Report on Medium-Term Vision on Competition in Digital Market by the Government of Japan

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On June 16, 2020, the Digital Market Competition Council published the “Report on the Medium-Term Vision on Competition in the Digital Market” (“Report.”)1 The Report discusses the current situation surrounding the digital market and the future direction and policy measures.

On June 21, 2019, the Cabinet of Japan made a decision on the growth strategy, which included maintaining rules for the digital market, such as (i) to establish the Headquarters for Digital Market Competition (“Headquarters”) and (ii) to make efforts for submitting a bill on improving transparency and fairness of transactions of digital platform operators at the ordinary Diet session in 2020.2

In accordance with the Cabinet’s growth strategy decision, it established the Headquarters under the Cabinet’s organization on September 27, 2019 in order to implement competition policies for promoting competition and innovation in the digital market in a timely and effective manner. The Headquarters hosted Digital Market Competition Council and Digital Market Competition Working Group in order to study and deliberate important matters concerning the digital market.

At the Digital Market Competition Council, Mr. Suga of the Chief Cabinet Secretary serves as the chair and Mr. Nishimura of the Minister in charge Economic Revitalization serves as the vice chair. In addition to the chair and vice chair, there are 11 members attending the Council including Mr. Sugimoto, the Chairman of the Japan Fair Trade Commission (“JFTC”) and Mr. Kajiyama, the Minister of Economy, Trade and Industry. They had four meetings, including October 4 and December 17, 2019, January 28 and June 16, 2020.3

The Report emphasizes the importance of competition in the digital market and recognizes that the Government of Japan has been actively working on it. However, at the same time, the structure of the market environment would be changing significantly when it comes to the digital market, therefore it is important to discuss proposed approaches considering the future. The purpose of the Report was to discuss and organize the current situation surrounding the digital market and to propose proactive approaches to create a market environment for dynamic competition in the digital market considering the future of the digital market.

In the section about the current situation, the Report discusses the strength and future direction of the digital platforms with significant influence in the digital market centered on cyberspace (“Mega Platforms”). It indicates that the strength of Mega Platforms is having strong customer contacts, and using network effects to build an ecosystem of vast amounts of data. It recognizes that the business model defers depending on various Mega Platforms. The Report expects that the Mega Platforms will (i) enhance the customer contacts, (ii) expand their business into physical space and (iii) enter into upstream markets (e.g., develop and manufacture private brand products).

The Report notes that the risks of the digital market in the future include digital dominance, digital dystopia, data free flow with distrust and digital heaviness, and that they may be able to be resolved by the Trusted Web (e.g., layer of data governance).

The Report’s proposition is that the direction to be pursued in the future for the short term is accelerating digital transformation to create diverse players in the digital market. For the short-and medium-term, an enforcement system for Anti-Monopoly Act, in accordance with developments of the digital market, shall be developed. In addition, measures to change the Internet structure and data governance appropriately should be pursued in the medium- to long-term time frame.

The four-page summary of the Report in English is available at https://www.kantei.go.jp/jp/singi/digitalmarket/pdf_e/documents_200616.pdf

The Report (46 pages) in Japanese is available at https://www.kantei.go.jp/jp/singi/digitalmarket/kyosokaigi/dai4/siryou3s.pdf

1 Summary of the Report in English is available at https://www.kantei.go.jp/jp/singi/digitalmarket/pdf_e/documents_200616.pdf.
2 On June 3, 2020, the Act on Improving Transparency and Fairness of Specified Digital Platforms was promulgated.
3 On June 17, 2020, the Digital Market Competition Council also submitted the “Interim Report on Competitive Evaluation of the Digital Advertising Market” which is subject to the public comment. Comments are due by July 27, 2020

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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