In 2019, the Japanese Government established a central co-ordinating agency to consider how to promote and regulate digital technology, AI etc, called the Digital Competition Headquarters (memo to ScoMo: not a bad idea for your post-COVID digital economic revival initiative).

The Japanese competition regulator and the Digital Competition Headquarters conducted a survey of sellers and buyers over digital platforms (these platforms being two-sided markets), which found:

  • 65-75% of businesses found terms in the standard contracts of digital platform providers to be ‘problematic’, although fewer advertising agencies were unhappy (around 45%);
  • Businesses were overwhelmingly satisfied with the ‘adtech’ services supplied by digital platforms, up to 93%;
  • When asked if ad servers sent advertising requests to a specific digital platform preferentially, most business said they did not experience any preference (around 35%) or were unsure (50%);
  • Most businesses had complaints (up to 60%) with ‘adtech’ fraud on digital platforms, such as use of bots generating clicks;

On the other side of the digital platform market:

  • When asked if they knew search engines used search information to display advertising, around 30% of consumers answered with a definite ‘no we did not know’, while the other 70% were hazier about what was happening.  Yet nearly 60% said they had concerns about the practice. Even so, 75% would still use a search engine because it was useful or essential;
  • There was a low level of consumer engagement with a digital platform provider’s terms: only around 25% of consumers said they remembered and agreed with (i.e. clicked ‘ok’) platform terms and conditions.  Of the rest, nearly a third said they remembered agreeing but without much understanding of the terms, another 25% said they agreed without any understanding at all and 17% could not remember anything about terms.

The consumer responses were pretty similar for social media, although there was both a little higher awareness of collection of data for adtech (72%) and more concern about its use for adtech (60%).

Off the back of this survey, the Digital Competition Headquarters prepared a Bill on Improving Transparency and Fairness of Specified Digital Platforms which has been recently passed by the Japanese Parliament.  

  • a digital platform is defined as Internet accessible, provides a two sided market and benefits from ‘network effects’ (escalating trajectory of sellers and buyers);
  • the law applies to digital platforms (defined by type of platform or scale) specified by Cabinet order having regard to the impact on citizens, the degree of market concentration, and consumer protection.  Foreign-based digital platforms will be caught if accessible to Japanese citizens;
  • the specified digital platforms have to publish their seller terms and their consumer terms and variations to them.  The seller terms must include an outline of search engine result rankings (but not the algorithms), what data is collected and how it is used, whether consumer data is passed to sellers, an explanation of why potential sellers or products they are proposing to sell are rejected from the platform, and complaint handling.  The buyer terms must include the explanation of search rankings and the disclosure of consumer data; and
  • the preferred approach is that these matters would be addressed through voluntary codes, but METI can make regulations as a back-up to ensure ‘fair dealing’;
  • there are ‘anti-victimisation’ measures allowing sellers to disclose information to the competition law authority or METI despite confidentiality clauses in supply contracts and protections against being disadvantaged by the digital platform for complaining about the provider’s conduct.

For one of the most heroic attempts at an ‘on a page’ summary, see unofficial translation published by METI.