Japan’s Prime Minister Fumio Kishida is in Washington this week as part of his G7 tour to discuss trusted partnerships around national security strategy and political and social issues. Underneath that, however, Kishida also intends to discuss digital platform policy; his administration is considering changes to its competition laws and regulations related to online platforms to create a more precautionary regulatory structure similar to that of the European Union.

The Japan Fair Trade Commission (JFTC) is looking to make changes to what it considers unfair trade practices by digital platforms. This independent administrative agency of the Japanese government is currently responsible for enforcing the country’s competition laws and promoting fair trade practices. In 2020, the JFTC established a special task force to manage digital-related matters and created a new subdivision in its investigation bureau to focus specifically on digital issues. We may very well see a push for mandatory data sharing between platforms and third parties. Several potential risks are associated with these changes, including harms to privacy and security and the potential costs of data transfer and interoperability.

As part of this effort to change the regulations around digital markets, the Japanese Secretariat of the Headquarters for Digital Market Competition published a competition assessment of the mobile ecosystem in April 2022 that highlights its tremendous benefits. It notes that the mobile ecosystem serves as the “foundation of the economy and society” and highlights the importance of mobile providers responsibly managing their operating systems, app stores, and browsers.

However, there is an eye toward upending the current primacy of Apple’s iOS and Google’s Android operating systems to increase competitiveness. It’s worth considering whether the JFTC’s proposed changes would address real harm to consumers or if they are more focused on protecting Japanese markets from speculative harm. The Computer and Communications Industry Association (based in the US and Belgium) reviewed this request and recommended the Japanese embrace a balanced, evidence-based approach that considers consumer benefits, business confidentiality, security, and privacy.

Regulatory disruption is not innovation: It creates a potential risk to the mobile infrastructure, which depends on a trusted ecosystem to maximize consumer benefits. Industry-placed controls at the right points are important to balance security and “data privacy by design” on a mobile device. If Japan follows the same path the EU went down on mandating sideloading over curated app stores, then ransomware, pirated software, and apps that steal user data could become a persistent problem for mobile device users.

The Japanese are following the formula of the European Union’s Digital Markets Act (DMA) to create fault lines in foreign policy between data access around cross-border data flows and how certain platform service providers will trigger regulatory obligations. The Japanese Ministry of Economy, Trade, and Industry began this process in May 2020 to reinvigorate “fairness“—or competition away from US dominance in the digital platform space. These new digital platform rules regulated by the Digital Market Competition Headquarters will only apply to US companies and echo the intent of the EU’s DMA in targeting Alphabet (the parent company of Google), Amazon, Apple, and Meta.

The legal modification in question is whether Japan transforms the JFTC’s role of regulator into a risk-taker or moves instead toward voluntary commitments by companies with alleged unfair practices to create settlements or other regulatory actions modeled after the US Federal Trade Commission. The first path reveals an agency that wants more power to regulate what the new guidelines consider unfair. These guidelines go beyond the traditional antitrust violations that were supported with evidence and legal arguments and were well established in Japanese policy regarding competition and unfair practices in a vertical market.

This proposal forces us to think deeply about what harm really means. If the Japanese move forward with this new regulation model, they will put themselves in the same mired position as the Europeans are in. They want to limit the amount of data companies can obtain from consumers while creating new sharing rules to enable local companies to access and exploit the same big datasets and algorithms of the large US companies they want to punish.

The difference between protecting data privacy versus disclosing information to competitors in the name of competition is enormous. Citizens will have less, not more, control over their data with government-mandated sharing agreements. Effective data portability and interoperability should be done by company design, not via regulatory mandate. Companies that agree to cross-company sharing should ensure each platform has an agreed-upon, cross-product data-sharing portal with additional security measures to prevent fraud and data theft. Data transfers create security risks such as breaches, data corruption, and manipulation of consumer data, and these are more harmful to the average user than unfair business.

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