Vanderbilt Journal of Transnational Law

First Page



Japanese cartels known as keiretsu pursue illegal transfer pricing policies which cost American taxpayers billions of dollars and place American businesses at a competitive disadvantage. Keiretsu-controlled subsidiaries located in the United States buy goods, financial products or services from their Japanese parent at fraudulently inflated prices. Their dual purpose is to create artificial business expenses and costs (thereby reducing taxable income and paying little or no United States corporate income tax) and to gain an edge on American businesses through tax evasion.

Mr. Harmon proposes that American businesses respond to this problem with techniques normally used against organized crime. The Racketeer Influenced and Corrupt Organizations Act (RICO) can combat the anti-competitive market effects of keiretsu. When transfer pricing damages American businesses through tax evasion and money laundering, RICO's treble damage provisions provide them with the means to recover lost profits.

RICO provides a juridical approach to what has been treated as a matter of international diplomacy. By offering a domestic legal solution to curb corporate Japan's predatory trade practices, Mr. Harmon undertakes to neutralize Japan's powerful political resources and provide a private remedy for harmful trade practices which the Government has been unable to control.