(Reuters) - Apple and Alphabet's Google engage in practices that undermine competition in the smartphone app market, Nikkei said, citing a report by Japan's Ministry of Economy, Trade and Industry.

The report looked at how the two U.S. technology giants, as well as others that control platforms through which smartphone applications are sold, use their positions of power to decide what app developers can and cannot do, Nikkei reported.

Restricting what payment methods developers can accept and limiting their pricing freedom may not directly violate Japan's anti-monopoly law, but these practices lead to elimination of competitors, Nikkei reported.

Japan's competition watchdog intends to investigate further and "may choose to conduct on-site inspections if there is sufficient suspicion of regulation breach," Nikkei reported, citing a high-ranking official.

(Reporting by Aishwarya Venugopal in Bengaluru; Editing by Anil D'Silva)