• Kyodo, JIJI

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The government Tuesday finalized an outline of a bill designed to enhance the transparency of contracts involving large technology companies, hopefully ensuring that such firms do not employ undue leverage over small vendors that operate on their platforms.

The bill would call on operators of massive online shopping sites and app stores, including Amazon.com and Google, to report to the government on their internal processes and systems.

The Headquarters for Digital Market Competition, chaired by Chief Cabinet Secretary Yoshihide Suga, will work out further details in hope of submitting the bill to the Diet during next year’s ordinary legislative session.

“As a full-blown debate (on IT giants) has been held worldwide, we have demonstrated how rules should be formulated regarding the digital market,” Suga said at the meeting.

Concern has been growing that the IT giants are abusing their dominant position and taking advantage of smaller companies that do business on their platforms, often unilaterally changing terms and conditions and raising fees without warning.

Under the bill, the IT giants would be asked to notify vendors of changes to contract terms in advance and give them a means to make complaints. The government would issue warnings and orders if the companies do not meet the requirements.

The government has also pledged to establish a system that would allow evaluation of proposed status reports regarding the IT giants through hearings conducted with vendors.

The affected companies are expected to include U.S. IT giants Google LLC, Apple Inc., Facebook Inc. and Amazon.com Inc., collectively known as GAFA, as well as major Japanese IT firms Rakuten Inc. and Yahoo Japan Corp., a unit of Z Holdings Corp.

In November, a government panel heard from GAFA representatives. Such firms’ online shopping and app sales are considered to be within the scope of the draft bill, and the government has already conducted related investigations.

Adam Cohen, Google’s global head of economics and competition, expressed concern about the request for regular reports on GAFA businesses, a government official said.

Amazon also questioned the regular reporting requirement, while Facebook expressed concerns about some rules being tighter than those in the European Union.

To address concerns that the IT giants are collecting customers’ personal data without sufficient consent and failing to disclose how the information will be used, the government is also seeking a revision to the personal information protection law to enable individuals to block firms from using their data.

IT firms of a certain scale are expected to be defined as “digital platformers” under the bill. They would be subject to strict regulations and would have to report their management situation to the government on a regular basis.

IT companies, which have a huge number of customers, are often in an advantageous position over their clients, with IT firms having unilaterally raised their commission charges in some cases.

The government will request that digital platformers disclose information and build systems to ensure fair operations. It will also work on developing laws so that the state will be able to take administrative action, including issuing business improvement orders, if there are any problems.

The government will review antimonopoly law guidelines to check whether a potential consolidation of IT firms would lead to them controlling a disproportionate amount of customer data.

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