Japan, South Korea and Australia are tightening rules to rein in the market power of Big Tech groups, posing fresh regulatory challenges for Apple and Google following a similar crackdown in the EU and the US.
The cabinet of Japanese prime minister Fumio Kishida recently approved landmark legislation aimed at preventing the largest online platforms from using their dominance in mobile software to thwart the entry of new rivals.
The rules — a narrower version of the EU’s sweeping Digital Markets Act — seek to offer more choices for consumers, such as by making it easier to switch between mobile operating systems and allowing users to download apps from other sources.
The move in Tokyo comes as officials in South Korea intend to introduce wide-ranging legislation to regulate online platforms, targeting ecommerce players to streaming services and social media providers. In Australia, watchdogs are pushing to widen the regime for online regulation into areas including digital payments.
Tech industry players said the spread of the regulatory scrutiny from Europe and the US to the biggest markets in Asia presents deeper troubles for the world’s biggest technology companies.
In the EU, legislation has forced Apple to change core parts of its closed mobile operating system, such as allowing users to download apps from other sources for the first time and changing the fee structure charged to developers. While in the US, the iPhone-maker has been hit by a sweeping antitrust case that alleges the Silicon Valley giant uses its power in the smartphone sector to quash rivals and limit consumer choice.
“If you know there is a change in legislation and if that is just limited to Europe, you might try to fight it,” one tech industry executive said. “But if you see that legislation that happened in Europe is happening in Japan, South Korea, Australia and the UK, at some point you’ve learned your lesson and say why am I fighting?”
In Japan, legislation drafted by the country’s Fair Trade Commission does not name specific companies but, rather, focuses on unravelling the duopoly held by Apple and Google owner Alphabet, as their iOS and Android software controls almost all of Japan’s market for mobile operating systems.
“Considering the monopolistic circumstances with app stores, we want to realise an environment where the benefits of growth in the digital area can be enjoyed in a fair and equitable manner,” Kazuyuki Furuya, the FTC’s chair, said in late April.
In the face of heavy lobbying by Apple to block the bill, people familiar with the discussions said its scope is intentionally narrow in order to avoid delays to introducing the new rules, which are expected to be enacted from late next year if parliament passes the bill.
The law would allow Japanese regulators to hit companies with hefty fines that could amount to up to 20 per cent of domestic annual revenue if they are found guilty of non-compliance. For repeat infringements within a period of 10 years, the fine can be raised to 30 per cent of annual turnover.
Apple generated $24bn in revenue in Japan last year. The company declined to comment specifically on the Japanese legislation and other regulatory measures in Asia. It said it had limited changes to iOS “to the European Union because we’re concerned about their impacts on privacy and security of our users’ experience”.
Google said it had “proactive engaged” with the government to explain its practices, adding “we will continue to collaborate with the government and industry stakeholders throughout this process”.
In previous discussions with Tokyo, Google has also argued that the fees it charges developers are necessary to ensure the safety and security measures for its mobile Play store.
While regulators worldwide are given larger enforcement powers, some industry players remain sceptical whether the rules being introduced globally would have the desired effect of opening up more competition in the digital marketplace.
Other people advising the industry in Tokyo also suggested the chances of Japan’s FTC actually imposing the new fines was limited for now, since Big Tech groups are likely to negotiate closely with regulators ahead of the bill’s enactment. Recent investigations by the FTC involving Apple and Google have often been resolved with the two companies presenting remedies.
In South Korea, regulators are struggling to enforce a 2021 telecommunications law designed to break Apple and Google’s hold over in-app payments, by forcing the US tech giants to cut transaction fees and offer third-party payment options.
The legislation, which was supported by a coalition of app developers including Tinder owner Match group, Spotify and Epic Games, was the first of its kind in the world.
In October last year, the Korea Communications Commission (KCC) said it planned to fine Apple and Google for violations of the law after Korean mobile gaming developers accused them of continuing to levy fees in breach of the new rules. Both companies have denied the allegations.
Wi Jong-hyun, professor of business at Chung-Ang University in Seoul, said it was hard for regulators to enforce the law because Korean companies tend not to disclose their contracts with the big US app stores.
“Korean app developers generally prefer not to file complaints against Apple and Google because they are afraid of potential reprisals,” said Wi. “They have seen other apps forced off the app stores, and they know that once they have been kicked off it takes a long time to re-enter.”
Apple said it has clear guidelines to help developers understand its rules, which are applied equally.
Korean officials also intend to introduce a more broader legislation, which, like the EU’s DMA, is expected to identify dominant online platforms that would be subjected to tougher scrutiny.
Practices being targeted by the Korea Fair Trade Commission (KFTC) include the “self-preferencing” of a platform’s own products, as well as restricting companies from selling goods elsewhere or more cheaply.
“We will strengthen our scrutiny of the monopolistic abuse of platforms and their unfair trade practices,” KFTC chair Han Ki-jeong told the American Chamber of Commerce in Korea in March.
Wi said the picture in South Korea is complicated by the fact that in many online sectors the most dominant players are not the US Big Tech firms, but local platforms including Naver, Kakao and the US-domiciled ecommerce market leader Coupang.
“South Korea can’t be as tough as the EU because it also needs to protect its local players,” Wi added, noting that Seoul was also sensitive to Washington’s objections given discussions over subsidies and export controls in the all-important chip sector.
Australia has also been a pioneer in tech regulation, introducing legislation to crack down on multinational tax avoidance, online safety and measures to push large digital companies to pay media companies to support the news industry.
In recent months, Canberra has moved to broaden its regulatory scrutiny into digital payments and enforce existing measures that are being resisted by technology businesses. As part of the effort, the government will introduce legislation this year imposing mandatory obligations on social media companies, banks and telecoms companies to tackle scammers.
Stephen Jones, minister for financial services, told the Financial Times that the Australian government’s review of digital platforms is focused on digital scams, which he called the “biggest part of the problem”.
Among the proposals is that social media companies verify businesses advertising on their platforms. Another area under review is digital payments, where banks are regulated but companies like Apple and Google offering similar services are not.
“[Big Tech companies are] not regulated and they’ve got to be brought into the tent,” said Jones.
Additional reporting by David Keohane in Tokyo
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