Japan Ruling Poised to Make Problems for Big Tech

Image of Mount Fuji in Japan.
Court in Japan ruled that platforms must disclose their algorithms, which will cause problems for Big Tech worldwide.

The ruling of the Japanese court was a relatively small case about antitrust concerns. Still, the result may create problems for Big Tech worldwide. Other platforms operating in the country, like Amazon, Google, and Facebook, may also be subject to the same legal standard.

The publicized case is between Kakaku.com, the operator of a Yelp-style restaurant rating platform Tabelog, and the Korean BBQ restaurant Hanryumura. The court in Tokyo ruled in favor of the restaurant as the plaintiff. 

To summarize, the Tokyo court has decided that:

  1. Kakaku will pay Hanryumura ¥38.4 million (~$282,000) in damages
  2. The platform is found guilty of misusing a superior market position
  3. The platform’s algorithms will need to become public

This is a precedent for competition law anywhere in the world, with ranking algorithms usually being trade secrets. Now, unless global platforms localize quickly for the Japanese market, their ranking systems may become public and available for review worldwide.

Secret Algorithms and Antitrust Laws

Algorithms have been a point of contention and discussion in the IT sector for years now. Most local and international businesses use algorithms. The questions to ask are: 

  1. How do these algorithms work? 
  2. How might a business thrive on a network? 
  3. What problems for Big Tech could the ruling bring?

In the words of Joel Dudley, who led the Mount Sinai Hospital in New York in 2015, ”we build those algorithms, but we don’t know how they work.” That may be the core of the question, as most Big Tech algorithms that work can’t be disambiguated even by their creators.

Because of this, disclosing the algorithms may create unknown issues for Big Tech developers, because nobody knows why the effects are as they are, only that they work as desired. This opens the road to both business people willing to exploit the system’s inner workings and malicious hackers who might find a flaw where others don’t. 

For companies, users, and competitors, the risks and rewards of the Tokyo ruling are still only hypothetical. But, it will certainly cause problems for Big Tech companies working in Japan, at least in the short term as they scramble to patch algorithms and localize before they have to make them public.

Image of Marix faux algorithms on a laptop.
Algorithms are frequently in discussion, but very rarely understood, even by their makers.

Ruling May Cause Issues Globally

According to Japanese legal experts, the court ruling, in this case, may influence how global players operate. Though the jurisdiction doesn’t extend further than the island Empire, the implications might go global if all companies operating in Japan disclose their algorithms.

The ruling might work in accordance with the US bill proposed this June, which has a similar aim at the same targets across the Pacific.

Companies like Facebook, Google, and Amazon are all present in the country. Even if authorities do not press them to disclose trade secrets due to this precedent, they are a likely target of competitor lawsuits that will force them to do so.

Presumably, the same algorithms that govern the behavior of Big Tech in Japan do the same in the United States and all other countries where these services are present. The moment these algorithms become public, all competitors and experts worldwide may distribute and investigate them.

Publicizing algorithms won’t cause issues for the functioning of these platforms right away. But, if kept public, some will be able, and willing, to misuse the availability. They may also engineer their content to be propped up inorganically.

Possible Abuse of Big Tech Algorithms

Abusing algorithms has become an issue in the commerce and marketing sectors as well as cybersecurity and information safety. Big Tech uses a lot of personal information to tailor feeds and ads for their users. This makes them a prime target for cybercriminals that wish to take such information.

The main issue that arises with commerce is the overuse of SEO services. This issue might reach new levels where new tricks will forsake organic content. Such over-optimization was already an issue for Google, which did everything to snub the practice back in 2017 as it renewed its algorithms and search features.

Cybersecurity issues are different, as the ability to trick Big Tech platforms may open a way to more harmful phishing attacks and online scams. Siphoning private information directly, as several stakeholders have mentioned , might not be so big of an issue. Yet, it can also prove to be possible, which would require a major overhaul of business models for the companies in question.

Image of Twitter logo on an iPad.
Social media, like Twitter, might have more PR than commercial concerns.

Sparking Issues in the United States

Technical and security issues that have become prominent with this case in Japan aren’t the only concern. The issue in the United States might negatively impact social media companies such as Twitter. That’s because these companies have a considerable presence in Japan, with Twitter reporting 58 million users in 2021.

Prominent figures on Twitter and Meta have been caught on tape explaining how they would influence political and social movements in the US. Such claims still don’t stand, but they remain an important talking point.

A chance exists that accusations will be propelled further or confirmed if the disclosing of the algorithms comes to fruition. Regardless, the waves coming from Japan are sure to have an impact on the social events across the Pacific.

Push Toward Localization and Splinternet

It is yet unknown what impact the ruling against Kakaku.com will have on the company itself apart from the fine. The effect on other companies is even more unknown as the extent people will go to force Big Tech to disclose trade secrets is unpredictable.

What is almost certain is that the implications alone might push IT giants to aim for more localization and compartmentalization when it comes to tier services. In such cases, we will see even greater strides toward what is now commonly called the ”splinternet” where services and platforms are disconnected on a regional basis.

It is improbable that this move will have a direct negative effect on consumers. It might also allow local competitors to join the game. But, overall, creative and commercial distancing on a national basis rarely leads to good outcomes.

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