Japanese prosecutors charge Dentsu over Olympic bid-rigging scandal

Dentsu and five other Japanese companies have been indicted over bid-rigging allegations related to the 2020 Tokyo Olympics in a scandal that has engulfed the most richly sponsored sporting event in history.

The move by Japanese prosecutors against the advertising behemoth Dentsu marks an escalation in authorities’ efforts to unravel a complex web of suspected impropriety ahead of the Games, which were held a year behind schedule and without spectators because of the Covid-19 pandemic.

Over the past six months, prosecutors have brought a string of bribery charges against a former Dentsu executive and business leaders involved in the Tokyo Olympics, including the chair of one of Japan’s most famous makers of business suits, the chair of a publishing empire and the president of a company that made Games mascot toys.

But the central focus of the investigations has been Dentsu, which is widely regarded as one of the country’s most powerful institutions. As well as its grip on many of Japan’s biggest corporate accounts, Dentsu has long been entwined with the ruling Liberal Democratic party and counts the government among its largest clients.

Dentsu was heavily involved in Tokyo’s hosting bid and in many subsequent preparations for the Olympics. Executives at companies that joined the list of sponsors for Tokyo 2020, which included banks, real estate developers and toilet makers, described high-pressure negotiations with Dentsu that ultimately secured more than $3bn in sponsorship.

In a statement on Tuesday, Tokyo prosecutors alleged that Dentsu — along with its largest domestic advertising rival Hakuhodo, the smaller Tokyu Agency, two event organising companies Cerespo and Same Two, and TV production group Fuji Creative — violated antitrust regulations by restricting participation in Olympic test events and competitions in 2018.

Seven individuals allegedly involved in the bid-rigging process were also indicted.

The charges were triggered by criminal complaints filed earlier in the day by Japan’s Fair Trade Commission, which said that bidding for these events amounted to ¥43.7bn ($320mn).

Following the indictment, Dentsu said five executives at the group and its subsidiary would return their pay and that it would set up an investigative committee of outside experts. “We take this matter extremely seriously,” the company said.

One person close to Dentsu said despite the widening scandal, the company was unlikely to suffer significant long-term damage to its position as a virtual monopoly in Japan’s advertising market.

“The company will get a slap on the wrist, but the truth is that no major company in Japan can really live without Dentsu in some capacity, and so they will likely not lose many clients over this,” the person said.

Last year, prosecutors arrested senior figures at Dentsu and other companies alleged to have played a role in rigging bids. The heads of some sponsors were arrested over allegations that they paid bribes for favourable treatment during preparations for the Games.

In separate statements following the indictment, Hakuhodo and Tokyu Agency said they took the issue “very seriously” and pledged to take measures to strengthen their compliance.

Fuji Creative apologised for concerns it caused to stakeholders but disputed the allegations, saying it would explain its position in full at trial.

Cerespo and Same Two declined to comment, saying they had not received a formal notice from prosecutors.

“The Tokyo 2020 Olympics must have been the first time for non-major Japanese companies to sponsor the Games, and these companies depended on Dentsu for everything,” said one of the corporate supporters who worked with Dentsu for the first time on the Games and declined to be named. “All these scandals of Dentsu are a result of this heavy dependence.”

Earlier in the week, Tokyo governor Yuriko Koike told an assembly meeting that the metropolitan government would potentially seek compensation from companies found to have rigged bids around the Olympics and would assist the organising committee under the city’s government to do the same.

Koike, who was a prominent figure during the Games, said she would encourage the organising committee to file a damages claim against Dentsu, with the city acting as the committee’s adviser.


Business Asia
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