Japan: A Spotlight on the Key Trends in Digital Policymaking

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In recent years, the Japanese government has been keen to scrutinise the digital markets from various perspectives, including competition policy, cybersecurity and privacy. To implement appropriate competition policy promptly and effectively in order to enhance competition and innovation in digital markets, the government formed an inter-ministry organisation, the Headquarters for Digital Market Competition (DMCH) in 2019.

The Japan Fair Trade Commission (JFTC) has also shown its great interest in the digital markets. It created a special taskforce to deal with digital-related matters by reforming an existing taskforce and thereafter established a subdivision within its investigation bureau in 2020. In the same year, it also formed the Office of Policy Planning and Research for Digital Markets to study and gather information from the digital markets. In 2021, the JFTC announced that it had engaged four experts in digital areas (i.e., 5G, articial intelligence (AI), digital advertising and digital privacy) as ‘digital special advisers’. The JFTC contemplates to reflect their advisers in its practices and policymaking efforts.

Legislative developments

The JFTC has been updating and amending its guidelines to apply the Antimonopoly Act (AMA) more effectively and improve transparency in its operation of the AMA. In 2017, the JFTC amended its Guidelines Concerning Distribution Systems and Business Practices (the Distribution Guidelines) to modernise their overall structure and to apply them to e-commerce more easily. In 2019, the JFTC issued new guidelines to regulate digital platform operators on their activities to collect and use consumers’ personal data.

On merger control, the JFTC amended its guidelines on merger review (the Merger Review Guidelines) in 2020 to clarify the JFTC’s approach to various issues mainly relating to the digital economy. At the same time, the JFTC also introduced a new quasi-threshold mainly based on transaction value to more appropriately capture mergers that do not meet the target’s turnover threshold but may have an negative impact on competition in Japan.

In addition to these efforts by the JFTC, the government studied business practices involving digital platform operators and, based on such efforts, introduced a couple of new laws, the Act on Improving Transparency and Fairness of Digital Platforms (the Transparency Act, enacted in 2020 and made into effect in 2021) and the Act for the Protection of Consumers who use Digital Platforms (the Digital Platformer Consumer Protection Act, enacted in 2021), which were introduced to ensure transparency and fairness of business practices involving digital platforms.

Enforcement actions

With the updates of relevant guidelines, the JFTC has been very active in investigating and reviewing cases involving digital or e-commerce businesses.

In recent years, the JFTC has vigorously investigated digital platform operators for their potentially anticompetitive conduct and terminated the investigations on conditions of voluntary remedial actions by the digital platform operators. The commitment procedure introduced in 2018 encourages the JFTC to aggressively intervene in anticompetitive behaviour in digital markets.

For example, the JFTC investigated two Amazon group companies operating online sales platform and e-books delivery business from 2016 to 2017 for their practices to contain parity clauses in the contracts with the merchants and publishers or distributors that use Amazon’s platform. In 2017, the JFTC initiated an investigation against Airbnb group companies, which operate an online private lodging service platform, for their alleged exclusionary practices. In 2018, the JFTC investigated Minna no Pet Online (Minna no Pet), which operates online platforms connecting pet breeders and consumers, for its alleged exclusionary practices. All of these investigations were closed upon the JFTC’s confirming the suspects’ voluntary remedial measures.

In 2019, the JFTC investigated online travel platform operators for their alleged practices to contain parity clauses in the contracts with hotel operators, and announced that it had approved the commitment plan submitted by one of the suspects. In 2020, the JFTC announced that it approved the commitment plan submitted by Amazon Japan regarding its suspected violation of the abuse of its superior bargaining position. In 2021, the JFTC announced that it had closed an investigation against Apple, Inc for its suspected violation of the AMA concerning Apple’s restrictions to application developers that distribute applications on the App Store after confirming certain measures taken by Apple to eliminate the JFTC’s concerns.

On merger control, the JFTC has carefully reviewed various digital-related mergers, such as Yahoo! Japan/Ikyu (2015, online travel/restaurant platform and digital advertising); Yahoo! Japan/eBOOK Initiative Japan (2016, e-book distribution platform); Media Do/Digital Publishing Initiatives Japan (2016, e-book distribution platform); M3/Nihon Ultmarc (2019, medical information platform); Z holdings/LINE (2020, various digital services); Google/Fitbit (2021, health-related data and operating systems); and Salesforce.com/Slack Technologies (2021, customer relationship management (CRM) software and business chat service).

