Japan's antitrust watchdog said Monday it has asked Google LLC to voluntarily reform its business practices after finding that it imposed unfair restrictions in its search advertising agreement with Yahoo Japan.

The Japan Fair Trade Commission concluded that the practices by the U.S. search giant compromised the fairness of the digital advertising market. It is the first administrative step taken by Japanese authorities against Google.

The commission said Google has submitted proposals to improve its practices and that it has accepted them, exempting the company from facing fines or other punitive measures under the antimonopoly law.

An official of the Japan Fair Trade Commission holds a press briefing in Tokyo on April 22, 2024. (Kyodo)

The commission will continue investigating as Google is also suspected of preventing fair competition in search services.

The regulator began its probe in 2022, and notified Google of possible violations of the law in March this year. It concluded that Google's practices could amount to private monopoly or interference with competitors' transactions.

Google said in a statement that it has not been found to have violated the law. But it also said it will implement the improvement plan steadily.

Yahoo Japan, now LY Corp., said it will refrain from commenting.

The plan includes suspending restrictions on technology provision to Yahoo for three years.

In the transactions under scrutiny, Google and Yahoo purchased advertising spots from other companies' portal sites and distributed online ads linked to search key words.

The two companies entered a contract in 2010 enabling Yahoo to use Google's search engine and search advertising technologies.

But Google later asked Yahoo to stop distributing search-linked advertisements, changed the contract in 2014, and restricted Yahoo's ad distribution for seven years through 2022, during which period advertisers and portal site operators had no choice but to rely on Google, the commission said.

Yahoo accepted the restrictions out of concern that it could be denied access to Google's technologies, sources close to the matter said earlier.

Fair trade regulators in the United States and Europe have been strengthening their oversight of large information technology companies.

Japan's FTC has also aligned with the trend as the market size of search-linked advertising has surged to more than 1 trillion yen ($6.5 billion).

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