Japan Proposes EU-like Regulation to Curb Big Tech App Marketplace Monopoly

By John Lopez

Apr 16, 2024 02:37 PM EDT

Japan recently unveiled proposed legislation aimed at curbing tech giants' dominance in the mobile app marketplace, echoing regulatory measures seen in Europe. 

Nikkei Asia reports that the bill, drafted by the Japan Fair Trade Commission, represents Japan's first ex-ante competition regulation, intending to prevent anticompetitive practices before they occur. 

The legislation targets specific behaviors, such as blocking third-party app stores and payment systems, which are commonly associated with gatekeeping practices.

Japan Looking to Implement EU DMA Copy

Like Europe's Digital Markets Act (DMA), the proposed legislation imposes hefty fines on non-compliant companies, amounting to 20% of their Japanese sales or higher. Repeat offenders could face fines of up to 30%, significantly surpassing previous penalties. 

The two goals are to deter problematic behavior and allow regulators to respond quickly in a rapidly changing tech landscape. Subject to approval, the anticipated legislation is expected to be submitted to parliament this month and could go into effect by the end of 2025.

The move aligns with the European Union's efforts to regulate big tech firms, where the DMA mandates tech "gatekeepers" to allow app distribution outside their platforms. The European Commission has already initiated investigations into potential violations, with penalties reaching up to 20% of companies' gross global sales.

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Members of security stand at the entrance to an Apple store as customers queue up for the launch of the new iPhone 14 in Tokyo on September 16, 2022.
(Photo : Photo by Richard A. Brooks / AFP)

Concerns and Industry Response

Despite the proactive approach, concerns linger regarding enforcement and potential loopholes. While Apple has started accommodating alternative app marketplaces under Europe's DMA, it has introduced additional fees for developers, hinting at possible workarounds. Similar scenarios are anticipated in Japan, as noted by Kazuhiro Tsuchida, a law professor at Waseda University.

Japan's Fair Trade Commission acknowledges the need for a robust enforcement mechanism and plans to augment its workforce with more technology experts. However, organizational hurdles pose significant challenges, as highlighted by a senior agency official.

Japan's Tech Sector

In related news, Japan's Fair Trade Commission has been probing Google for suspected antitrust violations. Allegations include unfair restrictions on digital advertising distribution, prompting Google to submit an improvement plan for review. 

This legislation also coincides with OpenAI's expansion into Japan, with the establishment of its Tokyo hub. OpenAI aims to provide local companies with early access to advanced AI models tailored for the Japanese language, further fueling the country's technological evolution.

Additionally, Prime Minister Fumio Kishida has been actively lobbying for support and investments from American executives to bolster Japan's tech sector. During a recent luncheon with American CEOs in Washington, the Prime Minister emphasized the importance of cooperation in advancing technology.

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