Promote Competition in App Distribution Market

Two U.S. tech giants continue to hold an oligopoly in the distribution market for smartphone operating systems and apps. To prevent consumers from being disadvantaged, the government should swiftly introduce regulations.

The government’s Digital Market Competition Council has compiled a final report on new regulations for giant information technology companies. The government intends to start regulating them through a new law and aims to submit the bill to the ordinary Diet session next year.

Regarding smartphone operating systems, two U.S. IT companies, Apple Inc. and Google LLC, hold the dominant positions, dividing the market between them. They also have an oligopoly in the market for app stores, which offer products such as games and e-books.

Companies that sell apps are forced to follow the rules set by the two companies and pay them high commissions. It is possible the burden on app users is increasing.

In principle, Apple only allows iPhone users to obtain apps from its own app store. Apple collects a commission of up to 30% of sales from companies that provide apps, and some of them complain the commissions are too high.

The sales of Apple’s app store in Japan are said to amount to ¥1.6 trillion a year.

To prevent the negative effects of oligopoly, it is necessary to encourage new entrants to the app store market and enhance competition.

The final report indicates a policy of requiring Apple to allow users to download apps from stores other than its own. The aim is to encourage other companies to enter the market and compete by lowering commissions.

However, Apple cites security as the reason for limiting app acquisition to its own app store. There are concerns that allowing access to other companies’ app stores could increase leaks of personal information and the distribution of unauthorized apps, among other issues.

The new regulations will likely allow Apple to take steps such as screening other companies’ app stores. The government must check to see if Apple is conducting appropriate screening and take proper measures to both ensure safety and promote competition.

On the other hand, under the new regulations, the government will consider banning Google from favoring its own services in search site displays. It is seen as problematic that Google shows its own services, such as maps and video distribution, at the top of the list for search results.

Google has an oligopoly on the search engine market, and it is not fair for the company to give preferential treatment to its own services in search results.

In May, the European Union enforced the Digital Markets Act. In addition to requiring tech giants to allow the use of app stores from other companies, the law prohibits them from forcing users to use their own services, and Japan is following suit. The hope is that the Japanese government will use the European example as a reference and flesh out its own regulations.

(From The Yomiuri Shimbun, June 21, 2023)