Competition Law and Platform Regulation: From the DMA to the Smartphone Act

Recent competition enforcement actions spearheaded by the Japan Fair Trade Commission (JFTC), including The SmartPhone Act and Transparency Act, represent a growing trend of nations outside the European Union (EU) adopting stricter regulations for digital markets. At a recent roundtable in Tokyo, ICLE brought together a diverse group of international scholars, legal experts, and economists for an off-the-record exchange on contemporary issues in competition and digital markets regulation. Participants shared insights into the nuances of legislative efforts and enforcement priorities in regions such as Japan, South Korea, and the EU. The discussion underscored similarities and divergences in regulatory philosophies and the on-the-ground realities of implementation.

FIVE TAKEAWAYS:

• Divergent Approaches to Digital Market Regulation: The discussion highlighted significant differences in how various jurisdictions are approaching the regulation of digital markets. Japan’s Smartphone Act, for instance, was characterized as intentionally narrow in scope, focusing specifically on the smartphone sector. This contrasts with the broader reach of the EU’s Digital Markets Act (DMA) and the ongoing legislative proceedings in South Korea, which are considering regulations spanning multiple device types and service categories. The practical implications of these differing approaches, particularly in terms of their adaptability to technological change, were a central point of discussion.

• The Smartphone Market as a Unique Regulatory Target: Several participants noted the distinct characteristics of the smartphone market that make it a specific focus for regulatory efforts in some regions. The perceived absence of strong domestic smartphone manufacturers in Japan was mentioned as a potential factor facilitating regulatory intervention in this sector. The emergence of generative AI and its potential to disrupt the smartphone market further underscored the dynamic nature of the challenges facing regulators.

• Trade-offs in Regulatory Design: The roundtable explored the inherent trade-offs in designing effective digital market regulations. The discussion touched upon the balance between promoting competition and innovation, ensuring consumer welfare, and addressing concerns related to privacy and security. It was noted that some regulatory frameworks, like Japan’s Smartphone Act, prioritize clear-cut rules over explicit considerations of consumer welfare or economic arguments, potentially mirroring some of the criticisms leveled against the EU’s DMA.

• The Interplay Between Competition Policy and Industrial Policy: The potential for digital market regulations to intersect with industrial policy objectives was a significant theme. Concerns were raised about whether certain regulations might be perceived as protectionist measures aimed at bolstering domestic companies. The historical tensions between competition authorities and government bodies responsible for industrial policy in countries like Japan were also discussed, highlighting the complex dynamics at play in shaping the regulatory landscape.
• Measuring the Success of Digital Market Regulations: Participants considered the challenging question of how to evaluate the success or failure of new digital market regulations like the Smartphone Act and its Korean equivalents. Potential metrics discussed included changes in market share among key players in areas like app stores and search engines. However, the ambiguity surrounding concepts like “fairness,” often cited as an objective of these regulations, underscores the difficulty in establishing clear and measurable outcomes.