Japan Govt to Require Opening Up of Smartphone App Stores; Legislation Aimed at Big Tech Giants

Yomiuri Shimbun file photo
The building that houses the Fair Trade Commission and the Public Prosecutors Office is seen in Chiyoda Ward, Tokyo, in February 2022.

Companies who run app stores will be required to open them up to competitors and will be banned from giving their own products and services preferential treatment, it has been learned.

The envisaged law, an outline of which was recently revealed, is aimed at regulating tech giants such as Apple Inc. and Google LLC.

The two companies effectively dominate the smartphone operating system market and have faced various accusations including restricting competition, high transaction fees and highlighting their own services over other companies.

The government intends to have the Cabinet approve the bill before the end of this month and pass it during the current Diet session. It is hoped that the new law will correct problematic practices of tech giants and promote more competition in the app and other markets.

If a company violates the envisaged law, the Fair Trade Commission (FTC) will impose a fine worth 20% of domestic sales in the relevant field. The monetary penalty, a big increase from the basic 10% level under the Antimonopoly Law, can rise to 30% if repeated violations occur.

Since the global sales of tech giants amount to tens of trillions of yen, the government considered it necessary to impose a high monetary penalty in order to ensure compliance with the regulations and to prevent them from making profit unjustly.

Giant tech companies will be required to submit reports every year and the FTC will monitor their compliance. The bill also includes a system for the FTC to petition a court for an “emergency suspension order” to temporarily halt acts of noncompliance.

The bill also contains specific regulations such as: stopping companies preventing other companies from offering alternative app stores; requiring companies to allow users to easily change default app settings, and banning companies from prioritizing their own products and services in search results.

Amid concerns that opening up app stores could allow the easy spread of malware, the bill will allow tech giants to take necessary security measures when other companies enter the app store market.

In 2021, the government implemented the Improving Transparency and Fairness of Digital Platforms Law, which requires tech giants to disclose terms and conditions and other information. The new law will add to regulations that target tech giants.

In other countries and regions, the European Union has implemented the Digital Markets Act, which prohibits big tech companies from promoting their own products and services over other companies, among other rules. Violators face a fine of up to 10% of their total worldwide turnover. Similar legislation is also being introduced in the United Kingdom and other countries. In March, the U.S. Justice Department sued Apple over antitrust violations.