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Amid the accelerating digitization of society and the increasing importance of start-ups taking on new fields, there is no end to the unreasonable demands that major companies are making of start-ups. The government should make efforts to monitor and prevent such business practices.
The Fair Trade Commission has compiled a report on whether the business practices of major companies and other entities violate the Antimonopoly Law when they conduct transactions or joint research with start-ups.
The FTC, together with the Economy, Trade and Industry Ministry, intends to draw up operational guidelines, including corrective measures, by the end of this fiscal year. It is important to present examples of problems in an easy-to-understand manner and have the guidelines prevent unreasonable business practices toward start-ups.
In November last year, the FTC began a survey on large companies’ transactions with start-ups that have been in business for no more than 10 years. The survey has revealed a number of unfair business practices.
There was a joint research project in which a large company entrusted the development of a core program entirely to a start-up firm, but the large company unilaterally owned the patent. In another case, a large company sought customer information that was not included in the contract and tried to steal business from a start-up.
The report pointed out that such acts could constitute “abuse of a superior bargaining position,” which is prohibited by the Antimonopoly Law.
There have been reports of large companies taking advantage of the weakness of start-ups that had little business experience and had difficulty securing operating funds.
According to the FTC report, when large companies invest in start-ups, they often establish the right to demand that the start-ups buy back their shares in the event there is a problem on the side of the start-ups. By threatening to withdraw funds through the use of this right, the large companies force the start-ups to accept their requests.
This is a vicious practice that could deprive companies in a weak position of growth opportunities.
It is hoped that the FTC will quickly identify suspected violations and rectify them as soon as possible by collecting detailed information through such means as setting up consultation corners. Serious misconduct needs to be dealt with rigorously, such as by legal action.
Large companies should review their transactions by referring to the FTC report and other materials. It is also important for start-ups to make efforts to enhance their management transparency and protect their rights through such measures as strengthening their legal departments.
The government is encouraging industry circles to engage in what is called “open innovation” to gather cross-industry knowledge to promote technological innovation in the digital age. To do so, it is essential for there to be cooperation between start-ups, which have strengths in new technologies and services, and large corporations, which have financial resources.
If many start-ups improve their performance, that will create jobs and vitalize the economy. It is desirable for both sides to enhance their relationship of trust for smooth cooperation between large companies and start-ups.
