Photo/Illutration A search through the Tabelog site shows restaurants in the area. (Satoru Eguchi)

The Tokyo District Court has ordered the operator of a leading peer-to-peer restaurant review site to pay 38.4 million yen ($286,000) in damages to a Korean barbecue chain.

The court recognized that the defendant’s changed algorithm at the Tabelog website caused a drop in sales at the barbecue chain's outlets.

“The defendant violated antimonopoly law by abusing its dominant bargaining position,” Presiding Judge Fumitaka Hayashi said in a June 16 ruling.

The plaintiff, the Tokyo-based Hanryumura Co., sought about 640 million yen in compensation, arguing its ratings were unfairly lowered on the grounds that it is a chain restaurant establishment.

Hanryumura said after the ratings were lowered, its monthly sales dropped by 25 million yen, on average, as the number of customers who visited its restaurants through Tabelog fell by more than 5,000 each month compared to previously. 

Kakaku.com Inc., which operates the Tabelog site, appealed the court decision, calling it “unjust.”

The ruling will likely have broader repercussions in the country as rating systems using a computer algorithm have also been widely used for hotels, medical facilities, movies and real estate.

Kentaro Hirayama, associate professor at Kyushu University with expertise in antimonopoly law, called the court ruling “significant.”

He praised Hanryumura’s legal action to make Kakaku.com accountable for what it thought was an opaque use of a computer algorithm.

He said the case should prompt digital platform operators to offer more transparency about their algorithms to help secure fairness in their rating systems.

Tabelog calls itself “one of the largest gourmet sites in Japan,” covering more than 820,000 establishments.

Kakaku.com rates restaurants on a scale of 1 to a perfect score of 5 through its own algorithm based on more than 40 million reviews filed by posters.

Hanryumura said the scores of its 21 outlets went down an average 0.2 point in May 2019 compared with the previous rating, according to court documents. One of the stores saw a decline of as much as 0.45 point.

Hanryumura argued in court its survey had found the ratings of all chain stores were lowered and that Kakaku.com had illicitly changed the algorithm to reduce the scores of such establishments across the board.

In the ruling, the court recognized that Kakaku.com has a dominant position over the plaintiff as the Tabelog site can sway the business fortunes of Hanryumura outlets.

The court said the change in the algorithm was a “transaction that put the plaintiff at a disadvantage” and that it amounted to “a disadvantage that (the plaintiff) could not anticipate” beforehand in light of the rating method, only part of which had been published. 

Therefore, the defendant must pay part of the lost sales to Hanryumura in compensation, the court said.

Rules and regulations posted by Tabelog states that it is not liable for damages to member restaurants.

However, the court determined that the rules and the regulations are not applicable.

“Kakaku.com made a grave error by changing the algorithm despite its knowledge that changing it would be tantamount to the abuse of its dominant business position,” the court said. 

Tabelog revises its ratings twice a month. 

It said the ratings are not simply calculated by averaging the marks given by customers but are designed to expand the impact of assessments by people with rich gourmet experiences.

It does not publish most of the details of its rating methods, however.

Hanryumura also maintained that Kakaku.com lowered the ratings to prod restaurant chain operators to switch to a more expensive contract with the site operator so that they could be featured more prominently in searches.

Kakaku.com denied the claim, saying the algorithm is applied irrespective of the nature of contracts.

It contended that ratings and rankings do not constitute business terms and transactions.

(This story was compiled from reports by Kyota Tanaka and Satoru Eguchi.)

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