New Law Targeting Tech Giants: Expand Legal System to Prevent Unfair Transactions

The adverse effects of an oligopoly by giant information technology companies are only growing. It is hoped that the government will increase the personnel and expand the system responsible for a new law and speed up efforts to correct the unfair competitive environment.

The new law to regulate giant tech companies, called the law on promotion of competition for specified smartphone software, has been passed during the Diet session. Prior to the new law being passed, another law requiring tech giants to disclose such information as transaction conditions took effect in 2021. The new law is intended to strengthen regulations following the 2021 law. The government aims to enact the new law by the end of 2025.

Two U.S. firms — Apple Inc. and Google LLC — have an oligopoly in smartphone operating systems and the market of app stores that provide games and other apps.

For this reason, other companies selling apps are forced to follow the rules of the two companies and cannot refuse to pay the high fee charged.

Bearing the two U.S. firms in mind, the new law will require giant tech companies to open their app stores to other firms. If more companies newly enter the app market, positive effects are expected, such as more options for consumers and apps being offered at lower prices.

The new law also prohibits the preferential display of a company’s own services on search sites. By clearly stating conduct that is prohibited in the law, companies that do business with tech giants will be able to voice their problems more easily. The government should actively listen to opinions and correct unfair transactions.

A future challenge is to strengthen the system to enforce the new law.

The current Antimonopoly Law basically cracks down on violations after they come to light, and in many cases, it takes several years to uncover violations.

In contrast, the new law is designed to stipulate beforehand what tech giants will be prohibited from doing, allowing the government to deal with the companies’ potential violations in advance, an approach known as “ex-ante regulation.” This approach is expected to speed up the process of cracking down on prohibited practices.

The European Union has already adopted the ex-ante regulation approach. In March this year, the EU started applying the Digital Markets Act, and now, a team of about 100 people is monitoring and looking into companies’ practices.

However, the Japan Fair Trade Commission currently has only 14 people working on the new law, far fewer compared to the EU.

In addition to the rapid pace of change in the business conducted by tech giants, many services are provided for free to consumers, making it difficult to ascertain the harmful effects of an oligopoly.

Outside personnel who are well-versed in the digital field will be indispensable when investigating prohibited practices. It is important for the JFTC to promote the recruitment of data analysis and security experts, and understand the actual market situation.

Tech giants are operating internationally. The Japanese government must share the problems it is facing by exchanging information with Europe and the United States to deal with tech giants.

(From The Yomiuri Shimbun, June 19, 2024)