1. Ex Post Facto Regulations
1.1. Restrictions on business-to-business transactions
In general, digital platformers have the discretion to decide the conditions of the transactions with their counterparties; however, their conduct may cause issues to arise under the Japanese Antimonopoly Act ("AMA") if it artificially restricts free competition in the market or if there is an unfair conduct against the counterparty by using their relatively superior position. For example, this may arise if the digital platformer restricts the counterparty and only permits the counterparty to deal with such digital platformer to the exclusion of other competing digital platformers (restrictive trading, exclusive dealing), or if the digital platformer otherwise unfairly disadvantages the counterparty which is forced to use the digital platformer's services by unilaterally changing the terms of the contract therewith (abuse of a dominant position).
In a recent case, the Japan Fair Trade Commission ("JFTC") announced on April 11, 2019 that they had dropped their investigation into Amazon's clause requiring third-party sellers to provide customers with rewards points worth at least 1% of the purchase amounts for all items on its shopping site, since Amazon agreed to amend the requirements in their agreements with such third-party sellers.
1.2 Regulations on business-to-consumers transactions
Unlike most other countries' competition laws, Japanese competition law prohibits the abuse of a dominant position. The doctrine of abuse of a dominant position is aimed at protecting small and medium-sized businesses in business-to-business transactions. Due to such background, the cases the JFTC has enforced to date have been focused on business-to-business transactions; however, since personal information, etc. provided by consumers has an economic value, it could be said that consumers are providing their personal information, etc. in exchange for using the services provided by the digital platformers. Thus, even when talking about a transaction with a consumer, the application of the AMA should not be precluded. Therefore, the JFTC is planning to use the prohibition of abuse of a dominant position as a means of regulating business-to-consumer transactions, such as the improper acquisition and use of personal information.
In terms of recent trends, on December 17, 2019, the JFTC published guidelines on abuse of a superior bargaining position by digital platforms in their transactions with consumers who provide personal information under the AMA.
2. Ex Ante Regulations
In a situation where there are only ex post facto regulations against digital platformers, there are concerns that if the digital platformers commit anticompetitive conduct and thereby acquire a dominant position in the market, it will be difficult to provide effective relief in a timely manner. Thus, the Japanese government has been discussing the necessity of ex ante regulations against digital platformers.
Based on such discussion, on May 27, 2020, the Japanese parliament passed the Bill for the Act on Improvement of Transparency and Fairness in Trading on Specified Digital Platforms (the "Act") which will come into force within a year from the date on which the bill passed. The Act designates digital platformers whose transparency and fairness in trading should be improved as "specified digital platform providers" ("SDPP") based on a Cabinet Order. Japan's Ministry of Economy, Trade and Industry ("METI") has started work to determine which digital platforms should be designated. According to METI, it is planned that the metrics for such determination will be the categories by sizes of business stipulated under the Cabinet Order. Based on press coverage, it is assumed that 5 to 10 digital platformers running online malls and app stores will come under regulatory oversight once the regulations come into effect.
If the provider is specified as an SDPP, it will be subject to the following rules, regardless of whether it is a domestic or overseas business.
- Requiring SDPP to disclose information such as the trading terms and conditions;
- Requesting SDPP to develop procedures and systems in a voluntary manner; and
- Requiring SDPP to submit a report on the results of their self-assessment and requiring the METI Minister to assess the report
Additionally, the Act requires METI to request the JFTC to exercise certain measures under the AMA in the event that METI finds any cases which are suspected of violating the Antimonopoly Act.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.