JFTC strives to curb technology giants, boost fair competition

The Japan Fair Trade Commission’s recent administrative action against Google LLC is part of a global trend to strengthen regulations on technology giants that could distort markets.

The JFTC will continue to monitor Google, the world’s most powerful search engine provider, to prevent the U.S. tech company from engaging in the same conduct again.

GOOGLE’S DOMINATION

“Yahoo Japan struggled to keep its business going. Competition was severely restricted,” Saiko Nakajima, JFTC’s senior investigator of digital platform operators, said on April 22 at a press conference held to announce the administrative action against Google.

Nakajima was describing the problems that stemmed from Google’s violation of the Antimonopoly Law. From September 2015 to October 2022, Google stopped providing Yahoo Japan, now LY Corp., with technology to display search-linked ads, in which ads linked to the keywords from users’ searches are displayed on websites on smartphones and other devices.

In November 2014, Google changed a technical cooperation contract that it had signed with Yahoo in 2010. Yahoo depended on Google’s technology, so it had no choice but to acquiesce.

In 2023, the market for search-linked ads exceeded ¥1 trillion. Google had a 70% to 80% share, while the rest of the market was believed to be dominated by Yahoo. Services to display ads on smartphones and other devices, whose market value is said to be around ¥10 billion, were effectively dominated by Google, and Yahoo lost business partners and ad revenue for about seven years.

The impact has not been limited to Yahoo. “If ads displayed by Google become expensive due to there being no competition, those cost increases might be reflected in the prices of goods and services, which will be detrimental to consumers. The distortion created by the domination of Google might affect the lives of ordinary consumers,” a senior JFTC official said.

‘BETRAYED’

The JFTC began investigating the allegations in the early summer of 2022. Google then resumed providing its technology for Yahoo in November 2022 and competition was seemingly restored. At that time, it was difficult for the JFTC to swiftly issue a cease-and-desist order or an administrative surcharge payment order, both of which require solid evidence.

In past cases in which the JFTC investigated tech giants, the JFTC canceled the probe if the company concerned improved matters on its own.

The commission viewed this as the allegations being addressed. However, refraining from imposing an administrative action was not an option for the latest Google case, according to the JFTC.

When Google and Yahoo signed their contract in 2010, the JFTC interviewed both companies to see whether the partnership between the two search engine giants might infringe on the Antimonopoly Law.

Google told the JFTC that it would provide technology but conduct business operations on its own, so the commission approved the signing of the contract.

The JFTC later interviewed parties several times, but Google restricted transactions for Yahoo five years later. A JFTC official familiar with that period said, “We weren’t informed of the change in the contract at all, and we felt betrayed.”

The JFTC’s action against Google does not recognize a violation of the Antimonopoly Law, but it allows the commission to monitor for three years the implementation status of an improvement plan submitted by Google.

The improvement plan specifies that Google will not restrict the provision of its technologies for Yahoo and also includes the implementation of regular audits — a first — based on the supervision of external experts.

If the JFTC decides that Google is not complying with the plan, it will be able to resume its investigation. This will also help prevent a recurrence of the misconduct. The JFTC is currently investigating Google over other allegations that the company pressured smartphone manufacturers to favor its apps.

“We’re gathering information in cooperation with overseas authorities. We’ll maintain a strict stance on the dominance of tech giants in the future,” a senior JFTC official said.