Digital platforms' handling of consumer data to be scrutinized under antitrust law in Japan

The way digital platforms handle consumer data will be scrutinized in the future under the Japanese antitrust law, the competition regulator said today in a draft proposal. By expanding the reach of the antitrust law’s provisions on the abuse of superior bargaining position to business-to-consumer transactions for the first time, the Japan Fair Trade Commission is preparing to enter new territory where competition and data-protection issues merge.

The JFTC clarified today that the competition law's provisions on abuse of superior bargaining position — which have traditionally been applied only to transactions between companies, such as a large retailer and its small suppliers — can be applied to transactions between online platforms and their users, because users offer their personal data, which have economic value, in exchange for receiving a platform’s services.

“If a digital platform operator disadvantages consumers and negatively affects fair competition by collecting or using personal and other data through unfair means, this can pose a problem under the Antimonopoly Act,” the JFTC said in a draft stance on the issue, published today for public consultation.

If an online platform, which has a superior position relative to consumers, takes advantage of its position and imposes unfair disadvantages on consumers, their free and autonomous transactions could be hampered, and the platform may unfairly gain an advantageous position in relation to its competitors," the JFTC said.

In the JFTC’s previous enforcement actions based on the abuse of superior bargaining position, the rather ambiguous nature of this type of antitrust violation often prompted appeals from companies that were punished, based on the circumstances under which a company is regarded as having a superior bargaining position, as well as on what kind of conduct is seen as abusive, among other issues.

The JFTC said today that a digital platform can be seen as having a superior bargaining position if consumers are obliged to accept its disadvantageous treatment in order to continue to use its services. The regulator will look into whether consumers had a need to continue to use the platform for such reasons as a lack of an alternative to switch to, or if the platform was able to determine prices, quality and quantity relatively freely.

The JFTC pointed to two types of conduct as potential abuses:  unfair means of personal data collection, and unfair utilization of personal data.

If a platform collects personal data without notifying the purpose of its use, beyond the scope of necessity, or without taking proper security measures, that can be seen as an abuse. Collecting additional personal data, even though the service remains the same, could be seen as abuse as well.

Use of consumers’ personal data beyond the stated purposes can also be seen as an abuse of superior position. For instance, if a platform collects personal data for the purpose of selling products and uses them for targeted ads without the consumers’ consent, that can be seen as an abuse. Providing personal data to third parties without consumers’ consent could also be seen as an abuse of superior bargaining position.

The JFTC didn’t name any specific platform in today's statement, saying only that the platforms include online malls, application markets, search, content providers, and social media.  

MLex was told the JFTC had social media platforms such as Facebook in mind when drafting this new stance by looking at the German regulator's actions against Facebook. The JFTC is also investigating Amazon Japan for suspected abuse of superior bargaining position.

The JFTC released today's document for public consultation, and will accept opinions until Sept. 30.

Earlier this morning, JFTC officials explained the regulator's new stance to lawmakers from the ruling Liberal Democratic Party, or LDP.

Tatsuya Ito, head of the LDP’s competition unit, told reporters after the meeting that the JFTC and the Personal Information Protection Commission would have to work together, because the JFTC will address the areas where the privacy commission cannot apply the privacy law.

“Unfortunately, there are areas that the Act on the Protection of Personal Information cannot cover, and this is where the JFTC steps in. It’s major progress that the JFTC has clarified its stance over competition issues [in this area],” Ito said.