This recent amendment to Japan’s law marks a significant step in the competition law system. Why? Because in the past, hindering fair competition targeted anti-competitive behaviors of a single company within a specific market range. However, the key to Japan’s current law amendment is “starting from the ecosystem perspective”!

The Shortcomings of Past Competition Law Systems – Neglecting Ecosystem Warfare

In the past, the process of judging unfair competition or hindrance to fair competition was based on whether a “specific action” caused harm to free competition within a “specific market.”

For example, (randomly speaking) if Uni-President instant noodles and Wei Lih fried noodles jointly raised prices on a certain day, or if Uni-President made an agreement with PX Mart to sell only their instant noodles, these were cases of companies taking specific actions that resulted in adverse effects on free competition in a specific market (instant noodles).

However, this model is difficult to operate in the ecosystem warfare of the digital age. In ecosystem warfare, the Apple ecosystem might take several small actions on multiple levels. These small actions might have limited impact on their own market share and might not be considered as hindering fair competition. But when these small actions accumulate, they can cause significant damage to free competition.

Moreover, since almost all user data is on the platform side, it becomes difficult to determine whether free competition has been violated, and further law enforcement becomes relatively challenging.

Apple Ecosystem Warfare Tactics

Taking the Apple operating system as an example, when users buy an iPhone, they’re not just simply buying a phone but entering the Apple ecosystem. Apple is adept at using every node of this entire ecosystem to strengthen its ecological nature and avoid fair competition.

  • How Apple influences third-party apps → The following tactics won’t significantly increase the sales or market share of Apple’s own apps or iPhones, but can effectively strengthen Apple’s own ecosystem:
    • Negative statements for third-party app cross-platform tracking vs. positive statements for Apple’s own behavior
    • Requiring Apple account login options in specific situations
    • Requiring developers to share data with Apple when third-party apps launch on the App Store
  • How Apple utilizes the App Store → This can effectively keep developers and users within the Apple ecosystem to find apps, thereby establishing App Store hegemony:
    • Restricting third-party apps from bypassing the App Store’s payment processing system
    • Apple’s iOS system doesn’t allow downloading third-party apps bypassing the App Store
  • How Apple leverages its own Safari browser and restricts third-party browsers
    → Apple builds Safari usage through its ecosystem support while strengthening the Apple ecosystem through user’s Safari usage:
    • Apple sets Safari as the default browser for all apps
    • Apple doesn’t open Apple Pay for non-Safari (WebKit) environments
    • Video/live streaming sites need to use Apple’s developed HLS streaming format
    • Safari doesn’t support web applications
    • More user data collection and ecosystem binding through default browser usage
    • Safari actually isn’t superior, with higher failure rates in developer tests compared to other browsers
  • How Apple utilizes the iOS operating system:
    • Apple doesn’t open NFC, forcing developers to use Apple Pay
    • Apple gives itself a head start with UltraWideBand connectivity
    • Apple restricts third-party voice assistants while privileging Siri
    • Apple opens features to Apple Watch but restricts third-party smartwatches

Never Leaving Apple

Besides the above techniques, Apple likely has other small tricks to make it difficult for users to leave the Apple ecosystem. The main goal of these tricks isn’t to make a single app dominate the market, but to strengthen user binding within the Apple ecosystem.

For instance, when I use an iPhone but not Apple’s wireless Bluetooth earphones, the connection experience isn’t as smooth, which is frustrating. Also, due to Apple Pay and password support, I often use Safari on my MacBook & iPhone. Even when looking at smartwatches, I only researched Apple Watch due to connection limitations for non-Apple watches. Even if I don’t buy an Apple Watch, it’s hard for me to imagine completely leaving the Apple ecosystem now.

This is exactly the result Apple wants. Once a user buys an iPhone, they will not only continue to buy iPhones but may also only buy Apple’s laptops, earphones, watches, VR headsets, etc., making it difficult for users to leave the Apple ecosystem.

Japan’s “Smartphone Application Competition Promotion Act”

To prevent hindering fair competition, Japan’s law amendment targets the dominant players in the smartphone ecosystem. It can be divided into three stages:

(1) Designating large mobile operating systems (undoubtedly Apple and Google)

(2) Pre-prohibited items and compliance obligations (pre-regulation) To address competition issues related to mobile operating systems, certain behaviors are prohibited for Apple and Google (prohibited items) and certain measures are obligatory (compliance items). These include not restricting other companies from providing app stores, not limiting other companies’ charging systems, not having unfair treatment, and not using acquired data to provide competitive services, etc.

(3) Hotline with regulatory authorities and immediate intervention Operators must provide reports to regulatory authorities, relevant businesses must provide data and coordinate with relevant administrative agencies, grant investigation authority to the Fair Trade Commission, issue correction orders for violations, impose fines, etc.

Conclusion

From the above Japanese regulations, we can see that this legislation comprehensively responds to ecosystem warfare, no longer adopting the past approach of observing whether specific actions in specific markets cause anti-competition. Because some of Apple’s small moves, if observed in isolation – such as the contactless payment market (Apple Pay), web browser market (Safari), application store (App Store), etc. – may not necessarily violate regulations, but can effectively strengthen the ecosystem and oppose competition through the ecosystem.

Although smartphones have developed to a quite mature stage, the law has only now developed techniques to respond to ecosystem warfare. However, it’s believed that this logic can be applied to AI ecosystems or other Internet of Things ecosystems in the future. The future war between law and ecosystems promises to be exciting.