Scholarship Survey:The Tuna Court

Eric Feldman recently posted to SSRN a draft of his article, The Tuna Court: Law and Norms in the World’s Premier Fish Market, 94 Cal. L. Rev. (Mar. 2006). He spent a month in Japan watching the daily workings of the Tsukiji tuna market and its specialized court (the Jiko Shori-jyō, literally “Accident Management Place”). The result is a great analysis of a legal institution doing the work that recent scholarship might lead one to expect would be done instead by informal norms.

Every morning at 5:30, five authorized sellers begin auctioing fish to about 350 authorized buyers, who have spent the previous hour or two inspecting the whole tuna. Prices range from $5 to $40 per kilogram; fish range from 50 to 250 kilograms. About 300 of the buyers are wholesalers with stalls in the marketetplace; they sell tuna mostly in smaller quantities to restaurants, fish markets, and other local retailers. The rest of the buyers include representatives of such entities as from supermarkets and sushi chains. The auctions are orderly and quick, lasting an hour or two; about 3000 fish change hands daily.

For four fifteen-minute shifts each morning—at 7:30, 8:15, 9:15, and 10:30—the Tuna Court convenes to hear disputes about the quality of the fish sold that morning in a setting whose description reminds me of the early days of the common-law English courts setting up shop in different corners of the same room:

Located on a barren rectangle of outdoor cement adjacent to the tuna auction house, the Court is clearly demarcated by a metal fence on two sides, a cinderblock wall on one, and three plastic cones linked by a yellow pole that serve as its entrance. On an A4-sized piece of paper taped to the wall is a sign posted by the Tokyo Metropolitan Government (TMG) that officially designates the area as the Jiko Kensa-sho, or Accident Inspection Place. A small cardboard box attached to one wall contains forms for judges to fill out when making their decisions, and in a corner is a pile of square pieces of plywood that the judges can place on top of an I-beam and use as their “bench” between cases.

Five judges—one auctioneer from each seller—inspect the fish brought back by dissatisfied buyers. They are looking either for defects that could not have been discovered by inspection of the whole, unsliced fish or for seller misrepresentations (e.g. that a 110-kilogram fish actually weighs 125 kilograms). Typical defects include parasites or spoilage not visible from outside. The court can offer a single remedy: a reduction in the selling price equal to half the value of the damage (subject to an 11% floor). (No refunds need be made because accounts will not yet have settled).

All in all, about 2% of fish are disputed. Over 95% of all claims brought to the court result in a reduction in price. About half of the time, the reduction consists of the minimum 11% reduction; another tenth of the time or so, the reduction is the maximum 50% possible. There is an “appeal” process available to buyers, which might better be described as a motion for rehearing on the basis of new evidence; the tuna is returned with further cuts to indicate additional defects. Only about 3% of cases are appealed after the initial award. There is, in theory, a further possible appeal, but in recorded memory, the few cases that have theatened such escalation have been resolved informally with the intervention of third parties from the tuna community.

Feldman raises some very interesting questions by looking at the court. In particular, he notes that the use of a legalized dispute-resolution system runs counter to, say, the normative primacy thesis one would associate with Ellickson’s Order Without Law. Feldman quite convincingly argues that the Tuna Court is consistent with Ellickson’s arguments because it is in many ways an “informal” system as compared with a true adversary lawsuit, and because it reinforces market norms rather than undercutting them. He also uses it as a quite convincing rebuttal of the argument that norms will always predominate in actual dispute resolution; when a legal system is close enough to the ground, it can formalize, at least partially, the everyday matter of handling small grievances.

At the same time, I think he makes matters more difficult for himself than he needs to. Some of his questions have very simple answers in the data he himself supplies. For example …

Why do buyers go to the Tuna Court rather than to informal prcesses of direct negotiation for refunds?

Possible unexamined answer: because those informal processes would be illegal. As he says, “According to the Central Wholesale Market Law, wholesalers cannot change the price of a good after a bid is accepted at auction, except in special circumstances. The Tuna Court operates as one of those special circumstances.” Of course, his question could be reformulated to ask why the buyers and sellers asked for state intervention to make the Tuna Court the exclusive means of offering such refuns. But that’s now a different question, one that can’t be answered convincingly without some significant attention to history and political economy. Feldman makes a good start, but there’s more work to be done here.

Why do other fish markets in the United States not use a similar system?

Buried in an extended discussion of cultural issues, the ownership of American fish markets, and market size, we learn that “in most cases [in the Honolulu tuna market] a whole tuna will be resold to and filleted by a downstream buyer, not the wholesale company that bought it at the auction.” That is, the Tsukiji wholesale whole-fish market is linked to a wholesale sliced fish market in the same space; at the Honolulu market, there are strong reasons (principally spoilage) not to cut the fish up until later on. I take this fact to be virtually determinative; at Tsukiji, close inspection of the merchandise shortly after the sale is economically feasible. That, in turn, allows for an adjustment process close in time and space to the auction. In the Honolulu market—and apparently in the other food auction markets in the United States he discusses—it would be substantially more cumbersome, even impossible, to bring the fish back to illustrate the defects.

This brings me to my not-enough-free-ice-cream complaint: I would have liked to see more discussion of the incentives that this arrangement creates for sellers and the suppliers on whose behalf they act. Feldman notes, intriguingly, that sellers will sometimes use their cameraphones to take pictures of damaged fish for immediate transmission to their suppliers. He also notes some agency issues; sellers have only comparatively small commissions at stake in repricings that may cost a supplier thousands of dollars. Finally, he points out that the auctions themselves prize speed over the highest possible selling price. It would have been interesting to see these strands linked up. I would think that having accurate feedback on disease and damage—in the form of reduced prices for tuna with defects—would encourage suppliers to be more discerning and more careful in their practices, to the general improvement of the quality of the tuna. I would then think that this improvement could itself be a significant contribution to the value of the Tsukiji market for all concerned. It might also be another way (in addition to several Feldman notes) that the market’s design builds a specialzed community of expertise that gives it a competitive advantage.

So yeah, neat paper.