Maintain vigilance against adverse effects in cloud computing market

The use of cloud computing services to manage various corporate data on the internet is rapidly increasing. Vigilance against the adverse effects of an oligopoly by tech giants is needed.

The Japan Fair Trade Commission has compiled a report on the actual state of transactions of cloud services by companies.

The report said that user companies sometimes have to sign contracts that require them to pay high data transfer fees if they later switch to another provider’s service. The report states that such contracts may be in violation of the Antimonopoly Law.

Also, adding new functions to a service that is currently being provided and raising the usage fee is considered a form of tie-in sales and may violate the law, according to the report.

In the markets for search services, social media and digital advertising, it is argued that a tech-giant oligopoly is preventing healthy competition. A similar situation must be avoided in the rapidly growing field of cloud computing.

Cloud computing eliminates the need for companies to build and manage their own computer systems, offering significant cost savings and other advantages. It is also becoming part of the foundation of the digitization of the economy.

The services are provided mainly by U.S. tech giants. Just three companies held a combined 60% to 70% share of the corporate cloud computing market in Japan as of fiscal 2020. The three are Amazon Web Services, Inc. (AWS, under the umbrella of, Inc.), Microsoft Corp. and Google LLC.

In its report, the commission emphasized its intention to enhance its monitoring of the cloud computing market. The JFTC must further examine what transactions could be problematic and take effective measures to ensure that user companies are not disadvantaged.

Overseas, there are already moves to regulate the cloud computing market due to concerns about an oligopoly in the market. In its Data Act bill unveiled in February, the European Union included a provision that prohibits any action that would hinder switching to competing cloud computing services.

The Japanese government should also keep a close eye on overseas developments and consider whether new legislation and regulations are necessary.

Government bodies are also beginning to utilize cloud computing. A cloud system for sharing administrative data between central government ministries and agencies and local governments is under development. For some of the projects that have been implemented ahead of others in the system, it is said that two U.S. IT companies have been awarded contracts.

However, in transferring administrative data to the cloud service, it is preferable to contract with domestic companies for handling confidential information. NTT Group, Fujitsu Ltd., and NEC Corp. are among the Japanese companies working on this task.

To stimulate competition in the market, the government should regard cloud computing as an important field and take supportive measures to strengthen the industrial base.

(From The Yomiuri Shimbun, July 19, 2022)