Japan must toughen regulation if 'joint approach' e-commerce law falls short: lawmaker

TOKYO (Reuters) - Japanese policymakers must keep open the option of toughening regulations on technology giants if an e-commerce law introduced this month does not work as expected, said a lawmaker overseeing the ruling party’s deliberations on competition policy.

Japan on Feb. 1 joined a global trend towards increased scrutiny of possible antitrust activity by big tech names with legislation requiring disclosure of information such as terms of contracts with business partners, how search rankings operate and reasons for suspending or refusing vendors.

The law, which offers leeway in how much information companies must submit, comes as authorities in Europe, Australia and elsewhere confront the clout of global e-commerce and social media firms, concerned of their significant market dominance.

“If this joint regulatory approach isn’t sufficient, we have to make rules going a step further,” Tatsuya Ito, a ruling Liberal Democratic Party (LDP) lawmaker, told Reuters in an interview on Wednesday.

Ito, who oversees competition policy in the LDP’s powerful policy research council, described the law as “light-touch”, saying policymakers must assess how it is working before taking any further steps or expanding its scope.

Japan’s e-commerce market was worth 19 trillion yen ($180 billion) in 2019. Its app store market reached $20.2 billion in 2020, showed data from App Annie.

Amazon Inc and Rakuten Inc were the largest e-commerce operators in 2018, while the app store market was split between Apple Inc and Alphabet Inc’s Google, showed a 2019 report from the Japan Fair Trade Commission (JFTC).

Under the new law, operators of shopping sites and app stores with annual Japan revenue of at least 300 billion yen and 200 billion yen respectively must submit annual reports to the Ministry of Economy, Trade and Industry.

The ministry can then issue improvement orders if operators do not follow its recommendations, or refer operators to the JFTC if it suspects antitrust activity.

Critics, however, said the law lacks teeth when compared with those planned by the European Union, under which regulators can impose fines and even break up firms.

Antitrust expert Yosuke Okada, a professor at Hitotsubashi University, said the law is more of a cooperation type of regulation aimed at gathering information on firms’ operations.

“It isn’t a framework in which businesses are regulated in great detail,” he said.

Moreover, any imposition of fines would likely require large-scale reform of anti-monopoly law, Ito said.

“It’s important to see how much results can be got while moving ahead with making rules and responding to digital platformers,” he added.

Separately on Wednesday, the antitrust watchdog outlined actions in digital advertising that may constitute abuse of any dominant bargaining position. Such actions include inappropriate use of personal data and unilateral change to contract terms.

($1 = 105.7800 yen)

Reporting by Daniel Leussink; Additional reporting by Takaya Yamaguchi; Editing by Christopher Cushing