Japan ramping up digital platform regulation with mixed toolkit

In keeping with trends seen among active enforcers around the world, Japan is ramping up digital platform regulation with a toolkit that includes a mix of data privacy, competition, and consumer protection considerations.

Japan’s most recent efforts are a draft bill proposing a new platform regulation to ensure transparent and fair dealing with users and vendors on digital platforms.

The proposed law seeks to balance preserving innovation on digital platforms with offering protections to consumers who use, and vendors who compete on, such platforms.¹https://www.kantei.go.jp/jp/singi/digitalmarket/pdf_e/documents_200218.pdf The proposed requirements would apply to certain platforms defined by their scale, importance to society and economy, and potential to lock-in users. Based on current proposals, the main targets appear to be online shopping services and app stores.

Under the proposed bill, platform operators would have to ensure that they are being transparent about their terms and conditions and dealing fairly with their users. Some prohibited practices could include: rejecting transactions for products that compete with the platform’s own, engaging in self-preferencing of the platform’s own products with priority placement, or tying access to the platform to use of other services or products. ²https://search.e-gov.go.jp/servlet/PcmFileDownload?seqNo=0000196591 Affected platforms would also be required to submit an annual report on their compliance with the regulation, as well as interim updates on changes to their terms and conditions, such as criteria for rejecting transactions, processes for dispute resolution, search ranking criteria, or data use policies. And to bolster its competition law bona fides, the bill considers that enforcement of the new regulation could lead to requests for legal action under the antitrust laws by the Japan Fair Trade Commission (JFTC).

The proposed bill seeks to achieve what can be described as a mix of consumer protection, competition, and data protection goals. Its stated aim of “fair competition” and some of the specific conduct it targets look similar to theories underlying some ground-breaking antitrust investigations of digital platforms in Europe. For example, a self-preferencing antitrust theory underpins the controversial (currently under appeal) fine by the European Commission in the Google Shopping case.³http://europa.eu/rapid/press-release_MEMO-17-1785_en.htm Or, as another example, France fined Google under national antitrust laws because the rules for participating in its search advertising service were deemed to include “non-objective, non-transparent and discriminatory conditions.” ⁴https://www.autoritedelaconcurrence.fr/en/press-release/autorite-de-la-concurrence-hands-down-eu150m-fine-abuse-dominant-position And ongoing investigations by the European Commission and national competition authorities are looking at whether Amazon gave better terms and conditions to vendors who used its logistics services, and relied on third-party vendor data to help advantage sales of its own products.⁵https://ec.europa.eu/commission/presscorner/detail/en/IP_19_4291; https://en.agcm.it/en/media/press-releases/2019/4/Amazon-investigation-launched-on-possible-abuse-of-a-dominant-position-in-online-marketplaces-and-logistic-services

Japan’s latest proposed regulations, therefore, have some similarities with the flexible approach to tech regulation seen in Europe. But even without the new proposed regulations, the JFTC had already in December 2019 put in place antitrust guidelines for digital platforms that reflected this thinking. Those guidelines seek to promote “free and fair competition” by clarifying the circumstances under which a platform operator’s abuse of a superior bargaining position in the acquisition or use of consumer’s personal data can trigger antitrust liability.⁶https://www.jftc.go.jp/en/pressreleases/yearly-2019/December/191217DPconsumerGL.pdf Under the guidelines, the types of practices that can be deemed abusive include: failing to disclose the purposes of collecting personal data, collecting data in excess of what is disclosed, using data in ways that exceed the stated purposes, or failing to safeguard collected data.

Mixing privacy and antitrust concerns, the JFTC guidelines further reflect Japan’s flexible approach to regulating tech. In particular, by relying on a platform’s conduct vis-a-vis end consumers’ data as the basis for finding harm to competition, the guidelines have some of the hallmarks of another controversial European antitrust decision: the recent finding (currently under appeal) by Germany’s Bundeskartellamt that Facebook abused a market dominant position in how it collected and used data about its users.⁷https://www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2019/07_02_2019_Facebook.html

To top it off, the JFTC also recently announced that it is launching a new digital investigative unit and bolstering its IT systems to handle complex data analysis, in actions that mirror other major jurisdictions (most recently, in Mexico) in acknowledging the unique expertise and challenges of tech regulation. ⁸https://www.nikkei.com/article/DGXMZO57541260R00C20A4EE8000/ (in Japanese)

All of this suggests that regulators in Japan are looking to put themselves on the front lines of digital platform regulation. And like other active enforcers around the world, they are relying on a toolkit that combines competition / antitrust, data privacy / protection, and consumer protection considerations.