Chuo Onlineロゴ

  • twitter-icon
  • facebook-icon
  • rss-icon


Digital Platforms and the Law

Mika Nakashima
Associate Professor, Faculty of Global Informatics, Chuo University
Areas of Specialization: Civil Law, Information Law and Competition Law

1. What is a digital platform?

A digital platform generally refers to a space which provides the basis of services on the Internet. Companies that provide digital platform services are called digital platformers. Typical of these are the gigantic IT companies such as Google, Amazon, Facebook and Apple (collectively known as GAFA) in the United States or Baidu, Alibaba and Tencent (BAT) in China. On March 1, 2021, Yahoo Japan Corporation and LINE Corporation were merged into Z Holdings Corporation, which is referred to as the coming of a "Japanese GAFA" company.

Digital platformers have created a wide variety of business models such as search services, online shopping, SNS and smartphone operating systems. In recent years, digital platformers have been quick to enter into new technological innovations and business development such as big data, IoT, artificial intelligence (AI), autonomous driving, and the sharing economy. Indeed, digital platformers have played a crucial role in the development of such innovative businesses.

Digital platforms are characterized by being multi-sided markets and generating networking effects. Digital platformers provide very convenient services to users by collecting and utilizing their personal data. Digital platforms run on a positive cycle in which the quality of services improves as the number of users grows, thus also attracting numerous business partners who wish to do business with digital platformers.

2. Digital platforms and the Law

Conversely, these groundbreaking initiatives have also created new legal issues. In recent years, digital platformers have been attracting attention because of their adversive acts such as excluding rival companies, forcing small businesses to comply with unfavorable transaction conditions, leaking personal information and infringing on privacy. In conjunction with such issues, there comes a succession of new regulatory legislation and policy-making against digital platformers in various jurisdictions around the world, including Europe, the United States and Japan.

In particular, the EU has been the first jurisdiction in the world to actively address competition policy issues related to digital platformers. Recently, the European Commission engaged in active investigations, sending statement of objections and adopting prohibition decisions under the EU competition law against GAFA. For example, Google's search service business was held to have violated the EU competition law in three cases from 2017 to 2019 and Google was ordered to pay huge fines. According to the findings of the Prohibition Decisions, Google excluded rival companies from the market by implementing searching bias in search services and by designing mobile devices to use Google search apps as the default setting. These decisions forces Google, which has held a monopoly in general search market in the EEA, to change its business model of providing free services to users whereas earning advertising revenue from advertisers. The EU is also active in enacting legislation which targets digital platformers. On July 12, 2020, enforcement began for the EU Regulation on Promoting Fairness and Transparency for Business Users of Online Intermediation Services. On December 15, 2020, the Digital Services Act and the Digital Markets Act were officially announced.

In the United States, on October 6, 2020, a report issued by the U.S. House of Representatives Judiciary Antitrust Subcommittee recommended a business split for GAFA. Currently, policy trends under the Democratic Party of the Biden Administration are drawing much attention. Lina Khan, Associate Professor of Columbia Law School, who was involved in the subcommittee report, is reported as being nominated as a member of the Federal Trade Commission. Tim Wu, Professor of Columbia Law School, who is known for supporting tighter regulation on GAFA, is also reported as having been appointed as Special Assistant to the President for technology and competition policy. On October 20, 2020, the U.S. Department of Justice and 11 states filed an antitrust lawsuit regarding Google's search service business. This attracted attention as the largest proceeding since the 1998 Microsoft case. On August 13, 2020, it was widely reported that the U.S. company, Epic Games, Inc. had filed a lawsuit regarding the mechanism for agency fees collected for the popular online video game "Fortnite" on app stores operated by Apple and Google. It is reported that similar proceedings have been filed not only in the United States but also in various jurisdictions around the world.

3. The direction of competition policy in Japan

The Japanese government is also actively working on competition policy issues for digital platformers while keeping a close eye on related trends in other countries. In December 2018, the Japan Fair Trade Commission, the Ministry of Economy, Trade and Industry and the Ministry of Internal Affairs and Communications jointly formulated the Basic Principles for Rule Maintenance Corresponding to the Rise in Platformer-type Businesses. Based on these Principles, in December 2019, the Japan Fair Trade Commission formulated the Guidelines Concerning Abuse of a Superior Bargaining Position under the Antimonopoly Act on the Transactions between Digital Platform Operators and Consumers that Provide Personal Information, etc. On May 27, 2020, Japan passed and enacted the Act on Improving Transparency and Fairness of the Specified Digital Platforms (the DP Act), which states that the Minister of Economy, Trade and Industry shall monitor and review reports on the status of voluntary efforts produced annually by digital platform companies. The Act was put into effect on February 1, 2021. The Guidelines, however, specialize in the abuse of superior bargaining position, which is one of several unfair business practices enumerated in the Antimonopoly Act whereas the DP Act regulates only online shopping and app stores for the present. As such, the scope the DP Act and the Guidelines apply is rather limited. With good reference to EU legislative examples, researches will be advanced for a more comprehensive regulation of the digital platform business.

Digital platformers tend to be monopolistic and oligopolistic as huge amounts of data accumulates through their services. Arguably it has been observed that capitalizing on their market dominance, digital platformers are eliminating rival companies or imposing unfavorable terms and conditions on small businesses with whom they engage in business transactions. Also, there are cases in which personal information of consumers who use the services of digital platformers is collected and used without their explicit consents, which should not be overlooked. In order to address these issues, we have to put digital platformers and their business models under scrutiny for their not exploiting market dominance. I believe that it will be useful to conduct studies of the EU and the US competition cases and thereby to obtain suggestions for Japan's antimonopoly law, assuming that there are not much if any of difference between digital platform business models in those jurisdictions and in Japan. In this way it is possible, we may hope, to pave way to achieve the fair competition for digital platform companies and promote sound innovations in the digital platform markets, also taking measures necessary to secure interests of consumers in Japan.

Mika Nakashima
Associate Professor, Faculty of Global Informatics, Chuo University
Areas of Specialization: Civil Law, Information Law and Competition Law

Mika Nakashima holds LL.M from Tokai University.
She served as a Senior Researcher at the Legal Research and Consulting Division of InfoCom Research, Inc. before assuming her current position in 2019.
Her main academic papers include The Google Android Case: Licensable Smart Mobile OSs and Competition Law Issues, Patent Studies, Issue No. 71 (2021), The Right to Request the Deletion of Personal Data in the EU, the U.S. and Japan and the Right to Be Forgotten, Tokai Law Review, Issue No. 60 (2021) and more.