Studies and policy discussions

The JFTC is also active in gathering information and studying further measures to enforce the AMA in digital markets more effectively. It has been conducting sector inquiries on e-commerce and digital platform operators from various perspectives and issued reports of trade practices on various digital platforms, such as Online Retail Platform and App Store (final report issued in 2019), and Digital Advertising (final report issued in 2021). It held a study group and released a report on Data and Competition Policy in 2017 (the 2017 Report on Data), which discusses and analyses whether and how to apply the AMA to various competition issues concerning data.

In 2018, the JFTC released, jointly with other ministries, an interim study group report on Trade Environment concerning Digital Platform Operators, which discusses possible issues concerning digital platforms and effective ways to keep markets involving digital platform operators in good condition.

In May 2019, the JFTC, jointly with other ministries, also released two reports titled Options for Ideal Approaches to Rulemaking for Securing Transparency and Fairness in Trading Environments and Options for Ideal Approaches to Data Transfer and Disclosure. These reports present some policy options that the Japanese government may take to ensure the transparency and fairness of the trade environment with respect to digital platform operators.

In 2021, the JFTC released two new study group reports: the Report on Algorithms/AI and Competition Policy (the Algorithms Report) and the Report on Competition Policy for Data Markets (the 2021 Report on Data Markets).

The DMCH and its working group have discussed rule-making for the digital markets, and to that end they studied practices in the digital markets by holding public hearings and examined study group reports issued by the JFTC, the Consumer Affairs Agency, and the Ministry of Internal Affairs and Communications on digital advertising services and digital platform services. These efforts were embodied in the new laws the Transparency Act and the Digital Platform Consumer Protection Act.

This chapter covers these recent developments in the regulations, enforcements and policies.

Discussions of individual issues

How data affects competition


In recent years, along with the progress of AI and internet-of-things technology, the range of available data has expanded, and the potential for its use has increased as well. In this regard, data should be considered as a source of competitiveness and generating innovation. Under this background, the JFTC published two reports focusing on the relationship between data and competition: the 2017 Report on Data and the 2021 Report on Data Markets. These two reports are briefly examined here but they address how data affects competition and suggest how the JFTC should address the issue.

Market definition in data-related business areas

Scope of goods and services

Basically, as is the case for any product, the market for data-related business is defined from the viewpoint of substitutability for consumers and, if necessary, for suppliers. However, the 2017 Report on Data provides that the following points should be kept in mind when analysing actions relating to the collection and utilisation of data transactions owing to the characteristics of the data itself:

  • Data analysis may be considered to be the same as research and development of various products, so the market impact of future technologies or products resulting from such analysis may need to be considered. In the case of vertical business combinations between companies that hold vast amounts of data and those that hold critical technologies, it is also necessary to consider the synergies between that data and those technologies.
  • When the data itself is the subject of a transaction, there may be cases where an evaluation is made of the market for trading the data. In such case, owing to the nature of the data, it is difficult to calculate the market share for the transaction based on the amount or quantity of data. Instead, it may be effective to evaluate the status of the parties in the market based on the source of the acquired data. Even if no data is being transferred by the parties upon implementation of the transaction, it may be appropriate to consider the market for potential data transactions where the parties are likely to trade data in the future.
  • If a multi-sided market comprises digital platforms such as social networking services (SNSs) where free services are deployed and there is non-price competition over quality, such a market may be defined as a free market.
Scope of geography

Since data transactions are less constrained by transportation needs than physical product transactions are, and the data itself can potentially be used in other fields, their geographical scope is often broader. As such, the geographical scope of data for which there is global demand can be formed across national borders.

Methods of competitive analysis in data-related business areas

Traditionally, data has been considered to have characteristics that differ from those of other goods. The 2017 Report on Data and 2021 Report on Data Markets provide that the following characteristics of data for competition analysis must be taken into account:

  • ease of duplication;
  • exclusive possession cannot be conceived;
  • meaningful knowledge may be obtained only when a certain amount of data of a certain type is secured (entering the market without the proper amount may be difficult);
  • the value of use arises only through aggregation and analysis;
  • the combination of different types of data may engender synergies;
  • the potential for sustained improvement in data accumulation owing to network effects and economies of scale; and
  • the amount of available data does not decrease after utilisation by multiple parties.

