his team has only scratched the surface concerning Japan's unfair trade practices in the photographic industry. USTR's investigation into Japan's practices began July 3 when Kodak filed a petition with a 300-page supporting document. USTR has up to 12 months to examine and resolve the issue, after which it may elect to impose sanctions against the Japanese government.

''What has been filed is voluminous but only a tiny fraction of what's out there,'' says Wolff. Fuji, no doubt, will have to respond. Here come more telephone-book-sized briefs.

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