New Legislation to Regulate Tech Giants Should Be Used to Realize Fair Business

A new law has come into effect to urge tech giants that provide e-commerce and other services to make their businesses more transparent. It is hoped that the new regulation framework will be effective in ensuring fair business.

Online retail site operators with annual domestic sales of ¥300 billion or more, as well as app store operators whose domestic sales exceed ¥200 billion per year, are subject to the new legislation.

The likely targets are Google LLC, Inc. and Apple Inc., three of the U.S. tech giants collectively dubbed GAFA, in addition to domestic firms such as Rakuten Inc. and Yahoo Japan Corp.

The new law requires that targeted companies disclose such information as the terms and conditions agreed with online shop operators and app developers, as well as how they determine search result rankings. The law also obliges them to deal with complaints from their business partners and establish a system for resolving disputes with them.

The new law requires the companies to submit a report to the central government once a year on how they have tackled these issues. The law also stipulates that penalties will be imposed if they fail to comply with business improvement orders.

Government monitoring will play a vital role in applying the law. The government should establish a system to scrutinize reports from tech giants by appropriately assigning specialists. It must also grasp the actual situation by compiling complaints and opinions from the targeted firms’ business partners and other parties that are submitted through its channels.

Tech giants are performing well thanks to strong consumer demand from people staying at home amid the novel coronavirus pandemic. The companies that comprise GAFA, which operate worldwide, all posted their highest-ever profits during the October-December period last year.

Profits come mainly from commission fees that tech giants charge businesses that have online shops on their platforms.

To date, many of their business partners have complained that the contract terms have been unilaterally modified and that they have been charged excessive commission fees.

Rakuten faced strong opposition at one point when it planned to offer free shipping for all purchases in its online mall over a certain amount and to make shop operators shoulder the cost.

It is unacceptable for tech giants to impose unfavorable conditions on their business partners by taking advantage of their overwhelmingly strong positions. It is essential to use the new law to deter such a practice. It is hoped that the government will identify the problems involved and flexibly review its monitoring system.

The new law is characterized by its stance of placing importance on the voluntary actions taken by targeted companies. This means the efforts of tech giants themselves will be questioned.

Apple has reduced commission fees for smaller app developers from 30% of their revenues to 15%. Rakuten plans to have more communication with store operators by setting up a new organization to exchange opinions with a group of its business partners. Yahoo has already disclosed factors behind how the order of search results is determined, and other information.

Tech giants should be aware of their responsibility to provide essential infrastructure for daily life and do their best to protect the interests of their business partners and customers.