Japan forces Apple and Google to allow third-party app stores and payments

DMA-like law passes in pursuit of a more innovative and open smartphone market

Japan's parliament has passed a law that will require Apple and Google to allow access to third-party app stores and payment providers on devices running their mobile operating systems.

The Act on Promotion of Competition for Specified Smartphone Software passed Japan's upper house yesterday and will be enforced once Cabinet rubber-stamps it at some point in the next eighteen months.

The law allows local authorities to name "designated providers" of a certain scale – currently only achieved by Apple and Google – and require those providers to do three things:

  • Allow third-party app stores on their devices;
  • Allow application developers to use third-party billing services;
  • Enable users to change default settings with simple procedures, and offer choice screens for tools like browsers;

And it forbids them doing three more:

  • Engage in any form of preferential treatment of their services over those of competitors in the display of search results without justifiable reason;
  • Use acquired data about competing applications for their own applications;
  • Prevent application developers from using features controlled by the OS with the same level of performance as the one used by Designated Providers.

The last item on the list is a shot across Apple's bows, as the iGiant has been reticent to allow third-party developers to use the NFC chip in iPhones for payments. Requiring the same level of access is a big deal – especially as non-compliance could result in fines that represent "20 percent of relevant turnover."

Mmmmmmm … apple turnover …

Japanese lawmakers have justified the law on multiple grounds, the first being that the smartphone market has become an oligopoly in which would-be competitors find it very hard to get a toehold – meaning innovators are deterred from even trying to crack the market.

The justification is that existing antimonopoly laws aren't useful instruments with which to regulate the smartphone ecosystem. "Self-correction by market mechanisms such as new entries is difficult and it takes a remarkably long time to demonstrate anticompetitive activities in response to individual cases under the Antimonopoly Act," states an outline [PDF] of the Act published by the Japan Fair Trade Commission (JFTC).

Finally, the Commission feels that given international legislative responses – the EU's Digital Markets Act (DMA), the UK's Digital Markets, Competition and Consumers Bill, and antitrust lawsuits under way in the US aiming to achieve similar ends – Japan needs to have its own legislation on the books.

As it implements the law, the JFTC will seek comment from relevant ministries and agencies on matters including security, privacy, and protecting kids. Chats about security may be especially important, as the law gives designated providers room to assert that third parties' plans may create security issues and suggest different approaches.

Apple has sometimes argued that security is a major concern if third party app stores are allowed to access iThings – but has complied with requirements to open its devices to competition under the DMA. ®

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