In the expanding digital advertising market, the adverse effects of an oligopoly by IT giants have become conspicuous. The government must clarify the rules and improve the situation.

The Fair Trade Commission has released a final report summarizing the problems of advertisements displayed online. The report presented cases that possibly violate the Antimonopoly Law, urging IT companies to take voluntary action.

IT giants such as Google LLC and Facebook Inc., both headquartered in the United States, collect vast amounts of information such as users’ ages and browsing histories through their search engines and social media, and utilize such information to deliver digital ads tailored to individual preference.

The report argues that there is a lack of transparency in advertising fees and the way advertising is displayed, making it difficult to know such factors as on which site ads are shown, meaning that fair competition could be distorted.

The report said that if IT companies unilaterally change their contracts with business partners such as ad agencies it could constitute an “abuse of a superior bargaining position.”

It is reasonable to restrict such a practice. A new law came into effect this month to make online shopping and other transactions facilitated by IT giants more transparent. The government is considering having digital advertising covered by the law as well.

Under the new law, IT companies are required to disclose information and respond to complaints from business operators, and they have to regularly report on how they dealt with such matters. It is hoped the law will be effective in protecting internet users and business partners in the field of digital advertising.

The domestic digital advertising market doubled over five years to reach about ¥2 trillion in 2019, and it has become a key source of revenue for IT companies. Google accounts for about 80% of the search engine market share, and its business partners are reportedly frustrated by the situation, making such complaints as, “We have no choice but to comply with its requests.”

The report also expressed concern that IT companies are using personal data in advertising without fully explaining how it is used. According to the FTC, less than 10% of all people have read the terms of service.

IT companies need to make every effort to have people gain an understanding of data collection by making it easy to understand. They should make it easier for users to reject the use of their personal information.

The more times a website is visited, the better ranking it gets, generating more advertising revenue for IT companies and others.

The report noted that inaccurate information and fake news can spread in an attempt to attract attention, making it difficult for accurate news to be displayed and potentially disadvantaging users.

The report proposes that IT companies explicitly state the source of the content displayed and show stories that are very reliable higher up in search results. To improve the quality of information on the internet, IT companies should put effort into their own reforms.

— The original Japanese article appeared in The Yomiuri Shimbun on Feb. 22, 2021.