WASHINGTON – The Japan Fair Trade Commission (JFTC) has finalized its guidelines to implement the Act on Promotion of Competition for Specific Smartphone Software (SSCPA). ACT | The App Association issued the following statement:

“The App Association remains deeply concerned with Japan’s intervention into curated online marketplaces (COMs) through its Act on Promotion of Competition for Specific Smartphone Software (SSCPA),” said Morgan Reed, president of ACT | The App Association. “The final guidelines for SSCPA implementation, recently released by the Japan Fair Trade Commission, fail to address the major concerns small technology companies and independent developers expressed during the comment period. Much like the EU’s Digital Markets Act, Japan’s regulatory approach to COMs’ practices will undermine the foundations of digital platforms, such as security and privacy, that app developers rely on and consumers expect. Ultimately, distorting the hypercompetitive dynamics of the digital economy will create barriers to entry for small business developers and limit consumer choice.

“The App Association remains committed to engaging with the JFTC as implementation of the SSCPA moves forward to ensure that its policies support small business growth and job creation.”

For App Association Members and other small technology companies, regulatory hurdles like the SSCPA mean diminished prospects:

  1. Diminished Distribution Value for Small Businesses
    Small businesses that distribute their goods and services through curated online marketplaces (COMs) benefit disproportionately from those marketplaces making active management decisions. Examples include removing bad actors and elevating the best deals so that consumers want to come back to the marketplaces. These functions matter less to billion-dollar app brands and larger sellers for several reasons:

    1. They have their own brand recognition and need to rely less on consumers’ knowledge of and trust in established marketplaces;
    2. They have more resources to provide their own intellectual property enforcement, marketing, privacy, and security features, and are less reliant on the marketplaces’ versions of these services (e.g., they have the money and most importantly the time to shop around on the market for these things); and
    3. They actually benefit from their smaller competitors bearing greater distribution costs as a result of Japan’s digital platform regulations.

    Japan’s SSCPA weakens these critical COM management activities that the vast majority of developers rely on to compete and innovate, and distorts competition between platforms that contend for developer and consumer engagement.

  2. Increased Overhead Costs for Small Businesses
    Smaller companies leverage COMs to reach global markets and benefit significantly from using the cost-effective services COMs provide. For app developers, for example, being able to hit “publish” after undergoing app review and immediately be available to more than a billion smart devices and discoverable through on-device search is an exceptionally cost-effective path to market with minimal overhead. Under Japan’s SSCPA, each app developer will have to go through far more layers of app review and abide by multiples of app store guidelines to reach the same number of potential consumers. Such an arrangement benefits specific, well-resourced rent-seekers to the obvious inconvenience and detriment of both small businesses and consumers.
  3. Shifting Costs Down from Big App to Small Tech
    In jurisdictions without regulations like the SSPCA, mobile app distribution on the major stores is subject to a progressive fee structure. That is, the largest companies distributing through the stores pay far more than their smaller rivals, like App Association members. Similarly, developers that monetize by selling digital-only goods and services (songs, video game items like “skins” for characters, and mobile app dating services) pay a commission while the vast majority (85 percent) of apps used in connection with or providing access to real world goods and services pay no commission at all when they fall below relevant thresholds. While smaller market entrants and developers clearly benefit from low barriers to entry and low overhead costs, Japan’s SSCPA flips this arrangement on its head by prohibiting key features of the framework that have enabled and empowered the small business developer community. The SSCPA effectively shifts distribution costs downward from the largest companies to the small businesses distributing through the stores.

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