Japan’s Attempt to Regulate Digital Platforms

Japan’s legislative proposal to regulate dominant digital platforms raises a few important issues. First, the draft perceives a digital platform as a “(market) place” and defines the business users who provide products or services through the market and the others, or consumers, and provide for obligations applicable to the dominant platform provider to both categories. One would immediately ask where Facebook would fall. As widely known almost all of Facebook’s revenue is advertisement, which is offered in conjunction with cost-free contents (posts, diaries, images of friends). Their business model is akin to network television who does not have to pay for contents, and is, naturally, highly profitable. In other words, Facebook is not a “marketplace” but a gigantic advertiser, and its core service is not well captured by the draft. Rather, ;the focus of the bill is on the traditional Amazon Internet sales. As Amazon shifts focus to AWS, how long would the purported regulation remain relevant?

Second, the bill adopts on a traditional competition law framework to supplement market inefficiency from the network effects. The reality is, however, the dominant networks have even a macroeconomic impact and they will all remain foreign based for the foreseeable future. Then there arises a serious question of what policy goals the traditional competition framework would serve. For Japan, the most pressing policy goal should be to ensure redistribution to the national economy. This bill is not designed to contribute to the redistribution, and it is left to the taxation and the labor legislation. It would be far more important for Japanese to watch and follow the taxation of international business under the OECD.