New Regulations on Tech Giants: Adverse Effects Caused by Smartphone Oligopoly Must Be Prevented

The question of how to rectify the adverse effects caused by the tech giant oligopoly has become a global issue. The government must use new legislation to create a fair and competitive environment.

The government approved at a Cabinet meeting a bill to impose regulations on tech giants to encourage competition in the smartphone software field. The government aims to implement the legislation by the end of 2025.

Companies to be subject to the envisioned regulations will be decided after the bill is passed, but Apple Inc. and Google LLC are expected to be among those kept in mind. The two giants hold an oligopoly in the smartphone operating systems market. In addition, the app store market — which offers games and other products — is almost exclusively divided between them.

The two companies have been facing increasing criticism that they are taking advantage of their dominant position to discourage fair competition. It is therefore natural for the government to establish a new law to tighten regulations over them.

Apple, in principle, currently prevents smartphone app developers from using any store and payment system other than its own when providing users with the developers’ products.

In addition, Apple imposes a commission fee of up to 30% on the sales of app providers that use its store. This charge is dubbed the “Apple tax.”

App providers may pass on this high fee by adding it to the prices of their goods and services. If this is the case, consumers could also be disadvantaged.

It has also been pointed out that Google prioritizes its own services when displaying results on its search engine. This practice could distort fair competition.

The bill would require tech giants to allow other companies to provide app stores and payment systems. It would also prohibit them from giving preferential treatment to their own services in search results, among other regulations.

The current Antimonopoly Law cracks down on violations after they come to light. In contrast, the envisioned law is designed to stipulate beforehand what tech giants will be prohibited from doing, thus allowing the government to deal with their potential violations in advance, an approach known as “ex-ante regulation.” The legislation would enable authorities to better deal with the fast-changing digital sector and impose punishments on violators sooner.

The bill also includes a provision to impose a fine equivalent to 20% of domestic sales on a violator.

The Japan Fair Trade Commission, tasked with overseeing compliance, should boost its capacity by, for example, increasing its number of personnel with knowledge of tech giants’ businesses and technologies.

The European Union has already implemented the Digital Markets Act, which is similar to the bill to be discussed in Japan. The U.S. Justice Department has sued the group of four tech giants known as GAFA on suspicion of violating antitrust laws.

It has become a global trend to tighten regulations on tech giants. The Japanese government should also deepen cooperation with Western authorities on this issue.

(From The Yomiuri Shimbun, April 27, 2024)