EDITORIAL | Google Japan Deserved Penalties for Unfair Competition

The Japan Fair Trade Commission (JFTC) imposed administrative sanctions on Google Japan GK based on the Antimonopoly Act (AMA) on Monday, April 22. This was the first instance of the JFTC administratively punishing Google. 

The JFTC was also investigating whether Google unduly restricted a part of the digital ad business of the popular chat app LINE and the internet portal Yahoo! JAPAN.

In response to the JFTC investigation, Google submitted an improvement plan. Based on the Antimonopoly Act's "commitment procedure system," it allows Google to voluntarily desist from the questioned behavior and commit to preventing any recurrence.

The JFTC has now approved the improvement plan proposed by Google. It judged the plan effective and likely to ensure a competitive environment if implemented. Nevertheless, requiring the commitment procedure and ensuring it is carried out constitutes administrative action by the JFTC.

Improper actions that restrict the business opportunities of competitors or business partners are malicious. They distort a fair, competitive environment. It is proper that they should warrant administrative penalties. Google must seriously reflect on its past misbehavior and work to ensure fair competition in line with the improvement plan.

Anti-Competition Actions 

The issue involves Google Japan's "search-linked advertising" service. Related ads will appear if a user enters a phrase in the search site. Google currently controls a 70-80% market share for this segment. Even so, it reportedly demanded that its competitor Yahoo! JAPAN stop engaging in such advertising. 

Not only is Yahoo! JAPAN a competitor. It relies on Google for its ad distribution technology. That left Yahoo with no option but to accept Google's demand. It feared that refusal would mean it would be unable to use the distribution technology and also possibly denied access to the Google search engine. 

By eliminating competitors, Google would have a free hand to set advertising fees at whatever amount it pleased. Increased advertising costs might in turn result in higher prices for goods and services, which would hurt consumers. 

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Creating a Fair Trade Playing Field

In October 2023 the JFTC announced that it had initiated a review of Google's search system. There has been considerable speculation that the company may have improperly lobbied smartphone manufacturers to give the Google search engine an unfair advantage.

With giant IT players such as Google and Apple in mind, the JFTC plans to submit regulatory legislation during the current Diet session. It would require companies to open up smartphone app stores and payment systems to other businesses. 

We would all benefit if that happened. The government should strengthen its oversight of giant IT firms and promote healthy competition in the digital market. 

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(Read the editorial in Japanese.)

Author: Editorial Board, The Sankei Shimbun