TOKYO - - Information technology giants like Google and Facebook should face greater antitrust oversight in Japan to prevent them from abusing their dominant market positions to stifle competition and infringe on consumer privacy, according to a government report compiled Wednesday .
The report suggests considering intellectual property, such as patents relating to data and artificial intelligence, as well as researchers on staff when making valuations of companies. Such a move would be geared at restraining the deep-pocketed companies from snapping up startups that could become future competitors.
The dominance of the big four American tech companies -- Google, Apple, Facebook and Amazon.com -- and how they use their huge arsenals of data has become an issue of concern for the government.
Whether to seek legal enforcement on the companies needs to be discussed, the report said. Some have opposed saddling the tech companies with too much responsibility, due to their roles as so-called platform providers. But the idea is taking hold that the government ought to have a degree of oversight over them owing to their outsize influence on business activities and everyday lives.
One proposal would require platform operators to provide greater transparency with their dealings with smaller companies so that they are not taken advantage of. Because the legal code could fall behind changes in technology and business, the report said it is important to have an approach that works with a platform's own rules.
The report was prompted by the expansion of the so-called data economy, which appears to have redrawn the maps to market domination.
Antitrust law has generally targeted major businesses that drive competitors out of a market through such means as price-fixing. But players such as Google and Facebook have instead offered free, convenient online services like search and social networking to amass huge amounts of personal data, which they use to build their market presence.
Such companies glean information about people's tastes and lifestyles based on what web pages they view, what they search for and what they post online. That lets the platform operators offer precisely targeted advertising, and show users information and products tailored to what they like. As their services improve, more users emerge and more data flows in, potentially creating information powerhouses that fence in consumers and impede competition.
For Google, Apple, Facebook and Amazon, "the more users come, the more their services are refined and the stronger their dominant position tends to grow," said Kei Kawai, an assistant professor of economics at the University of California, Berkeley.
Such data giants can cause a host of problems. While they may bring handy services for individual consumers, those users may suddenly find themselves unable to easily switch to a competing service.
The government report states that the personal information users provide platforms in exchange for convenience has economic value, just as money does. If companies fail to handle data carefully enough, consumers' personal information can be stolen, damaging their privacy and potentially causing harm.
Meanwhile, the platform operators are gaining great power over users and business partners. Such companies design, operate and manage entire markets with many consumers and businesses, the report said.
Their power in these markets is clear. Amazon, for instance, raised annual prices for its Prime membership service in the U.S. by 20% in the spring, yet its member count appears to still be growing.
Tokyo aims to share the report's contents with the international community at January's World Economic Forum in Davos, Switzerland, as well as at Group of 20 ministerial meetings on the digital economy in June in Tsukuba, Ibaraki Prefecture.