From Apple to local platforms, Japan tackles unfair digital commerce

Music and video streaming, free delivery for online purchases and funerals are among the services of companies designated in 2021 as the subject of antitrust investigations by Japanese authorities.

From global tech giant Apple Inc. to local online services, these companies provide digital platforms that are arguably credited with life-changing innovations, but also raise concerns about their monopolistic influence in the marketplace.

File photo taken in March 2019 showing an Apple Inc. logo at the Apple Store in Tokyo’s Ginza shopping district. (Kyodo)

Amid regulatory efforts around the world to deal with providers of core platforms such as internet search engines, online shopping, operating systems and social networking services, the scrutiny of Apple by the Japan Fair Trade Commission was revealed last September.

In a press release titled “Japan Fair Trade Commission Closes App Store Investigation,” Apple said it would allow developers of “reader” apps on the Apple Store to include a link integrated into their website where users can create or manage an account. .

Japan’s antimonopoly watchdog had been negotiating with Apple for nearly five years, an official told a news conference at the time.

File photo shows Apple Inc. CEO Tim Cook speaking in front of app icons in San Jose, California in June 2018. (Kyodo)

Until the change took effect in early 2022, all apps had to use Apple’s built-in payment system for a 15-30% commission.

The charge representing a significant portion of developer revenue has generated huge revenue for the iPhone maker, but has been questioned by governments of various countries as well as developers.

Now, apps providing digital magazines, newspapers, books, audio, music and videos worldwide could include a link to an external website where users can make purchases and thereby bypass the Apple’s payment system.

It is believed to be the first time Apple has accepted an issue raised by a government authority, a “compromise” widely seen as surprising even if the change does not apply to gaming apps.

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In December, the JFTC said Japan’s leading e-commerce platform, Rakuten Group Inc., was suspected of violating antitrust law over its free shipping program designed to compete with Inc.

Hiroshi Mikitani, Chairman and CEO of Rakuten Inc. (Kyodo)

Rakuten attempted in March 2020 to require free shipping from all stores in its Rakuten Ichiba online mall, prompting the JFTC to intervene and resulting in the program being launched on a voluntary basis.

But Rakuten sales staff were still unduly pressuring store owners to embrace the program, abusing the shopping platform’s dominant bargaining position, the commission said 21 months later, forcing Rakuten to improve the situation.

Such scrutiny doesn’t just affect large companies, but small companies can also wield anti-competitive power in digital markets, the JFTC showed when it named Uniquest Inc., which operates a funeral intermediary website, as well. in December.

The Osaka-based IT company has a dodgy contract scheme that prohibits funeral operators who use its website “Chiisana Ososhiki,” i.e. compact funerals, from doing business with competing websites, a said the committee.

Japan Fair Trade Commission official explains investigation of Uniquest Inc. on Dec. 2, 2021. (Kyodo)

The screenshot shows Unist Inc.’s “Chiisana Ososhiki” website.

The move “came as a surprise,” a Unist official said, suggesting the company hadn’t viewed its business as a digital platform – something perceived to be tied to tech giants such as GAFA like Google LLC, Apple, Facebook Inc. and Amazon. com are collectively referred to.

Uniquest, which also received the commission’s on-site inspection, subsequently abolished the contractual system.

These recent cases against the digital platforms have paid off in terms of improving their business practices, but also underscore the challenges the JFTC faces, according to officials and experts.

File photo taken in December 2015 showing the building housing the Japan Fair Trade Commission in Tokyo. (Kyodo)

Antitrust investigations generally aim to impose administrative disciplinary action such as a cease and desist order to prevent it from happening again and an order to pay surcharges.

If prompt action is required, the authority can compel the target company to promise a future preventive or remedial measure to the affected companies.

But investigations into digital platforms last year were closed with no action prescribed as the companies offered to take voluntary action to address alleged violations.

Against the backdrop of such lackluster consequences, it takes time to confirm violations or calculate surcharges in elusive digital marketplaces.

The five years for Apple’s case and the two years for Rakuten’s were apparently insufficient for the JFTC to issue an administrative order, and a commission official admitted the results were “not satisfactory”.

Kazuyuki Furuya, Chairman of the Japan Fair Trade Commission. (Kyodo)

JFTC Chairman Kazuyuki Furuya told a press conference in October that taking administrative action against digital platforms was “very difficult, it’s true.”

“It must be acceptable for us to take various actions when they lead to concrete improvements in their business models,” Furuya added.

A senior JFTC official said, “It’s hard to build a reputation when there aren’t visible, easy-to-understand results,” because the JFTC hasn’t issued any cease-and-desist orders. in 2021, in part due to the COVID-19 pandemic.

“When it comes to digital platforms, there is one aspect that we have chosen to make real improvements rather than make our name with administrative actions,” the official said on condition of anonymity.

Lawyer Kentaro Hirayama, familiar with antimonopoly laws, said Japanese authorities’ unwavering stance to crack down on digital platforms is welcome and encouraged, but challenges such as the soft end to recent investigations must be met. picked up quickly.

Lawyer Kentaro Hirayama is pictured January 11, 2022 in Tokyo. (Kyodo)

“Since the cases resulted in no clear acknowledgment of unlawful acts, it is difficult to refer to them in future trials and other cases,” he said, adding that many details remain unclear. clarified.

“Authorities in other countries are issuing formal orders while trying to take quick action, for example through an injunction” in a nod to the rapidly changing market environment, he said. he said, adding, “The JFTC’s response doesn’t necessarily seem to follow the global and particular tide.”

Japan’s watchdog may have issues with its workforce to investigate or collaborate with experts, and needs to pinpoint and resolve them, Hirayama said.