The 2021 Report on Data Markets provides that, given these characteristics, it is desirable to distribute as much data as possible from the standpoint of efficiency, and that it is important to abolish the hoarding of data by certain businesses, to make access to data free and easy, and to maintain the possibility of new entrants to industries that utilise data.

Further, the same report provides that the factors to be considered in competitive analysis of data include whether it is technically or economically feasible for new entrants to achieve data accumulation with the same level of value the data creates. For example, such an achievement is difficult for new entrants in the following cases:

  • when the raw data is essential for the product itself, and it is technically or economically difficult for business operators other than the specified business operator to obtain the same raw data due to restrictions on the installation of sensors or other circumstances and there is no alternative data for that product; and
  • when raw data collection and product improvement by such raw data are accelerated by network effects.

Further, although the right to data portability has not been established in Japan, it is generally thought that the lock-in effect may be mitigated if data portability is allowed, but switching platforms would be difficult for users in practice if the network effects are strong.

In addition, the 2017 Report on Data provides that when data protection is an important competitive measure in digital platforms such as SNSs that provide free services, the level of such protection may be regarded as an element of product quality and be considered in the competitive analysis. In fact, in a recent case in Japan, there was a sale of data gathered by a digital platform using measures that at least some users assumed were inappropriate without their consent that caused a significant decrease in the number of users of the platform.

Actions relating to the collection and use of data

Data collection

Collection by a single entity

There are two types of cases where a single entity collects data: one party in a business or other alliance collects data from the other parties; or an entity operating a platform collects data through services on the platform.

Type I

Data is not subject to ownership under Japanese law, and the concept of ‘data ownership’ itself has not been established either. Therefore, rights and obligations regarding data are determined by contract between the parties. Guidelines for AI and Data Contracts, which include a model contract as reference, were prepared by the Ministry of Economy, Trade and Industry, which suggests that it is important to set detailed terms of use for determining which data can be used by which parties and under what conditions, depending on the case at hand.

The 2021 Report on Data Markets suggests that situations such as taking advantage of a dominant position by one party over another party when concluding a contract between individual businesses should be addressed by the AMA. In addition, in relation to the fact that increasing the degree of freedom of access to data is desirable in terms of promoting competition, the Report also suggests that it is desirable from the standpoint of competition policy to avoid requiring data providers to trade data only among themselves to make exclusive use of certain data.

The 2017 Report on Data suggests that the act of one party in a business or other alliance to unilaterally provide data, such as attributing data or technology, to the other parties may lead to the strengthening of the acting party’s dominant position in the relevant market if the data is scarce, or impair the other parties’ motivation for research and development and impede the development of new technology, thereby reducing competition in the market. In such a case, the transaction may fall under the category of unfair trade practices (transactions with restrictive conditions) or abuse of a superior bargaining position.

Type II

The 2017 Report on Data suggests that if the platform operator has market dominance over the services provided through the platform, and platform users have difficulty switching to other similar services, even if the terms of trade for the services are changed to the detriment of users with respect to data collection, then it may be difficult for the users to stop using those services. In such a case, the platform operator may be able to use the collected data to form, maintain or enhance its dominance in the market.

In this regard, policies such as those allowing data portability are necessary to ensure freedom of choice for users. The 2021 Report on Data Markets also suggests that if interoperability is a required precondition for data portability, the cost burden will become a barrier to entry and new entrants will be discouraged.

Collection by multiple businesses

In recent years, business alliances are being used for the purpose of joint data collection and utilisation or as a basis for business activities. For example, there was a case where a joint venture was established by map companies and automobile manufacturers for the purpose of promoting studies for the development, demonstration and operation of dynamic maps, which are necessary for the realisation of automatic driving and safe driving support. Data collection by multiple businesses can reduce costs, enable the collection of complementary data, including a wider range of data than that collected by single entities, and promote the creation of new value, which generally has a procompetitive effect in many cases.

