Govt Should Promote Competition Regarding Smartphone App Commissions

Editorial

15:43 JST, February 18, 2023

Concerns are growing over the oligopoly of two giant U.S. IT companies over the market for providing smartphone apps that make the device more convenient.

The government should quickly discuss new legislation to ensure that consumers are not disadvantaged.

The Fair Trade Commission has released a report on the market for operating systems, which run smartphones, and app stores, which sell apps such as games and e-books.

Google LLC’s Android accounts for 51% of the OS market in Japan, while Apple Inc.’s iOS accounts for 45%. Competition is limited as it is not easy for new entrants to join the market in terms of funds and technology.

The report also said that the principle of competition is not working regarding commissions that the two companies earn in app stores where various firms provide apps. This situation needs to be improved.

Apple makes it impossible to download apps from anywhere other than its own App Store on the pretext of ensuring the safety of apps.

As for Google, users can use app stores other than its own, such as those operated by Amazon.com Inc. and Samsung Electronics Co., but the report said that in reality 97% of apps were, at one point, downloaded from Google Play.

In this oligopolistic situation, app firms using the two companies’ stores are charged fees of up to 30% of sales, which some complain is too high. The problem is serious if the commission remains high, hindering consumers from obtaining apps at low prices.

It is important to create a mechanism to encourage the use of app stores other than those of the two companies.

Furthermore, the report pointed out that the two companies could use their dominant position to favor their own services by, for example, displaying their own apps at the top of the app stores.

As a countermeasure, the report urges the government to consider introducing a kind of “proactive regulations” for giant IT companies that would specify prohibited acts in advance and impose penalties for violations.

The Antimonopoly Law cracks down on violations after the fact, making it difficult to respond to the fast-changing digital market. The report’s request is understandable.

The European Union enacted and will soon put into effect the Digital Markets Law, the first of its kind in the world, which incorporates proactive regulations.

The law would prohibit a company from giving preferential treatment to its own services, such as online shopping and searches on its own website. It would also prohibit the use of personal information it obtains from the website for other services.

The U.S. government, for its part, announced its intention to establish new legislation to rectify the oligopolistic situation in the app market.

Japan’s government should refer to developments in Europe and the United States as well to work out a concrete plan for regulations.

(From The Yomiuri Shimbun, Feb. 18, 2023)