This recent legislative change in Japan marks a significant step forward for its competition legal system. Why? Because historically, anti-competitive behavior was judged based on a single company’s actions within a specific market. However, the key focus of this Japanese amendment is “starting from the ecosystem”!
Shortcomings of the Past Competition Law System – Ignoring Ecosystem Warfare
The traditional process for assessing unfair competition or anti-competitive behavior focused on whether a specific action within a specific market caused harm to free competition.
For example (hypothetically), if Uni-President Instant Noodles and Ve Wong Zha Jiang Noodles jointly raised prices, or if Uni-President agreed with PX Mart to sell only Uni-President noodles, these would be instances where specific actions by companies harmed free competition in a specific market (e.g., instant noodles).
However, this model is increasingly difficult to apply in the digital era’s ecosystem warfare. In ecosystem warfare, an ecosystem like Apple’s might engage in numerous small actions across multiple levels. Individually, these actions may have limited impact on market share and might not be deemed anti-competitive. Yet, when combined, they can cause significant harm to free competition.
Moreover, with nearly all user data residing on platforms, determining whether competition is being undermined becomes challenging, making enforcement even harder.
Apple Ecosystem **Warfare** Tactics
Take the Apple operating system as an example. When a user buys an iPhone, it’s not just a phone purchase—it’s entry into the Apple ecosystem. Apple excels at leveraging every node within this ecosystem to strengthen it, thereby avoiding fair competition.
How Apple Influences Third-Party Apps
→ These tactics may not significantly boost Apple’s app or iPhone sales/market share but effectively expand the Apple ecosystem:
- Negative Framing for Third-Party App Tracking vs. Positive Framing for Apple’s Own Actions
When opening a third-party app on an iPhone, users are prompted with options like “Allow Tracking” or “Ask App Not to Track” my data, and most decline. This drastically reduces the data third-party apps can access.
In contrast, Apple frames its own app prompts positively, e.g., “helping Apple find products or services you need.” - Mandating Apple ID Login Options in Specific Cases
Third-party apps offering social logins (e.g., Google, Facebook, Twitter accounts) must also provide an Apple ID login option.
Choosing an Apple ID login increases the difficulty of switching away from an iPhone later. - Requiring Developers to Share Data with Apple When Launching on the App Store
Per Apple’s privacy policy, it can access user data (e.g., app usage time).
Developer contracts mandate sharing app data with Apple, which can use it as a reference for developing competing products.
How Apple Leverages the App Store
→ This effectively keeps developers and users within the Apple ecosystem, establishing App Store dominance:
- Restricts third-party apps from bypassing the App Store’s payment system, requiring use of its payment processing (developers face up to a 30% fee).
- iOS does not allow sideloading of third-party apps outside the App Store.
How Apple Uses Safari and Restricts Third-Party Browsers
→ Apple builds Safari usage through ecosystem support while reinforcing the ecosystem via user reliance on Safari:
- Default browser for all apps is Safari, though its WebKit engine underperforms compared to other browsers.
- Apple Pay is restricted to Safari (WebKit) environments, encouraging default browser use.
- Video/streaming sites must use Apple’s HLS streaming format, supporting only paid codecs (H.264, H.265) and not royalty-free VP8/VP9, forcing developers to pay high patent fees.
- Safari doesn’t support web-based apps (e.g., games), requiring app-based access.
- Default browser use enhances Apple’s data collection and binds users to the ecosystem.
- Safari’s failure rate is higher than other browsers, per developer tests.
How Apple Uses the iOS Operating System
- Restricts NFC access, preventing developers from creating independent contactless payments, channeling revenue through Apple Pay.
- Initially limits UltraWideBand connectivity to Apple hardware/software, opening it to third parties only after 2-3 years, giving Apple a competitive edge.
- Limits third-party voice assistants: Siri activates easily, while others require app-specific activation. Siri accesses messages, contacts, and calendars, but iOS denies similar permissions to third-party assistants.
- Opens features to Apple Watch but restricts third-party smartwatches.
Can’t Leave Apple Anymore
Beyond these tactics, Apple likely employs other subtle methods to make leaving the ecosystem difficult. The goal isn’t to dominate a single app market but to bind users more tightly to the Apple ecosystem.
For instance, using an iPhone with non-Apple Bluetooth earbuds feels less seamless, which frustrates me. With Apple Pay and password support, I often use Safari on my MacBook and iPhone. When exploring smartwatches, non-Apple options faced connectivity issues, leading me to focus on the Apple Watch. Even if I don’t buy one, I’m finding it hard to imagine fully exiting the Apple ecosystem.
This is exactly what Apple wants: once a user buys an iPhone, they’re likely to stick with iPhones and eventually buy Apple laptops, earbuds, watches, VR headsets, etc., making departure nearly impossible.
Japan’s **Smartphone Application Competition Promotion Act**
To prevent anti-competitive practices, Japan’s amendment targets smartphone ecosystem giants (undoubtedly Apple and Google), divided into three phases:
- Designating Major Smartphone Operating Systems (Clearly Apple and Google)
- Preemptive Prohibitions and Compliance Obligations (Preemptive Regulations)
To address competition issues with smartphone OSs, Apple and Google are prohibited from certain actions and required to adopt specific measures. This includes: no restricting other app stores, no limiting alternative payment systems, no unfair treatment, and no using collected data for competitive services. - Hotline with Authorities and Ongoing Intervention
Companies must submit reports to regulators, coordinate with relevant entities, grant the Fair Trade Commission investigative powers, and face corrective orders or fines for violations.
Conclusion
From Japan’s legislation, it’s clear this law comprehensively addresses ecosystem warfare, moving beyond the traditional approach of assessing specific anti-competitive actions in specific markets. Individually, Apple’s small moves—like in contactless payments (Apple Pay), web browsers (Safari), or the App Store—may not violate laws, but collectively, they strengthen the ecosystem to stifle competition.
Although smartphones have matured, it’s only now that laws are developing techniques to counter ecosystem warfare. This logic is likely to apply to AI ecosystems or other IoT ecosystems in the future. The battle between laws and ecosystems promises to be exciting.
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