The ever-expanding bribery scandal linked to last year’s Tokyo Olympics has cast a spotlight on the advertising agencies managing official Games business, further souring the image of the international sports spectacle. 

One senior prosecutor had even remarked that the scandal shows that “not only sponsor companies but also the management side lacked a sense of fairness.”

The latest entwined in the burgeoning scandal, Daiko Advertising Inc., had worked to obtain sponsors for the Games as a subcontractor for the advertising giant Dentsu Inc., which dominated Olympic-related business.

Industry insiders said that there must have been immense pressure for advertising firms to become involved in such a major event as the Olympics.

“It’s tough for an advertising company with a long history if it cannot be involved in such a huge event like the Olympics,” one person knowledgeable of the industry said. “Daiko must have wanted to show that it was involved in the Olympics.”

Daiko, established in 1944, became a wholly owned subsidiary of Hakuhodo DY Holdings Inc., a major advertising company, in 2003. The Osaka-based company operates primarily in the Kansai region.

Although the scale of its business is smaller than Hakuhodo, Daiko maintains a presence through sales.

Daiko grew, establishing offices in Tokyo and Nagoya and moved into TV commercials for large companies, and later expanded its business to China and India.

One of the goals of the 2003 merger was to compete with Dentsu, the largest company in the advertising industry.

But there is still a wide gap. Dentsu raked in 5.2 trillion yen ($36 billion) in sales in 2021, while Hakuhodo, the second largest in the industry, reached only 1.5 trillion yen in sales for the fiscal year ending March 2022.

Advertising companies that solicit sponsors for various events can play an important role in determining the success or failure of an event.

There are many companies in the industry, including small and midsize firms, but those involved in large-scale events are mostly large ones.

That is especially so for the Tokyo Olympics and Paralympics, which was a project both national and international in scope. The organizing committee commissioned Dentsu, designating it as a "dedicated marketing agency" to select and obtain official sponsors.

Dentsu outsourced some of its tasks for the Olympics to other advertising agencies, designating them as “sales cooperation agencies,” with the approval of the organizing committee.

Daiko asked Haruyuki Takahashi, 78, a former organizing committee executive, to become involved in the sponsorship contract and have it become a cooperating agency. Takahashi had notably previously worked at Dentsu.

Takahashi allegedly made that happen by approaching Dentsu.

The organizing committee then paid a commission for Dentsu from the sponsorship money, and Daiko gained a profit by receiving a subcontracting fee from Dentsu.

“Dentsu alone cannot handle an Olympic-scale event and virtually choose cooperating agencies,” said an executive of another advertising company that worked as a cooperating agency for the Games.

“We received a share of the profits from Dentsu, so it’s hard for us to object to Dentsu,” the executive said. “Mr. Takahashi was behind this, and his requests were accepted.”

Yoshikazu Taniguchi, 57, an executive officer of Daiko, was arrested on Sept. 27 on suspicion of giving bribes. He had worked in sales for a major game company and is currently overseeing the 2025 Osaka Expo and other events as general manager of the theme business division.

He has known Takahashi since Tokyo was bidding on hosting the Olympics.

Takahashi was arrested for a third time on Sept. 27 in yet another case of alleged bribery.

He has already been charged with bribery over Olympic sponsorships involving apparel maker Aoki Holdings Inc. and publishing company Kadokawa Corp.

But there are no signs of the scandal slowing anytime soon.

Prosecutors are investigating into the plush toy maker Sun Arrow Inc., which manufactured and sold dolls of the Olympic mascots. The company is suspected of having provided around 8 million yen to Takahashi.