Photo/Illutration Google LLC headquarters (Asahi Shimbun file photo)

The Fair Trade Commission learned a few years ago that Google LLC had “taken us for complete fools,” a source at Japan’s competition watchdog said.

The FTC had approved the U.S. company’s business tie-up with rival Yahoo Japan Corp. over Google’s technology for keyword-triggered search advertising services.

However, Google later effectively banned Yahoo from using that technology for smartphone sites.

For years, the FTC was not informed of the changed terms of the agreement it had approved.

Feeling betrayed, the FTC opened an investigation into Google in 2022. That led to its first administrative action against the U.S. search engine giant based on the Anti-Monopoly Law announced on April 22.

Google is now obligated to fulfill the measures laid out in its voluntary corrective action plan concerning its business with Yahoo Japan, which merged with Line Corp. into LY Corp. last year.

After its U.S. parent company stopped technological development, Yahoo Japan in 2010 decided to use Google’s advertisement delivery technology.

The proposed tie-up raised concerns among industry officials that Google would further tighten its iron grip on online advertising.

The FTC heard from both parties and approved the partnership after concluding that the contract would allow Yahoo to operate freely without constraints from Google.

But the power balance between the partners changed four years later.

In November 2014, Google demanded that Yahoo stop delivering search advertisements to smartphone sites other than its own using Google’s technology.

Yahoo, which relied on its rival for the core technology, complied, and it became unable to deliver such advertisements from September 2015, at the latest.

The FTC regularly communicated with Google and Yahoo to check the status of the contract but failed to notice the terms had been altered in favor of Google, sources said.

Even Yahoo did not consult with the FTC about the change.

The FTC was essentially left in the dark until it decided to start the official investigation in 2022.

When the FTC contacted Google about the impending investigation, the company soon returned the contract with Yahoo back to its original form.

“In 2010, some within the FTC questioned the decision to approve the business tie-up,” a former senior FTC official said. “At the time, we failed to fully recognize and respond to the changing digital market.”

After the FTC announced its administrative action against Google on April 22, the company said it will fulfill its FTC-approved “commitment plan” without fail.

Yahoo said it will refrain from commenting on the issue.

(This article was written by Yuji Masuyama and Kyota Tanaka.)

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