Japan law tightens regulation of major ecommerce players

Major technology firms that operate ecommerce services will be required to submit reports on business practices to the Japanese government every year as part of a new law enacted this week and targeted at opaque practices.

The law requires firms such as Google, Amazon, Facebook, Rakuten and Yahoo to submit annual reports disclosing their business operations and terms of contracts with customers to the Ministry of Economy, Trade and Industry. After receiving the reports, the ministry will solicit comments from merchants, conduct reviews and publish the results.

The law will also require the tech firms to give advance notice of any contract changes, set up ways to process complaints, and clarify their policies on determining the order of search results.

It is designed to improve transparency of the online commerce industry, and address concerns that major platforms are taking advantage of their market dominance to undermine small businesses.

Unlike other tech regulations such as GDPR, Japan's law will not carry a fine or any other penalties. This is to avoid "hampering innovation", Economy Minister Yasutoshi Nishimura told reporters last year. The ministry can issue an improvement order to the tech companies if they are deemed to have opaque practices. In severe cases that violate the antitrust law, the Fair Trade Commission will be asked to step in.

The law was enacted on Wednesday (May 27), and is expected to take effect next year.

In addition to ecommerce websites and apps, the Japanese government is planning to tighten regulations on online advertising.

In India, Amazon and Flipkart are being investigated by the country's antitrust regulator on allegations that the two ecommerce giants are illegally undercutting local businesses by giving preferential treatment to certain sellers which they control or have a stake in. Both companies deny the claims.