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The Fair Trade Commission of Japan closes its investigation into Overture K.K. and. Google, Inc.

October 21/2005
Japan Fair Trade Commission

The Fair Trade Commission of Japan (hereinafter“JFTC”) initiated its investigation into Overture K.K. (hereinafter“Overture”) and Google, Inc. (hereinafter“Google”), on suspicion of violation of Section 19 of the Antimonopoly Act (Item 11 of Unfair Trade Practice (Dealing on Executive Terms)) by imposing an unreasonable contract term which does not allow website administrators to display any listing advertisements (*) that are provided by competitors on their sites and therefore, reducing business opportunities of other advertising agencies. After a series of investigations, the JFTC found no facts that showed these companies violate the Antimonopoly Act and decided to close its investigation into these companies.
The summary of this case is as follows.

* The listing advertisement is a service which is offered on the internet. Under this service, an advertisement relevant to a keyword someone enters arbitrarily is displayed on the search result pages and so on.

1 The summary of the case

(1) The market of listing advertisement service

A In Japan, Overture and Google offer search engine services and listing advertisement services, and they are the leading companies in the market of listing advertisement services. The listing advertisement services were started in 2002, and the market of this service is growing rapidly and is expected to expand more in the future.

B Overture and Google have adopted the system called “Auction Type”, which gave priority to the highest bidder or the bidder with other factors on the search result pages through a competitive bidding process for a specific keyword, with the highest bidder and so on getting the most advantageous placement. An advertiser shall pay the advertisement fees based on how many times its advertisement was clicked by users, and so on.

C Overture as well as Google makes a contract with website administrators regarding a listing advertisement service on condition that the website administrators display an advertisement on the website which is transmitted from Overture or Google when a user of the website does a search on the internet, etc. This contract also provides a certain composition of displays of advertisements of the website, for example, the number of lines or the placement of these advertisements, etc., and the payment of due consideration to these website administrators from Overture or Google.

(2) After a series of investigations by the JFTC, the following facts are clarified.

A Regarding a contract with a website administrator, Overture makes a rule that obligates not to enter into a contract with any Overture’s competitors who offer competitive services of the listing advertisement provided by Overture. However, Overture has changed the contents of the contract by mutual consent and might permit to display a listing advertisement of its competitors after a negotiation about condition of the contract in response to a proposal from the website administrator.

B Regarding a contract with a website administrator, Google makes a rule that obligates not to enter into a contract with any Google’s competitor who offers competitive services of the listing advertisement provided by Google. However, Google has changed the contents of the contract by mutual consent and might permit to display a listing advertisement of its competitors after a negotiation about condition of the contract in response to a proposal from the website administrator.

C Most of website administrators make efforts to compose the display on their websites in order to earn maximum advertisement revenues as well as not to lose convenience for users of search services of their websites. Some of website administrators take a positive attitude to display multiple advertisements on their search result pages, but on the other hand, there are some website administrators who are reluctant to display multiple advertisements on their search result pages because it is inconvenient to display too many advertisements for search results on their search result pages or to display duplicate advertisements of same advertisers, and so on.

D Until now, as it was mentioned at 1 (2) A to C above, regarding the contract of Overture or Google, there are some terms that does not allow any kind of transactions between the website administrators and the other advertising agencies generally. However, when the website administrator desires, they can change the contents of the contract by negotiating with Overture or Google and, in practice, there are some cases that a website administrator makes a deal with the other advertising agencies. Therefore, the JFTC found no immediate evidence to show that the contract term interfered with transactions between website administrators and other advertising agencies.

E However, considering that the market of listing advertisement is expected to expand in the future, we have a concern that such contract made by the existing companies may reduce business opportunities of other advertising agencies of listing advertisement and new entrants to the market.

(3) During its investigation, the JFTC indicated a point of issue mentioned at 1 (2) E to Overture and Google, and Overture and Google accordingly decided to change the contract terms and clarified that it is not generally prohibited to make a deal with their competitors, but it is necessary to negotiate and reach an agreement with Overture or Google about the display of advertisements and the other incidental conditions in advance.

2 The measure taken by the JFTC

 Regarding the implementation of the contract between Overture or Google and website administrators, as it was mentioned at 1 (2) above, the JFTC found no evidence in violation of the Antimonopoly Act. Furthermore, as it was mentioned at 1 (3) above, Overture and Google decided to change the existing contract terms. Therefore, the JFTC concluded that their contracts would not cause any problems with respect to Antimonopoly Act for the time being and decided to close its investigation.
In addition, the JFTC will continue to monitor the conditions of competition in the market of listing advertisement for promotion of fair and free competition in the future as well.

*Every announcement is tentative translation. Please refer to the original text written in Japanese.



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