However, the 2017 Report on Data provides the following problematic cases under competition law:

  • when the data to be jointly collected enables other participants in a competitive relationship to mutually understand the content, price and quantity of products to be sold in the future, which may lead to concerted behaviours; and
  • where, in a market for products that rely heavily on data, most of the participants in a competitive relationship collect data jointly, even though each participant could do so independently, and restrict the collection of data by each participant separately, thereby substantially restricting competition in the market for those products.

Further, the Study Group Report on Alliances, also published by the JFTC, provides the following problematic cases under the AMA:

  • sharing data beyond the necessary scope;
  • manipulating and amplifying strong network effects relating to data collection and dominating the market through unfair methods;
  • restricting the participation of certain businesses in a data collection alliance when data essential to the businesses is created; and
  • unilaterally attributing and restricting the use of jointly collected data.

Access to collected data

In recent years, as the collection of real-time data, such as the operating status of equipment using sensors, has become possible, there have been cases where such data is being relied upon heavily for providing services, but the channels for obtaining the data are sometimes limited. In terms of competition policy, although wider access to the data is desirable, each party can decide to whom and under what conditions it provides data. However, there may be potential issues caused by denied access, as follows.

Access denied by a single entity

The 2017 Report on Data provides that, when a certain company dominates a certain market, the data collected through business activities in that market is essential to the business activities in that or other markets, and the obtainment of alternative data is technically or economically difficult (e.g., in the following two cases), there may be a competition problem if access to the data is limited by others without reasonable grounds:

  • denying access to data that was previously available without reasonable grounds, even though no reasonable purpose can be envisaged other than to exclude competitors in the market for the goods using the data; or
  • denying access to data to any competitors or customers without reasonable grounds, even though this would eliminate those competitors from the market for the goods or services using the data, where there is an obligation to provide such access.

The 2021 Report on Data Markets provides that, given the characteristics of platforms that are prone to monopolisation from the perspective of economies of scale and network effects, it is important to go beyond the regulations under the traditional antitrust framework, provided that certain conditions are met from the perspective of promoting competition in the data markets. For example, if a platform gains control of the market and there are competition policy concerns, the Report suggests that necessary measures, such as imposing a certain level of responsibility to provide value-added services or ensuring that newly launched venture companies and new entrants from other industries have access to the market under fair conditions, should be considered.

Access denied by a joint action

With respect to data that is jointly collected by multiple businesses with a significantly high aggregate market share, restricting participation in the joint collection to a specific business operator and not allowing access to collected data under reasonable conditions may exceptionally cause a competitive problem if any third party’s business activities become difficult as it is unable to find alternative measures to acquire the data and likely to be excluded from the market.

In addition, it should be noted that the bulk licensing of data through data pools by entities in a competitive relationship in the data trading market has the aspect of competition avoidance among entities regarding the licensing and provision of multiple goods in combination, which may have the effect of reducing competition.

Further, with regard to any situation where data generated by multiple parties is processed and analysed, and the analysis results and know-how obtained from such data are used to provide services to third parties, the 2021 Report on Data Markets suggests that fair contract rules should be formed since large companies may not allow small or medium-sized companies to provide services to third parties by making use of such data.

Merger reviews in the digital age


In order to explore the topic of merger reviews in the digital economy in Japan, we need to address the JFTC’s recent amendments of the Merger Review Guidelines made on December 2020. The amendments are collectively one of the most remarkable updates of the Guidelines since their enactment. With the updated Merger Review Guidelines, the JFTC has already conducted several reviews of business combinations between parties running digital services and data-related businesses.

Amendments of the Merger Review Guidelines

Market definition

Multi-sided market

The amendments of the Merger Review Guidelines add the concept of the multi-sided market to the chapter on market definition. Specifically, they state that the multi-sided market may be defined if a platform mediates business transactions between different user segments that have a strong indirect effect on the market. The updated Guidelines also suggest that markets of each user segment may be defined in an overlapping manner.

In the Z Holdings/LINE case (2020), the JFTC found that the code-based payment service business conducted by both parties should be considered a multi-sided market and defined the relevant market for the service as a ‘code-based payment service for member stores as users’ and ‘for consumers as users’.

