Dentsu, Hakuhodo raided as part of Tokyo 2020 corruption scandal

The bribery scandal engulfing last year’s Tokyo Olympics involving former Dentsu employee, Tokyo Games organizing committee member and powerful behind-the-scenes fixer Haruyuki Takahashi and five other companies, including ADK, shows no signs of abating.

As a part of the ongoing investigations, earlier this week Tokyo prosecutors and Japan's Fair Trade Commission raided the headquarters of the country’s second-largest advertising firm Hakuhodo over suspected bid-rigging. This follows the raid which happened in Dentsu’s offices on November 25.

According to Tokyo’s public broadcaster NHK, the ad giants are being investigated on suspicion of rigging bids for contracts related to Olympics and Paralympics events.

As Japan's most powerful agency network, Dentsu dominates the advertising, marketing and communications ecosystem in the country and helped to land the 2020 Games for Tokyo. Haruyuki Takahashi, a former executive at Dentsu, has been arrested four times in recent months on charges of receiving bribes from various stakeholders and sponsors for the Games.

At this point, prosecutors suspect rigging took place in the 26 open bids out of the total 56 test events planned in 2018. These events were eventually handed out to nine companies, including Dentsu and Cerespo, as well as a consortium without a tender process.

The money that exchanged hands for the alleged fixing is estimated at 500 million yen (US$3.6 million) but with the involvement of a growing number of companies coming to the forefront, speculation is rife that the contracts could have been much bigger, possibly worth tens of billions of yen and more arrests will follow as the investigation deepens.

Both Dentsu and Hakuhodo acknowledge being searched in connection with the rigging bids of Tokyo 2020. In a statement issued to Campaign, the spokesperson for Dentsu Inc says: "We continue to fully cooperate with this investigation."

Hakuhodo added: “We offer our most sincere apologies to all parties involved in this issue and will be fully cooperating with the authorities. Since this pertains to the ongoing investigation, at this point we are unable to give out any additional information.”

The shares of parent company Dentsu Group have fallen by roughly 2.7% since news of the fresh probe broke, while shares of the event company Cerespo Co tumbled approximately 11%.

(Campaign Asia-Pacific will continue to cover developments as the probe around Tokyo 2020 tainting ad majors unfolds.)