TOKYO -- The government has unveiled plans to regulate applications from IT giants on mergers and acquisitions (M&A) to prevent interference in healthy business competition through their growing possession of consumer data.
In addition to introducing new guidelines and laws, the government will also set up an expert organization to monitor the business competition of tech giants. These measures, presented at the Growth Strategy Council chaired by Prime Minister Shinzo Abe, will be incorporated in the administration's economic growth strategy to be drawn up as early as June.
Leading IT firms such as Google, Apple, Facebook and Amazon.com -- collectively called GAFA --and their Chinese counterparts such as the Alibaba group and Baidu, are strengthening their influence by diversifying their business activities. Their services, which started in such areas as internet searches, social networking and online commerce, have since grown to include transaction settlement services, retailing and self-driving cars.
In this business environment, acquiring and utilizing information such as consumer purchase records and market orientation data is expected to be vital in winning competition. It is also feared that the IT giants could become invincible by collecting such data through M&As.
The current regulatory framework, however, is insufficient to prevent market domination by a single or a few companies, said multiple participants at the Feb. 13 growth panel meeting. Moreover, some firms with smaller sales figures have big data accumulation, so it is not easy to regulate their purchases by focusing on their market share, as antitrust regulators at the Japan Fair Trade Commission (JFTC) have traditionally done, they said.
The Japanese government now intends to update its antimonopoly screening guidelines and related laws by incorporating data evaluation methods being developed in the U.S. and European countries.
Some panel members pointed out that existing government agencies such as the JFTC are not well equipped to understand the ever-changing competitive environments of digital markets. The government therefore will set up a body inside the Cabinet secretariat to investigate and monitor IT giants and map out policies on competition. The new unit will be manned by legal, economics and information engineering experts and others.
The government also intends to introduce new rules regulating big information technology corporations as they are accused of maltreating small- and medium-sized partners using their strong power to control the market. Under the new regulations, big IT firms will be required to make public reasons for terminating business with smaller companies or giving favorable treatment to their own products.
The IT giants will also be required to follow certain transactional regulations and will be required to explain their refusal to follow those rules.
(Japanese original by Kenji Wada, Business News Department)