Factors to be considered when defining the digital market

The amendments of the Merger Review Guidelines add a description of the factors to be considered when defining the market for digital services.

With regard to product and service perspectives, the new Merger Review Guidelines explain that the following factors may need to be taken into consideration when defining the market for digital services: content characteristics (e.g., type and function of the content); qualities (e.g., sound quality, image quality, communication speed and level of security); or user-friendliness (e.g., usable languages and terminals) of the relevant services.

When defining the geographical market for digital services, the amended Merger Review Guidelines describe that the following factors are to be considered, among others: the range within which users can enjoy the services provided by a supplier on or for the same terms such as in quality, etc.; and the range within which the users can enjoy such services that are provided by suppliers.

In the Salesforce.com/Slack Technologies case (2021), the JFTC appeared to take these factors into consideration when it defined the product market. It also defined the CRM software market as multiple markets comprising the overall market and several markets differentiated by functions.

Competition analysis

The competition analysis sections of the Merger Review Guidelines have also been significantly updated by the amendments. The update adds substantial descriptions to the chapter on competition assessment of both horizontal and vertical or conglomerate mergers.

Horizontal mergers

Network effects

The updated Merger Review Guidelines explicitly state that network effects will be taken into account in reviewing business combinations in markets where they function, and they define the effects as the cases where consumers are unable to switch to other suppliers due to switching costs or other reasons and where competitive pressure from consumers does not work effectively. Indirect network effects are mentioned as well. The updated Guidelines state that in mergers in multi-sided markets, such as those of platform operation businesses, the impact of indirect network effects on competition is taken into consideration.

In the Z Holdings/LINE case (2020), the JFTC found that indirect network effects exist between the parties’ various services provided via their platforms and their digital advertisement services. It also found that indirect network effects also exist between the ‘code-based payment service for member stores as users’ and ‘for consumers as users’.

Single or multi-homing

The updated Merger Review Guidelines also state that the difference between single and multi-homing will be taken into account, and that the former will have a greater impact on competition than the latter.

In the analysis of the code payment service market in the Z Holdings/LINE case (2020), the JFTC appears to pay attention to the parties’ explanation that there exists significant multi-homing by users in the market and concludes that certain (but not high-level) multi-homing exists there.

Vertical or conglomerate mergers

Assessment of the importance of data

The updated Merger Review Guidelines add a description of how to assess the importance of data in the context of merger reviews, stating that it is to be assessed using the following relatively common ‘1W3H’ framework, which is essential when conducting risk assessment of merger reviews of future data-driven mergers:

  • What kind of data is held or collected by one of the parties (Company A)?
  • How much data or how wide a range of it is collected by one of the parties on a daily basis as well as how much data is already held by it?
  • How frequently does one of the parties collect data?
  • How much does the data held or collected by Company A relate to the improvement of the services, etc., by data provided by the other parties (Company B) in the product market?

In the M3/Nihon Ultmarc case (2019), the JFTC evaluated the level of essentiality of a medical database provided by Nihon Ultmarc by using a framework similar to the 1W3H framework and found that the database may be critical for downstream competitors.

Data foreclosure

The updated Merger Review Guidelines mention the input closure in the digital market, where refusal to supply data can make competitors’ businesses difficult in the downstream market.

In addition, the refusal to license important intellectual property rights may affect the business activities of competitors in the downstream digital market. In practice, there are cases where competitors in that market are suffering from disadvantageous positions due to the loss of application programming interface (API) interoperability with one of those parties. The impact of such refusal is explicitly mentioned in the updated version of the Merger Review Guidelines, and the impact of such loss of API interoperability is taken into consideration in recent cases, most notably in the Google/Fitbit case (2020) and Salesforce.com/Slack Technologies case (2021).

Killer acquisitions

Killer acquisitions, where a company that is not currently a major competitor but is expected to become a potentially strong one and intensify competition is eliminated from the market through an early acquisition or other means, are increasingly being discussed all over the world, especially in the context of the digital market. In the updated Merger Review Guidelines, killer acquisitions are certainly explained, including the mechanism of their anticompetitive effects. In Japan, there have been no actual cases in which such concerns have been tested so far. The updated Guidelines explain that, among other concerns, whether and how to consider the impact on future competition is expected to be reviewed in the event that such concerns are realised.

