Apple Fights Bill to Allow App Store Competition; JFTC Head Hopes It Will Pass in Current Diet Session

By Yasuaki Kobayashi / Yomiuri Shimbun Staff Writer

6:00 JST, April 28, 2024

A bill newly approved by the Cabinet to regulate IT giants is chiefly aimed at forcing Apple Inc. to allow its App Store on its iPhone devices to face competition from other marketplaces for apps, thus ending Apple’s monopoly on the mobile app market for iPhone users.

The government aims for the bill’s passage during the current Diet session. But Apple is poised to block its passage, intensifying its lobbying of lawmakers in both the ruling and opposition parties.

The battle between the government and Apple is likely to intensify, with the current Diet session ending in late June.

Warning of bill’s ‘danger’

“Apple has not given up on preventing the bill’s passage into law. It is going around setting fires in various places,” was how one government official expressed alarm when the discussion on the matter within the ruling Liberal Democratic Party reached its most important stage in mid-April.

According to the official, Apple is intensifying its lobbying of key lawmakers in both the ruling and opposition parties, including the LDP, emphasizing the “danger” of the new law.

Prime Minister Fumio Kishida’s visit to the United States this month marked a lull before the storm. Kishida held a summit with President Joe Biden on April 10 in Washington. There was a state dinner at the White House that evening, to which Apple CEO Tim Cook was also invited.

It was not until the evening of April 11, Japan time, that the LDP put its procedures over the bill into full swing. “It was timed to avoid any impact on the summit meeting,” an LDP official said, explaining that the postponement was intended to avoid adverse circumstances, such as the U.S. side showing displeasure with the bill.

However, this has made the schedule for the bill’s passage into law precarious, leaving little time before the end of the Diet session, slated for late June.

If the Diet deliberations stagnate, the bill’s passage could be in jeopardy. One government official said that Apple is aware of this and is thus “trying to delay the procedures for the bill as much as possible to prevent its passage during the current Diet session.”

Resistance

Apple began full-fledged lobbying against the antitrust regulations around 2022, when the government accelerated the relevant discussion process. Apple has been vigorously campaigning against the regulations, claiming that if other app marketplaces were allowed on the iPhone, the security of the device would decline.

The government, for its part, also showed some consideration. In the latest proposed regulations, it will allow Apple to take necessary measures to ensure safety. It envisages steps such as allowing Apple to examine newly entering mobile app stores.

Even so, Apple remains opposed. Some in the app industry, who call for the new regulations, are even saying, “Apple is using ‘safety’ concerns as a way to avert the new rules.”

Such an opinion is also notable overseas. When the U.S. Justice Department filed a lawsuit against Apple for antitrust violations, it criticized Apple for using privacy and security concerns as a shield for its business interest.

‘Tenant farmers’

Behind the government’s move to tighten rules is the market structure involving global IT firms and the Japanese software service providers that are becoming “subcontractors” to them.

Takamasa Kishihara, managing director of the Mobile Content Forum, an app industry group, points out, “There is a huge difference in power relations between Apple and Japanese app distributors, with the Japanese firms being in such a weak position as they are called ‘digital tenant farmers.’”

The apps that developers provide to iPhone users – often free of charge – contribute to the iPhone’s sales. Despite this, the developers must pay commissions of up to 30% for in-app transactions, using Apple’s mandatory payment system. Smaller software service providers’ discontent with such a reality runs deep.

A senior official of the Japan Fair Trade Commission (JFTC), which would have jurisdiction over the new law, said: “As IT giants are big business partners for Japanese IT firms, the Japanese companies cannot complain directly to the global firms even if they do terrible things to Japanese IT firms. The new law is intended to empower these vulnerable Japanese IT firms and create a fair business environment.”

JFTC Chair Kazuyuki Furuya stressed at a press conference on Friday, “We must strive to pass this bill into law during the current Diet session.”