The Framework

Japan’s digital market is currently regulated under the Antimonopoly Act (AMA), enforced by the Japan Fair Trade Commission (JFTC), which has ramped up its scrutiny of mergers and acquisitions in the tech sector.[1] Additionally, the Act on Improving Transparency and Fairness of Digital Platforms (TFDPA), implemented in 2021 and expanded to cover digital advertising in 2022, imposes transparency and fairness obligations on certain platform operators. While these regulations focus on platform-to-business interactions, Japan is now considering a new framework that could introduce interoperability mandates. In June 2023, the Digital Market Competition Headquarters (DMCH) proposed a mix of voluntary co-regulation and an ex-ante regulatory framework similar to the EU’s Digital Markets Act (DMA). The anticipated regulations target mobile ecosystems, including operating systems, browsers, app stores, and search engines, potentially requiring greater interoperability between services.

Implications for U.S. Technology Companies

If enacted, Japan’s proposed regulations could impose significant compliance burdens on U.S. tech companies, restricting their ability to control platform operations. The DMA-style approach may require interoperability with third-party services, potentially undermining proprietary ecosystems and business models that rely on vertical integration. While the DMCH’s report suggests companies may justify certain practices, it remains unclear whether broad exemptions will exist for conduct that benefits consumers or fosters innovation. Given that the EU’s DMA has already set a precedent for strict limitations on platform operators, Japan’s regulations could further constrain U.S. firms’ flexibility in managing their services. While primarily targeting mobile ecosystems, the evolving regulatory landscape in Japan may signal a broader shift toward interventionist policies affecting digital competition.

How China Benefits

Japan’s regulatory push could inadvertently benefit Chinese technology companies. By imposing interoperability requirements and restricting business practices like self-preferencing, these regulations may weaken the competitive advantages of U.S. firms, opening the door for Chinese platforms to expand their foothold in Japan. If American companies face compliance burdens that limit their operational scope, Chinese firms—many of which already operate under different regulatory constraints—could step in with alternative services. Additionally, reducing U.S. firms’ dominance in Japan’s digital sector could allow Chinese companies to establish stronger partnerships and integrations, further increasing their influence in the region.

Endnotes