Japan’s New Legislation Targets Tech Giants to Foster Fair Competition

Japan Enacts New Law to Curb Dominance of Tech Giants in Smartphone Market

On June 12, 2024, the Japanese Upper House passed a significant piece of legislation designed to regulate large IT corporations that hold a dominant position in the smartphone market. The new law, known as the “Smartphone Software Competition Enhancement Act,” aims to prevent anti-competitive practices by establishing clear prohibitions and imposing hefty fines for non-compliance.

Background and Implications of the New Law

The law targets tech behemoths like Apple and Google, which have established a commanding presence in the smartphone OS market, as well as in app stores, browsers, and search engines. It outlines specific prohibited actions that hinder competition, such as obstructing the use of rival services or engaging in discriminatory treatment in terms of usage conditions and transactions.

Under this legislation, designated companies must annually report their compliance efforts. Those found in violation face penalties amounting to 20% of their domestic sales, a significant increase from the current antitrust law, which could triple for repeated offenses.

The Struggle for Fair Play in the App Economy

The dominance of Google’s Android and Apple’s iOS in Japan’s smartphone OS market has been a point of contention, with both companies commanding significant shares of app store revenues. Critics argue that the duopoly restricts competition and leads to inflated fees charged to app developers, who feel compelled to comply with the rules set by these platforms.

The Path Forward: Balancing Security and Competition

The new regulations are expected to diversify the app store landscape, potentially lowering fees and costs for consumers while encouraging investment in innovative services. However, concerns about security and the protection of minors remain, prompting the law to allow regulated companies to take necessary measures for security, privacy, and youth protection.

Global Context: Learning from the EU’s Digital Market Act

Japan’s regulatory efforts draw inspiration from the EU’s Digital Market Act, which encompasses a broader range of digital services and imposes even stricter penalties for violations. As global tech giants adapt to these regulations, the effectiveness of Japan’s new law in fostering a competitive and innovative digital market will be closely monitored.

Conclusion

The enactment of this law marks a pivotal moment in Japan’s approach to managing the digital economy. It reflects a growing global trend towards ensuring that the immense power of tech giants is wielded responsibly, fostering an environment where innovation can thrive without stifling competition. As the law comes into effect, its impact on the industry and consumers alike will be a subject of keen interest and ongoing scrutiny.

Source: NHK