Japanese Legislature Advances Bill to Rein in Smartphone App Dominance

The Japanese government is taking a proactive stance to curb the excessive market control exerted by dominant smartphone app stores. A recently proposed bill aims to establish a legal framework that promotes fair competition and safeguards user choice.

Key Provisions of the Proposed Law

App Store Transparency: App stores must provide developers with clear and detailed information about their policies, including reasons for app rejection or removal.
Fair Pricing Practices: Restrictions on exclusive payment systems within apps are prohibited, allowing developers to use alternative payment mechanisms. This provision aims to reduce the high commissions charged by app stores on in-app purchases.
Interoperability: App users should be able to transfer data and functionality between different apps and services, fostering competition and innovation.
Increased App Store Choice: The law would require device manufacturers to pre-install multiple app stores, giving users the freedom to choose their preferred platform.

Background and Rationale

The dominance of a few major app stores, such as Apple's App Store and Google's Google Play Store, has raised concerns about anti-competitive practices and the stifling of innovation. These stores control vast swaths of the mobile app market, giving them significant power over app developers and end-users.

Exorbitant Commissions: App stores often charge developers steep commissions on in-app purchases, ranging from 15% to 30%. This can be a significant financial barrier for developers, particularly for smaller businesses.
App Rejection: App stores have the unilateral authority to reject or remove apps from their platforms, sometimes without clear or consistent reasons. This can create uncertainty and stifle creativity.
Limited Competition: The lack of viable alternatives to major app stores has created a monopoly-like situation, limiting user choice and innovation.

International Context

Similar concerns have been raised in other jurisdictions. The European Union (EU) recently adopted the Digital Markets Act (DMA), which contains provisions aimed at curbing the dominance of "gatekeepers" in the digital market. The US Congress is also considering legislation to address competition issues in the app store market.

Industry and Consumer Response

The proposed law has received mixed reactions from various stakeholders.

App Developers: Generally supportive, as it would increase their bargaining power and reduce their dependence on a single app store.
App Stores: Opposed, arguing that the law would undermine their revenue streams and weaken their ability to moderate content.
Consumers: Expected to benefit from increased choice, lower app prices, and enhanced data portability.

Next Steps

The proposed law is currently being debated in the Japanese Parliament. If enacted, it would go into effect in April 2025. The government is also considering additional measures to promote fair competition in the digital economy.

Implications for the Global App Market

The Japanese law, if implemented, would represent a significant development in the global app market. It could serve as a model for other countries seeking to address concerns about app store dominance and promote a more competitive environment.