Gree, KDDI Sue DeNA Amid Japan Social-Network Competition

Gree Inc. (3632), controlled by billionaire Yoshikazu Tanaka, and KDDI Corp. (9433) sued DeNA Co. for allegedly telling game developers not to offer their titles on Gree’s social-networking platform.

Gree and partner KDDI Corp., Japan’s second-largest mobile- phone operator, together seek at least 1.05 billion yen ($14 million) in damages, the game developer said in a statement distributed in Tokyo today. Gree is asking for 900 million yen of that amount, it said.

DeNA, operator of the Mobage social-network site, kept blocking developers, carriers and ad agencies from offering services to Gree, even after Japan’s fair-trade commission issued a cease-and-desist order in June, Gree said. The litigation is a sign of competition in the market to develop titles for smartphones, said Hiroshi Naya, an analyst at Ichiyoshi Securities Co. in Tokyo.

“Both companies are feeling the pressure as growth in the gaming market is just consistent, not robust,” Naya said. “Their challenge is how to increase revenue.”

Tomoyuki Akiyama, a DeNA spokesman, declined to comment, saying the Tokyo-based company hasn’t seen the court filing.

Damages

DeNA and Gree are reshaping Japan’s $10.6 billion video- game market, as they offer games typically free and charge for virtual items to mobile-phone users. The domestic market for social gaming will almost triple to 305 billion yen in 2013, according to a June estimate by Mitsubishi UFJ Morgan Stanley Securities Co.

Gree, 48.5 percent owned by 34-year-old Tanaka, and 6.9 percent by KDDI, fell 5.1 percent to 2,614 yen at the close of trading in Tokyo today. DeNA declined 12 percent to 2,302 yen.

“We can’t allow DeNA’s behavior,” Tanaka said at a press conference in Tokyo. “We needed to take some kind of action to recover damages.”

Some game developers are worried about a “retaliation” by DeNA, Tanaka said without elaborating.

Gree is considering an overseas listing to help raise its profile outside Japan and not because it needs funding, Tanaka said in a July interview.

Tanaka set up Gree in 2004 as a social-networking service. KDDI decided to invest in Gree two years later to expand its game business.

Tanaka became interested in the digital world after reading American author Alvin Toffler, whose works include “Powershift,” as a junior high-school student, according to Forbes Magazine.

He first browsed the Internet in 1996 while visiting the U.S. Three years later, he graduated from Nihon University with a bachelor’s degree in law, according to the company’s website. Before founding Gree, he worked at a unit of Sony Corp. and at Rakuten Inc.

To contact the reporters on this story: Naoko Fujimura in Tokyo at nfujimura@bloomberg.net; Yuki Yamaguchi in Tokyo at yyamaguchi10@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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