Administrative Action against Google: Tech Giant’s Market Dominance Enabled It to Hamper Competition

Editorial

15:36 JST, April 24, 2024

A giant information technology company reportedly was unfairly restricting the business of its competitor. It can be said that this case highlights the harmful effects of one company’s domination of the market. It is hoped that the Japan Fair Trade Commission will step up its monitoring.

The JFTC has taken its first ever administrative action against U.S. technology giant Google LLC on suspicion of violation of the Antimonopoly Law over the digital advertising distribution business of Yahoo Japan Corp., now LY Corp., for which Google provides technology.

The problem was with “search advertising,” in which ads linked to keywords used in information searches on the internet are displayed on smartphones and other devices.

Yahoo Japan originally used the search technology of Yahoo Inc. of the United States. But as U.S. Yahoo has fallen behind in technology development competition with Google, Yahoo Japan entered into a business tie-up with Google in 2010 and began receiving search-related technology from Google.

Google also provided Yahoo Japan with the technology for search advertising, but Google stopped providing the technology needed to distribute ads for smartphones from September 2015. The aim may have been to stop ad revenue from flowing to Yahoo Japan.

Google resumed providing the technology to Yahoo Japan in 2022 when Google underwent an investigation by the JFTC over the issue. Even so, Yahoo Japan had found it difficult to operate its business in some areas of ad distribution for about seven years.

If Google, in a dominant position, interfered with Yahoo Japan’s business, the problem is serious. It is obvious that this would be an act that distorts fair competition.

When Google and Yahoo Japan concluded their business tie-up in 2010, the JFTC conducted investigative hearings, in which Google indicated its intention to maintain competition even if it provided the technology to Yahoo Japan. Therefore, the antitrust watchdog approved the tie-up. However, Google’s move shows that its promise has been broken, which can be described as absolutely dishonest.

Google has a 70% to 80% share of the Japan market for search advertising. If Yahoo Japan, a competitor, is shut out of the market and Google becomes the sole winner, the rates companies must pay for advertising could rise.

When higher ad rates are reflected in the prices of products and services, consumers are also disadvantaged.

This administrative action is based on the “commitment procedures” under the Antimonopoly Law.

If a business that is suspected of violating the law voluntarily submits an improvement plan to the JFTC and the plan is approved, the business will not have to face such harsh penalties as a cease and desist order and surcharge payment order. The system started in 2018 with the aim of quickly restoring an environment for fair competition.

Google’s improvement plan included that it would not restrict the provision of technology to Yahoo Japan and that it would conduct external audits regularly. It is quite natural that Google should abide by these stipulations. Based on that, Google should reaffirm the significance of its social responsibility.

(From The Yomiuri Shimbun, April 24, 2024)