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Japan's antitrust watchdog is planning to push Google to voluntarily reform its business practices over alleged unfair restrictions on a search advertising partnership with Yahoo, Nikkei has learned.
The Japan Fair Trade Commission has been investigating the Alphabet unit over keyword-targeted search ad technology it provides to Yahoo, now a subsidiary of Line operator LY Corp., according to a source familiar with the situation. Google is believed to have already submitted an improvement plan to prevent the problem from happening again, which the agency is expected to soon accept.
The commission is also looking into Google's search services, but decided to prioritize addressing its massive advertising business, which generates around 80% of its revenue and has also been the subject of increasing scrutiny overseas.
Google and Yahoo both serve ads in the results of searches on third-party websites, splitting the profits with the site operators. The two companies in 2010 entered a tie-up under which Yahoo could use Google's search engine and distribution system for keyword-targeted ads.
In the mid-2010s, Google reportedly told Yahoo to stop displaying search-linked mobile ads on third-party sites. Yahoo changed its contracts with its customers accordingly, appearing to be concerned that it could lose access to Google's search engine if it refused. The revisions may have prevented Yahoo customers from displaying search ads on mobile devices.
The Fair Trade Commission in 2022 launched an investigation into whether such moves by Google constituted unfair practices under Japanese antitrust law. Google reportedly retracted its demands to Yahoo in response.
The commission last month notified Google that it was indeed suspected of violating the law. The watchdog issued the notification through an administrative process known as commitment procedures, which -- unlike other sanctions such as cease and desist or payment orders -- involves having the company voluntarily submit a plan to address the problematic conduct.
While the commission can reopen an investigation if it considers a proposal inadequate, it is expected to conclude that Google's plan does enough to create a more level playing field, and close the case.
Authorities in other countries have also been intensifying scrutiny of Google's immense digital advertising business.
The European Union in 2019 fined the company 1.49 billion euros ($1.58 billion at current rates) over contracts with third-party websites between 2006 and 2016. Google has also faced antitrust lawsuits in the U.S. from attorneys general across multiple states since 2020.
Previous investigations by the Japan Fair Trade Commission have led other Big Tech companies to change practices suspected to violate antitrust law.
Amazon Japan was investigated for allegedly forcing suppliers to shoulder part of the cost of discounts on its e-commerce site, in a case that was closed via commitment procedures in September 2020. The following year, a probe into Apple's in-app payment system was closed after the company changed its policies.
