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Dentsu presence at Japan gov't pre-bid meet raises suspicions of rigged virus relief deal

This file photo taken May 15, 2020, shows the Tokyo headquarters of Dentsu Inc., Japan's largest advertising agency. (Kyodo)

TOKYO -- A representative from advertising giant Dentsu Inc. was present at hearings that the Japan industry ministry held for a private organization that ultimately won the bid for a contract to distribute coronavirus relief packages to small and medium companies, and then subcontracted the work to Dentsu, it has emerged.

The government's Subsidy Program for Sustaining Businesses offers subsidies to small, medium and other companies whose earnings have dropped considerably as a result of the novel coronavirus outbreak. When the Ministry of Economy, Trade and Industry (METI) held hearings with the Service Design Engineering Council before an invitation for bids officially went out, a representative from Dentsu was present. Later on, after winning the bid, the Service Design Engineering Council subcontracted the work out to Dentsu, which is now effectively presiding over the project, prompting experts to point out the possibility that the Dentsu representative's presence at the hearings may have worked in the council's favor.

The attendance by a Dentsu representative was revealed at a press conference held jointly by the council and Dentsu on the night of June 8. METI commissioned the council to carry out the administrative work for distributing the relief packages at approximately 76.9 billion yen (approx. $704.48 million), but the council subcontracted the work to Dentsu for approximately 74.9 billion yen (approx. $686.23 million). Opposition parties have criticized that the council is just a middleman taking 2 billion yen (approx. $18.59 million) without doing any work.

METI hearings with the council took place on March 30 and April 2, in which METI summoned representatives from the council and METI officials met them in person. A Dentsu representative was present both times. However, in the case of Deloitte Tohmatsu Financial Advisory LLC, which was the council's bidding rival, METI held a hearing once on the phone on April 2, and again in person on April 3. An invitation for bids went out on April 8, and the bidding took place on April 14.

In order to further potential bidders' understanding of projects, METI allows for hearings prior to accepting bids or written proposals. However, Hiroshi Arikawa, a professor of public policy at Nihon University, says, "By taking part in the hearings with Dentsu, which ultimately became the body that presides over the project, the council was possibly at an advantage in the bidding process, which makes the process unfair."

Minister of Economy, Trade and Industry Hiroshi Kajiyama explained at a June 9 session of the House of Representatives Budget Committee, "We gave Deloitte sufficient information, and did not provide the council any inappropriately detailed information." The Constitutional Democratic Party of Japan's Hiroshi Ogushi responded by saying, "There is a very clear difference (in the order and number of hearings), which makes it all seem like it was rigged."

(Japanese original by Yuki Takahashi and Shiho Fujibuchi, Business News Department)

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