In a significant move to curb anticompetitive practices, Japan has passed a new ordinance aimed at regulating major technology companies that have at least 40 million monthly domestic users. The ordinance, which will go into effect on December 19, 2024, is a response to the growing influence of global tech giants in Japan’s digital marketplace.
The Japanese Fair Trade Commission (JFTC) will be responsible for designating companies that meet the user threshold, signaling their inclusion under the new regulatory framework. While companies like Apple and Google are expected to be the main targets of the law, the regulations could apply to any platform holders in the tech sector with the necessary user base.
The law was passed by the Japanese Diet (parliament) in June 2024, with the goal of boosting market competition in digital services, particularly those related to smartphone apps, operating systems, web browsers, and search engines. The regulations are focused on ensuring that dominant platforms do not impede competition by blocking new entrants, or by giving preferential treatment to their own services and products.
Key Provisions of the Law
The new ordinance seeks to tackle several issues in the digital marketplace:
- App Store Market Dynamics: Platform holders will be prohibited from using their control over app stores to block the entry of new services or apps that could pose competition to their own offerings.
- Operating Systems and Browsers: The law includes provisions that prevent major platform providers from using their operating systems or browsers to favor their own apps and services, ensuring a level playing field for all developers and services.
- Search Engines: The regulation extends to search engines, prohibiting unfair manipulation of search results that could disadvantage competing services or businesses.
Penalties for Non-Compliance
Firms that violate the new regulations will face significant financial penalties. The law stipulates fines of up to 20% of a company’s sales in the relevant field where the violation occurred. For repeat offenses, the penalty increases to 30%. These penalties aim to deter non-compliance and encourage greater adherence to fair market practices.
Context and Implications for Global Tech Giants
Japan’s move is part of a broader global trend toward increasing scrutiny of large tech companies. U.S.-based firms, particularly Apple, Google, and other Silicon Valley giants, are likely to feel the impact of these changes. With both Apple and Google controlling key areas such as mobile operating systems, app stores, and search engines, they will be required to adjust their business models in Japan to comply with the new regulations.
The law follows the European Union’s lead, which has been increasingly active in regulating big tech companies under the Digital Markets Act (DMA) and Digital Services Act (DSA). These European regulations, similar to Japan’s, focus on curbing monopolistic practices and fostering a more competitive, user-friendly digital market.
For Japan, this is a key step in addressing concerns over market dominance and the potential stifling of innovation. The country’s digital economy, especially in the areas of mobile apps and digital services, has been growing rapidly, and regulators are eager to ensure a competitive environment where smaller firms can thrive alongside tech behemoths.
Future Outlook
While the new law is set to fully enter into force by December 2025, Japan’s regulators will continue refining the specifics of the law to ensure that it effectively addresses emerging market dynamics. In the meantime, companies in the tech space with a significant user base in Japan will need to prepare for these changes, potentially altering their business strategies to avoid hefty fines.
This regulatory shift reflects Japan’s commitment to maintaining a competitive and open digital market, ensuring that the benefits of technological innovation are accessible to all players, large and small.
Here are some references that provide context and further details regarding Japan’s new regulations on tech giants:
- Japan’s New Digital Market Law:
- “Japan Adopts New Law to Regulate Tech Giants.” Nikkei Asia. June 2024.
- “Japan Moves to Regulate Tech Giants Like Apple, Google.” Reuters. June 2024.
- Global Context – Antitrust and Big Tech:
- European Union’s Digital Markets Act (DMA): European Commission. “Digital Markets Act: Ensuring Fairness and Open Digital Markets.” EC Website.
- U.S. Federal Trade Commission’s Antitrust Policies: Federal Trade Commission. “Antitrust and Competition.” FTC Website.
- Fair Trade Commission (Japan):
- Japan’s Fair Trade Commission website: JFTC Overview.
These sources provide both the specifics of Japan’s ordinance and the broader global regulatory efforts aimed at curbing anticompetitive practices by big tech companies.
