Interim report signals expansive study of digital advertising by Japan’s JFTC

An interim report on a study of digital advertising done by the competition authority of Japan signals an expansive look at antitrust, data privacy, and consumer protection concerns sharing the hallmarks of recent enforcement against digital platforms in Europe.

Digital advertising platforms are services (offered by companies like Facebook and Google) connecting online publishers who want to sell advertising space to advertisers who want to pay to use that space. The interim report (which does not mention any specific platforms) contains initial factual findings from surveys sent to the various market players by the Japan Fair Trade Commission (JFTC).1

Several of the report’s findings concern how advertising platforms deal with the businesses that use them (such as advertisers, publishers, and intermediaries):

  • Terms and conditions for using the platform that are non-negotiable, subject to unilateral modification by the platform, or can result in termination at the operator’s sole discretion.
  • Restrictions imposed by the platform on businesses that prevent them from using third-party services that compete with the operator.
  • Lack of transparency about the occurrence of ad fraud (for example, ad clicks by a bot) and how it impacts the revenues and fees for the platform’s users.

The JFTC says it will focus additional fact-finding efforts on competition law and policy issues such as whether platforms “impose unfair disadvantage[s]” on businesses (such as one-sided changes in contract terms), exclude third-party competitors of the platform (such as intermediaries), or restrict the distribution of advertising through channels other than the platform. These appear to fall within what antitrust laws would generally refer to as “abuse of dominance” or “monopolization,” which is when a company uses a dominant market position to harm competition. That said, concerns about the lopsidedness of the contractual relationship between platforms and third parties might go beyond what some jurisdictions (most notably, the US) would consider a purely competition law issue.

The JFTC’s interim report more clearly transcends “traditional” competition law considerations in its initial findings on how digital advertising platforms impact consumers (end users). The findings suggest that consumers feel dependent on some online services and so they do not provide informed consent, but rather feel compelled to agree, to dis-favored data practices which in any event they do not understand very well. These issues might normally be considered within the ambit of consumer protection laws–more recently those concerning data protection and privacy–than of antitrust (though the line is blurring, as discussed below). The JFTC signals that it will consider whether any of it rises to an “abuse of superior bargaining position,” which is like an alternative form of “abuse of dominance” not present in US law but used in some jurisdictions in Europe and Asia.

The scope of the JFTC’s digital advertising inquiry therefore appears to be quite broad, mixing different concepts of regulation and enforcement, including competition/antitrust, data protection/privacy, unfair trading practices, and consumer protection. This gives it the flavor of Australia’s sweeping and influential digital platforms inquiry published last year.2

Aspects of the JFTC’s inquiry also track recent enforcement actions taken by several major European jurisdictions against digital platforms. The focus on how platforms treat user data (including consent issues and take-it-or-leave-it terms) is reminiscent of the controversial German decision (currently on appeal) finding Facebook in violation of competition law for how it collected and used personal data.3 Considerations of fairness and transparency in the terms and conditions between platforms and third parties rings of the settled antitrust investigations against Amazon by Germany and Austria.4 And the question of how platforms enforce their terms and conditions and treat ad fraud draws draws parallels with France’s antitrust fine of Google in late 2019 (being appealed) for discriminatory enforcement of opaque and subjective rules on its search advertising platform.5

All of these cases have in common an attempt to inject data privacy or consumer protection considerations into “abuse of dominance” claims brought under competition laws. The JFTC’s digital advertising study suggests that Japan’s tech policy is on a similar path, which is consistent with its other recent efforts to regulate digital platforms (covered previously here). In taking a 360-degree approach to understanding digital advertising platforms, the competition authority in Japan appears on track to use a wide range of legal tools to regulate their conduct.

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