Japan's smartphone law aims to reduce dominance of tech giantsーNHK WORLD-JAPAN NEWS

Key Concepts

• Japan Fair Trade Commission (JFTC): The regulatory body enacting the new law.
• App Store Dominance: The central issue – Apple and Google’s control over app distribution on smartphones.
• Third-Party App Stores: Alternative platforms for distributing apps, now permitted under the new law.
• Default Services: Pre-selected services (browsers, search engines) that users are presented with upon initial setup or OS updates.
• Interoperability: The ability of different systems and organizations to work together.
• Generative AI: Artificial intelligence capable of generating new content, posing new regulatory challenges.
• Digital Act (EU): A comprehensive set of regulations aimed at curbing the power of large tech companies in the European Union.

Japan’s New Law on Smartphone Services

A new law in Japan, enacted following passage in June of the previous year, aims to address the market dominance of major tech companies – specifically Apple and Google – in the smartphone services sector. The Japan Fair Trade Commission (JFTC) initiated this legislation to correct what it perceives as a market imbalance, with the goal of providing consumers with access to higher quality services at more reasonable prices through increased market competition.

Prohibitions and Requirements

The core of the new law prohibits Apple and Google from blocking third-party app stores on both iOS (iPhone) and Android devices. Previously, users were largely restricted to the official Apple App Store and Google Play Store. Furthermore, the law mandates that these companies offer first-time users a choice of multiple default services – including web browsers and search engines – during initial device setup and operating system updates.

Google notes that its Android ecosystem is already largely open and interoperable, stating they “already comply today” with many of the law’s obligations, but acknowledge they will be making “product changes” to meet others.

Market Share and Current Landscape

According to a survey conducted by Japanese mobile service provider NTO, Android currently holds a 50.3% market share of smartphone operating systems in Japan, while Apple’s iOS accounts for 44.2%. This indicates a relatively competitive OS landscape, though app store dominance remains concentrated.

Expert Perspectives and Comparative Analysis

Matsuzawa Noboru, a specialist in tech company regulation, believes the law’s immediate impact will be limited. He states, “In Japan, there are no app stores that are big enough to compete. So I don't think the new law will have an immediate effect.” He emphasizes that the law establishes a “space for fair competition” and “leveled the playing field,” but ultimately, Japanese companies must become competitive to capitalize on the opportunity.

He contrasts the Japanese situation with the United States, where companies like Epic Games (developer of Fortnite) have pursued legal action against Apple and Google to gain access to alternative app distribution channels. In the US, the lack of specific legislation has led to regulation through court rulings, resulting in a verdict requiring tech giants to allow downloads from other app stores.

The Japanese law is more aligned with the approach taken by the European Union through its Digital Act, although the EU’s scope of restrictions is broader. Matsuzawa also notes similar regulatory movements in Britain and Australia. However, achieving global consensus on regulating tech monopolies remains challenging, citing the current US administration’s view that the EU’s Digital Act is “too strict.” The US’s relationship with other nations is a key consideration when implementing smartphone regulations.

Emerging Challenges: Generative AI

Matsuzawa highlights that smartphone app regulation is only the beginning. The rapid development of generative AI presents a significant new regulatory challenge. He illustrates this with examples like Google’s AI-powered search app, which provides information directly within the app without directing users to the source website. He also points to AI-driven shopping experiences that bypass dedicated shopping apps, suggesting AI is beginning to “take the place of apps in the digital space.”

Security Concerns and Balancing Convenience

A key consideration for regulators is balancing improved user convenience with maintaining robust security. Concerns exist that insufficient security measures in alternative app stores could compromise user protections.

Conclusion

Japan has taken a proactive step in addressing smartphone app monopolies, but the broader digital landscape is evolving rapidly. The emergence of generative AI introduces new complexities that will require ongoing regulatory attention. While the immediate impact of the new law may be limited, it establishes a framework for increased competition and positions Japan to address future challenges in the digital space.