Japan is preparing regulations that would require Apple and Google to loosen their grip on the mobile app ecosystem. This legislation, slated for parliamentary submission in 2024, targets four key areas: app stores and payments, search engines, browsers, and operating systems. (via. Nikkei Asia)
The core objective is to prevent platform operators from erecting walled gardens around their ecosystems, effectively shutting out rivals and locking users within. The proposed regulations would tackle this issue by introducing a series of mandates and restrictions.
The legislation would empower the Japan Fair Trade Commission (JFTC) to impose fines on companies engaging in anti-competitive practices. These fines, likely modeled on existing antitrust laws, could reach up to 6% of revenue generated from problematic activities. Further details regarding the exact criteria and penalty structures will be finalized this spring.
The government will determine which companies fall under the purview of the legislation based on metrics like sales and user numbers. While the focus is primarily on multinational tech giants like Apple and Google, it’s unlikely that any Japanese firms will meet the threshold for regulatory intervention.
Apple’s current model, for instance, restricts app downloads on iPhones solely through its App Store, with in-app payments mandatorily routed through its system, incurring a hefty 15-30% cut. Similarly, Google, while permitting third-party app distribution platforms, still mandates the use of its own billing system. These effective monopolies on in-app transactions can lead to inflated prices for users compared to desktop counterparts.
The Japanese government views this closed-loop approach as detrimental to both competition and consumer welfare. The proposed legislation aims to address this by mandating compatibility with third-party app stores and payment systems, provided they meet security and privacy standards. This could open the door for Japanese game developers to launch dedicated store apps on iOS devices and utilize alternative payment systems with potentially lower fees from local fintech firms.
Looking beyond app stores, the proposed regulations also zero in on search engines. Provisions stipulate that operators like Google cannot prioritize their own services in search results. This means no more automatically placing Google’s flight booking or restaurant reservation tools at the top of the heap, potentially paving the way for a more neutral and diverse search landscape.
Japan’s initiative draws inspiration from similar regulatory efforts spearheaded by the European Union. Its Digital Markets Act, set for full implementation in 2024, similarly prohibits “gatekeepers” from favoring their own tools in search results, with hefty fines levied for non-compliance. The US also saw recent developments, with Google agreeing to a $700 million settlement last week in an antitrust case involving its app store practices.
In other news, Apple and Google have become responsible to collect and pay sales tax on behalf of foreign App Store developers who generate revenue from selling apps and in-app purchases in Japan. This is to make it easier for the Japanese government to collect taxes from developers who reside abroad and have no business presence in the country.
