Japan sets out plan to regulate IT giants more strictly

The government needs to create tough regulations for information technology giants through measures such as forming a specialist monitoring team, according to an interim report released Monday by the government’s expert panel.

Based on the report, the Fair Trade Commission will launch a large-scale investigation as early as the beginning of next year into the actual situation of business deals conducted by IT firms. The government will kick off discussions on tougher measures that would include obligating the firms to disclose the terms of their business deals.

The report urged the strengthening of regulations on IT giants, called platformers in Japanese, which operate or host search engines, online shopping sites and social media sites, among other things. The panel has in mind Google, Apple, Facebook and Amazon.com, which are collectively called GAFA and are all based in the United States.

These major IT companies have not been taking responsibility for any problematic transactions, since they merely offer platforms, or places where transactions take place. Under these circumstances, they have corralled users’ personal information, purchases and search histories, among other things, resulting in an oligopoly and their increasing dominance of the markets. The report points out that their management of the platforms “has the nature of manipulating [information and transactions] and is extremely obscure.” The government then decided to strengthen its regulation of these companies.

Initially, the FTC will launch a large-scale investigation into the actual situation of the IT giants’ business transactions, as early as the beginning of next year. The investigation will start out on a voluntary basis, but the FTC is even considering making it compulsory based on Article 40 of the Antimonopoly Law.

The mainstay of tougher regulation would be the establishment of a monitoring team of specialists that the government will form as early as next year. It will be a highly professional team that will analyze complicated matters including IT giants’ contract terms. The team will report back to the FTC if it discovers highly illegal business transactions, backing up the commission’s investigation under the Antimonopoly Law.

The government will also obligate companies to disclose crucial information regarding their transactions, with the aim of improving the transparency of the terms of their contracts. In Europe, which is a leader in this field, authorities plan to obligate IT giants to clarify their contract terms and provide a specific reason for demanding better terms than their rival firms. The Japanese government plans to follow suit.

With regard to the handling of personal information, the interim report warned that there may be “breaches of privacy, discrimination and the undermining of users’ interests” depending on how the information is handled, and urged IT companies to demonstrate transparency and integrity for the sake of consumers.

The expert panel was established in July this year by the Economy, Trade and Industry Ministry, the FTC and the Internal Affairs and Communications Ministry. The names of the panel’s 15 members were also announced on Monday, although they had previously been undisclosed out of fear they would be lobbied by interested parties. The final report will be compiled by the end of this year.