Japan Investigates Pay-for-Play on Restaurant Review Sites, Shares Fall

(Bloomberg) -- Shares of Japanese restaurant review site operators plunged Thursday after a regulator announced that it will investigate their business practices.

Japan’s Fair Trade Commission will examine whether the companies give higher ratings to restaurants that pay annual fees, the Nikkei reported, citing comments from the regulator’s Secretary General Akinori Yamada at a press conference on Wednesday.

Yamada did not name which specific portals would be subject to the investigation, the report said. FTC spokesman Yoshinori Sekine confirmed the probe, but declined to elaborate on the nature of the review.

Shares of Kakaku.com Inc., which runs the restaurant review site Tabelog, fell as much as 8.4%. Gurunavi Inc., which operates another major review site, declined as much as 5.7%.

Kakaku.com said in an emailed statement that whether or not restaurants subscribe to Tabelog’s paid service has no impact on their user ratings or rankings on the site. Gurunavi has received a voluntary survey request from the FTC, a company representative told Bloomberg by phone. Concern over rating practices isn’t applicable to Gurunavi, which doesn’t use its own system but instead uses comments and ratings provided by TripAdvisor, the representative said.

“The probe will cast a negative image on the companies, regardless of the investigation’s result,” said Tatsunori Kawai, a market strategist at Kabu.com Securities Co. in Tokyo. “There’s concern of companies’ sales falling if they lose users. It will take time to regain the users’ trust.”

This isn’t the first time the operators’ review systems have come under scrutiny, according to Masato Araki, a senior analyst at Mitsubishi UFJ Morgan Stanley. Kakaku.com, which also runs a price-comparison online retail site, has been subject in the past to complaints about unfair reviews and incorrect information on Tabelog, which accounted for 44% of its 54.8 billion ($510 million) in sales for the year ended March 31.

The FTC probe has caused “renewed concerns over Kakaku.com’s core business model, like Tabelog,” Araki said.

--With assistance from Lily Nonomiya.

To contact the reporters on this story: Shoko Oda in Tokyo at soda13@bloomberg.net;Shingo Kawamoto in Tokyo at skawamoto2@bloomberg.net

To contact the editors responsible for this story: Lianting Tu at ltu4@bloomberg.net, Kurt Schussler, Teo Chian Wei

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