Japan will require major technology firms to submit reports on business practices every year as part of tighter rules to improve their operational transparency and protect retailers, a government panel said Tuesday.
The obligation will be included in a bill to prevent tech giants such as Amazon.com Inc. and Rakuten Inc. from taking advantage of their dominant market positions against smaller online retailers that depend on their platforms.
The bill is intended to protect not only such small companies but also consumers. Google, for example, will be required to explain to users its policy on determining the order of search results. Rules will also be set up regarding collection of personal data.
The regulations will be reviewed three years after entering into force to assess whether any changes need to be made, the panel said.
The bill is expected to be submitted to the current Diet session after being approved by Prime Minister Shinzo Abe’s Cabinet in February or early March, a government official said. If all goes smoothly, it could enter into force by spring next year.
The government has been looking to address concerns that the operators of popular online shopping sites and app stores have been unilaterally changing contract terms and raising fees, with retailers having no choice but to comply, especially if they rely heavily on their e-commerce sites.
Under the new regulations, tech firms will need to give prior notice of as well as explain the reasoning behind such changes, as well as make clear any conditions that would lead it to terminate its contract with a vendor. They will also be called on to set up a mechanism to process complaints.
In November, the panel chaired by Chief Cabinet Secretary Yoshihide Suga gathered representatives from Google LLC, Amazon, Facebook Inc. and Apple Inc., collectively known as GAFA, or the Big Four, to hear their views.
The panel decided on the new rules even though there was pushback at the meeting, including from Adam Cohen, Google’s global head of economics and competition, regarding the requirement for annual reports, which will be submitted to the Ministry of Economy, Trade and Industry.
The bill will not specifically list certain practices that unjustly disadvantage small retailers as being illegal, although the panel once considered such a step, due to concerns such a move could hinder innovation in the fast-evolving industry, the panel said.
Instead, the government will use the existing antitrust law and task the Fair Trade Commission with punishing firms over such cases.