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Japan gov't mulls administrative punishment for IT giants that violate rules

TOKYO -- The government is considering regulating information technology giants with administrative punishment for those that violate rules, a draft report unveiled on April 19 shows.

The draft report, compiled by a government working group, proposes new legislation to supplement the Act on Prohibition of Private Monopolization and Maintenance of Fair Trade. It also outlines plans to take disciplinary action, such as introducing improvement orders, against any IT groups that violate regulations.

The draft midterm report states that the government will initially regulate online shopping malls and will expand the scope of control to other businesses as necessary.

The government has been mulling new regulatory schemes to prevent clients from suffering disadvantages through unilateral changes to contract terms by IT giants, dubbed in Japan as "platformers."

A working group of a joint panel set up by the Ministry of Economy, Trade and Industry, the Ministry of Internal Affairs and Communications and the Japan Fair Trade Commission has been discussing the issue since March at closed-door meetings. The group will file a report to a panel meeting scheduled for April 24.

According to the draft report, the government will keep an eye out for violations of laws by IT giants, through such measures as introducing guidelines specifically targeting those firms under the antimonopoly law, establishing trade associations of clients of those firms, and continuing fact-finding surveys including compulsory probes under Article 40 of the antimonopoly law.

The draft report also calls for the government to look into new legislation that will require the disclosure of contract terms in order to enhance the transparency of transactions. The working group aims to submit a relevant bill during the regular session of the Diet next year at the earliest.

In an attempt to boost the efficacy of regulations, the draft report underscores the need to consider administrative punishment, such as system improvement orders against IT groups. At the same time, the report also calls for consideration toward IT firms' autonomy to a certain extent so as not to hinder their technological innovation.

Based on the Fair Trade Commission's investigation results, the initial targets of regulations will be online shopping malls and smartphone app store operators. The spectrum of regulations will be flexibly expanded depending on the outcome of forthcoming surveys.

(Japanese original by Kenji Wada, Business News Department)

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