Smartphones have now become indispensable tools in the lives of many people. Used for email, social media, news, shopping, games, and many other purposes, they form part of the foundation of people’s lives and economic activity.
However, the provision of certain software used on smartphones—specifically operating systems, browsers, search engines, and app stores—is oligopolized by a small number of powerful companies such as Google and Apple. This has impeded fair and free competition and, in some respects, hindered innovation.
To improve this situation and promote competition, the Act on Promotion of Competition for Specified Software Used in Smartphones, which had been under consideration by the Japan Fair Trade Commission, was passed and enacted at a plenary session of the Diet on June 121.
The Japan Fair Trade Commission has played a central role in drafting and implementing this law while drawing on the expertise of specialists, including the Digital Special Advisor position that I hold. The Commission is an administrative agency whose purpose is to promote fair and free market competition. From the perspective of competition policy, it assesses competition in digital markets, identifies competition-related issues, and works to address them.
While taking security and privacy into account, this law aims to stimulate innovation and create an environment in which consumers can choose from diverse services by promoting competition in the provision of specified software.
The law’s main points are as follows.
- The Japan Fair Trade Commission will designate businesses of a certain scale or larger that provide specified software or related services as “designated businesses.”
- The following prohibitions and compliance obligations will apply to designated businesses.
- Prohibition on obstructing other businesses from providing app stores, except where measures are necessary for security or similar purposes and the objective would be difficult to achieve by other means
- Prohibition on obstructing the use of other billing systems, except where there is a legitimate reason
- Requirement to make default settings changeable through simple operations and to display selection screens for browsers and similar software
- Prohibition, in search, on favoring one’s own services over competing services without legitimate reason
- Prohibition on using acquired data to provide competing services
- Prohibition on obstructing app providers from using functions controlled by the operating system with performance equivalent to that available to the designated business itself, except where there is a legitimate reason
- Measures will be established for reporting on compliance with the regulations, receiving information from related businesses, coordinating with relevant ministries and agencies, granting investigative authority to the Japan Fair Trade Commission, issuing orders to remedy violations, and imposing surcharge payment orders with a calculation rate of 20%.
The law is scheduled to take effect within 1 year and 6 months of promulgation.
Promoting competition in the smartphone market is expected to encourage new businesses to enter fields such as operating systems and app stores. This should accelerate innovation and allow consumers to enjoy a wider variety of more convenient services.
However, ensuring security and privacy is an extremely important challenge. A balance must be struck between promoting free competition and protecting users.
We must continue to watch how the smartphone market changes after the new law takes effect and whether those changes benefit consumers. At the same time, from a global perspective, we should also monitor developments in other countries.
Smartphones have become indispensable to our lives, and their importance is expected to grow further. I hope this new law will contribute to the development of Japan’s digital society and to expanding consumer benefits.
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