The Japan Fair Trade Commission (JFTC) has hit U.S. IT giant Google LLC with administrative sanctions on suspicion of violating antitrust laws by obstructing the advertising business of competitor LY Corp., or LINE Yahoo. The internet now makes up half of Japan’s domestic advertising market and distortive practices must be promptly corrected.
Both companies are major players in “search-linked advertising,” which displays internet ads by analyzing search words. Google holds 70-80% of the Japanese online ad market by feeding ads to search sites including non-Google ones. Yahoo has the remainder.
Google has been providing systems to Yahoo since 2010, creating a monopoly on the technology front. Exploiting this position, for seven years beginning in 2015, Google blocked Yahoo from delivering ads to other companies’ smartphone sites.
This is overbearing pressure from what is essentially a monopoly. If such actions are permitted to continue, advertising fees could remain high, among other issues, negatively affecting consumers.
In the internet business, services become increasingly convenient the more users they attract, creating fertile soil for a “winner-takes-all” situation when a certain service comes to dominate its sector. As a result, search services and smartphone operating systems are dominated by a quartet of giant IT firms: Google LLC, Amazon.com Inc., Meta Platforms Inc. and Apple Inc.
These services and technologies are embedded in many companies’ operations, so they cannot realistically refuse even unfair contracts with the big IT firms.
Yahoo is believed to have feared being left at a disadvantage by Google in terms of technology sharing, among other concerns. However, Yahoo may have had options, including quickly reporting the U.S. IT giant to the JFTC. As a major player in the technology oligopoly itself, Yahoo should prioritize consumer interests.
The ideal situation is for innovative startups to introduce new services and products, revitalizing the market. However, breaking the dominance of the IT behemoths is extremely challenging. The hurdles for users to switch from familiar services are high, and Google and three enormous IT firms can also just buy any smaller rival.
In this context, the importance of policies to curb the digital oligopoly is increasing. The European Union has begun full-scale enforcement of laws that prohibit certain behavior among IT firms. The JFTC also plans to submit a new bill to regulate smartphone OS providers to the current Diet session.
The drawbacks of having a single dominant player in any field are significant. Strengthening market surveillance and efforts to maintain a fair competitive environment are urgently needed.
