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Tech giants taking advantage of market control, regulation needed: gov't report

A sign on a building at the Google campus in Kirkland, Washington is pictured on Nov. 1, 2018. (AP Photo/Ted S. Warren)
In this May 1, 2018, file photo, Facebook CEO Mark Zuckerberg makes the keynote speech at F8, Facebook's developer conference in San Jose, California. (AP Photo/Marcio Jose Sanchez, File)

TOKYO -- Tech giants tend to take advantage of their market control to conduct transactions favoring themselves and present biased information as neutral, an interim government report released on Nov. 5 said.

While noting that large IT firms create innovative businesses, the report underscored the need to require tech giants to disclose information on important transactions and prevent them from monopolizing the market.

Such firms, including Amazon, Apple, Facebook and Google, are referred to in the report as "platformers." The government will work out basic principles of regulating such companies by the end of this year after soliciting the public's opinions and interviewing representatives of these platformers and the firms that deal with them.

However, work to draw up effective rules contributing to ensuring fair transactions and protecting personal information will pose a challenge, since individuals and businesses are relying increasingly on these companies' services.

The Japan Fair Trade Commission (FTC), meanwhile, is poised to conduct a fact-finding survey on these firms, with an eye to launching a compulsory investigation under Article 40 of the Antimonopoly Act as early as the beginning of 2019, to see if such IT giants have abused their dominant bargaining positions.

The interim report was issued following discussions among experts from the Economy, Trade and Industry Ministry, the FTC and the Internal Affairs and Communications Ministry that had been ongoing since July.

The report defines personal data that IT giants gather in return for providing services such as internet searches and social networking sites as "things that have economic value similarly to money." It points out that the more data platformers accumulate, the more convenient their services become -- and the less costs they shoulder. This leads to a market monopoly or an oligopoly by a handful of IT giants, the report says.

The government points out the need to enforce "a certain level of order," as platformers are not only providing online platforms, but are also increasingly dominating the market.

The document also expresses concerns that such tech giants could revise their terms of service and contract conditions to their advantage.

The report additionally cited the outcome of a survey that the Economy, Trade and Industry Ministry conducted on 2,000 companies that have transactions with platformers, which sheds light on the situation.

In the ministry's survey, about 89 percent of respondents said they were unable to negotiate revisions to their terms of service with the tech giants, and around 86 percent complained that the platformers had unilaterally changed their terms of services while some 85 percent said the IT giants' usage fees and commission charges were too high.

Many of businesses which advertise with and sell goods through platformers have no choice but to accept high usage fees and unfavorable contract terms because they cannot attract customers without the IT giants' services.

The government is urgently seeking to shed light on the transactions of platformers. It will also consider obligating such IT giants to disclose the details of the contracts and terms of service they have signed with their business clients.

(Japanese original by Kenji Wada, Business News Department)

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