Photo/Illutration Smartphones are indispensable tools for our daily lives. (Asahi Shimbun file photo)

Almost all smartphones used around the world, vital devices in our daily lives, run on one of the two mobile operating systems provided by U.S. big techs Apple and Google.

Their effective duopoly in the mobile OS market may be hampering fair competition, a government expert panel says in a review calling for stronger regulatory actions to mitigate the harmful effects of the two technology behemoths’ stranglehold on the market.

The panel’s argument underscores the need of appropriate regulatory standards designed to protect the interests of consumers.

The government’s advisory council on competition in digital markets has worked out an interim report on its “evaluation of competition concerning digital ecosystems.” The panel will continue discussing key issues after soliciting public opinion.

The report points out that the two information technology (IT) giants, which offer the two dominant mobile operating systems, Apple iOS and Android, may use their control over rules for delivering applications to consumers and using browsers for unfair competitive advantages.

These companies demand that application providers use their systems for charging users and paying up to 30 percent of their sales as fees, the panel says, warning about possible anticompetitive effects of their market dominance.

The panel’s concern is well-founded given the history of the digital economy, which shows that Internet services are liable to be dominated by a small number of providers.

The panel says it will consider necessary regulatory measures “without being constrained by the existing legal framework.”

This statement reflects the view that antitrust regulators cannot keep up with the breakneck pace of digital innovation if they stick to their traditional approach of cracking down on anticompetitive practices under the antimonopoly law only after the harm caused by the practices is confirmed.

The panel cites the “ex-ante regulation” approach--banning in advance practices likely to impede competition--as an option.

In a separate legislative initiative to tighten regulations on IT juggernauts, a new law to inject greater transparency into transactions on digital platforms came into force last year.

The law requires providers of digital platforms to disclose the terms of contracts with businesses using their virtual shopping malls and application stores and report to the government on their efforts to establish a complaint handling system. But whether the law’s purpose will be achieved basically depends on voluntary efforts by IT powerhouses.

To be fair, Apple and Google have been leading the technological innovations that have built this smartphone society. But their influence has become so overwhelming as to define how the digital space should work.

There is a convincing case for stepping up regulatory control over what they are allowed and not allowed to do in the market.

Effective regulations to prohibit in advance certain anticompetitive practices would do a lot to weaken the negative effects of their duopoly.

Accelerated technological innovations and expanded choices due to increased competition would be a boon to consumers.

But new regulations would do more harm than good if they undermine privacy protection and security for smartphone users. The two companies claim their own rules are necessary for protecting users’ privacy and security.

But the report refers to some alternative ways to achieve these aims including a system for application certification by providers and guidelines on quality of applications. It is necessary to carefully weigh the pros and cons of possible measures including these alternatives.

Europe is also moving toward tighter regulations on gargantuan IT companies. More in-depth debate is needed to create a regulatory system that contributes to further development of digital markets while serving the interests of consumers in terms of both convenience and security.

--The Asahi Shimbun, June 5

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