Introduction of new thresholds

In Japan’s merger review regulations, thresholds are established based on domestic turnover of the parties relevant to the business combinations. However, as mentioned earlier, it is sometimes important to evaluate the impact on competition of the acquisition of a company with small existing turnover but huge future growth potential (i.e., killer acquisition). In light of such concerns, new thresholds, mainly based on transaction size, have been introduced in conjunction with the revision of the Merger Review Guidelines.

While the transaction size-based thresholds are not mandatory notification thresholds in the traditional meaning, a JFTC policy document (Policies Concerning Procedures of Review of Business Combination) strongly recommends that the merging parties voluntarily consult with it. Therefore, the newly introduced transaction size-based thresholds are expected to function like a kind of notification threshold in practice. The exact description of the newly introduced thresholds is when the total consideration for the acquisition exceeds ¥40 billion and the business combination plan is expected to affect domestic consumers in one of the following three ways (parties with a notification-free business combination plan are recommended to consult with the JFTC):

  • when the business base or research and development base of the acquired company, etc., is located in Japan;
  • when the acquired company conducts sales activities targeting domestic consumers, such as opening a Japanese website or using a Japanese pamphlet; and
  • when the total domestic sales of the acquired company exceed ¥100 million.

Among the recent publicly announced precedents, the M3/Nihon Ultmarc case (2019) and Google/Fitbit case (2020) were reviewed by the JFTC, although the mandatory notification thresholds were not met.

Since the JFTC pays extra attention towards business combinations in the digital sector, it is expected to contact the parties to business combinations in this sector where the transaction sizes appear to exceed the above-mentioned thresholds, even if the domestic turnovers of the targets appear not to meet the traditional thresholds.

Concerted practices in the digital market

As for concerted practices in the digital market, the JFTC has recently issued a noteworthy study group report, the Algorithms Report.

The relationship between algorithms or AI and competition policy has been the subject of worldwide debate for the past several years, starting with a discussion held at an Organisation for Economic Co-operation and Development forum. A series of policy documents, discussion papers and guidances by competition authorities in various countries have been released to date. The Algorithms Report is positioned as one of these papers. Similar to other materials released by the various authorities, it discusses four scenarios of concerted practice caused by algorithms and AI: monitoring algorithms; parallel algorithms; signalling algorithms; and self-learning algorithms.

The fundamental argument of the Algorithms Report is that the existing AMA adequately addresses the concerted practices caused by algorithms and AI. The report also suggests that the JFTC will closely watch technological developments and how new technologies are used in business activities, as well as cases of concerted practices caused by self-learning algorithms.

So far, no specific cases of concerted practices in which algorithms and AI have played a substantial role are known in Japan, but close attention to future developments may be required.

Future trends

In 2020, the Transparency Act was enacted and certain digital platform operators were designated in 2021 to comply with the Act. The Transparency Act focuses on ensuring transparency for digital platform operators in their dealings with other businesses and imposes various codes of conduct on those operators regarding, among other things, information disclosure and self-reporting. In addition, the JFTC and other government authorities have conducted a wide range of fact-finding surveys on various digital transactions, such as those made in e-commerce, app stores and the digital advertising market. The findings generally suggest that companies operating businesses in the digital market should conduct their business activities in accordance with the AMA and competition policy. In this regard, Japan is establishing rules to regulate practices in the digital markets largely through ex ante regulations. On the other hand, compared with Europe, ex post regulations, which strictly apply competition law to giant digital platform operators for abusing their powerful market positions, apparently have not been actively implemented in Japan.

To keep its eyes on the market, the JFTC has recently established the Office of Policy Planning and Research for Digital Markets, a new department that analyses the application of the AMA on the digital markets. On merger control, the JFTC strengthened the team that reviews digital-related mergers.

In light of these developments, companies running businesses in the digital market in Japan must keep abreast of the most up-to-date information on the competition laws and policies applied to digital markets.


1 Hideki Utsunomiya and Yusuke Takamiya are partners and Yuka Hemmi is an associate at Mori Hamada & Matsumoto. The information in this chapter was accurate as at November 2021.

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