Tentative Translation

Competition Assessment of the
Mobile Ecosystem
Final Report : Summary
June 16, 2023
Secretariat of the Headquarters for Digital Market Competition
Cabinet Secretariat, Japan

Competition Assessment of Mobile Ecosystem: Awareness of Issues
1. Importance of Mobile Ecosystem to economy and society◆ Smartphones are rapidly spreading in our society, and through smartphones, people are able to enjoy a variety of services
necessary for their daily lives. For consumers, they can keep them on hand and use services anytime, anywhere. For
businesses, smartphones provide an unprecedented opportunity to access a wide range of users as a strong
customer contact point. Accordingly, smartphones have brought tremendous benefits to both parties, serving as thefoundation of economy and society.

2. Influence of Platform Operators in Mobile Ecosystem◆ Businesses that access customers through smartphones need to provide services in accordance with specificationsand “rules” set by OS , app store, browser, etc.
⇒ Platform operators that form Mobile Ecosystem have a strong influence in determining nature of digital space .

This competition assessment has been conducted on how layer structure in Mobile Ecosystem affects
competition environment .
3. Draft development process and Goal

Interim report was published in April 2022, soliciting public comments. This final report has been completed, withparticipations of security and privacy experts, and a representative from the consumer related stakeholder group in Working
Group, while considering the large number of domestic and foreign feedbacks received during public comment period,
conducting interviews to various stakeholders inside/outside the country, conducting surveys to businesses and consumers,
and exchanging views with relevant foreign governments,.
◆ GOAL: By realizing fair and equitable competition environment in Mobile Ecosystem, while ensuring security andprivacy, innovation by various entities is activated, and users can choose various services created and benefit
from them1Growing importance of Mobile Ecosystem in economy and society◆ Smartphones spread rapidly, reaching 90.1 % of households (2022)◆ Average time spent for daily mobile internet use has also increased significantly both weekdays and holidays.
✔ Weekdays : 37.6 minutes (2012) → 110.0 minutes, about three times (2021)✔ Holidays: 53.7 minutes (2013) → 126.8 minutes, more than double (2021)◆ Mobile content-related market is also expanding (over 7.7 trillion yen, 108% from previous year) (2021)
Changes in average time spent for Internet

Smartphone penetration rate

* Average time spent for Internet on
major devices (all ages (holidays))

Smartphones(90.1 %)

Survey on information and communication media usage time and behavior (Figure 3-1-1-2)

Mobile content market

Created from “2022 telecommunication usage trend survey”, Chart 1-1

Mobile content-related market

Unit: Billion yen

Year

2018

2019

2020

YoY

2021

YoY

Mobile content market

2226.12337.82629.5112%2822.4

107%

Mobile commerce market

3994.14549.34486.399%4883.7

109%

Mobile content-related market

6220.26887.17115.8103%7706.1

108%

Mobole Content Forum Research*1 Games/social game market: Billedcontent in online games, SNS, etc.
Includes avatars, items, and otherpurchasable tools.
*2 Video/entertainment market: Video andother content available on smartphones
and other devices.
*3 E-books, etc. market: Book, comic andmagazine content available onsmartphones and other devices.
*4 Music content market: Music content
available on smartphones and otherdevices.

2

Layer Structure and Characteristics of Mobile Ecosystem

3◆ Layer structure: Consists of OS layer where only a handful of players exist, and other layers (app store, browser, etc.) withfoundation of OS layer◆ Characteristics of Mobile Ecosystem✔ Network effect : Increase in users by bringing in attractive apps . As the number of users increases, the number ofapps and developers in the ecosystem futher increases✔ Switching costs : User lock-in due to familiarity with UI design, and hassle of migrating data and reinstalling apps
✔ Economy of scale : Huge cost of development✔ Data Accumulation : Data, which cannot be obtained by other businesses, is collected and used in each layer.
Further increase competitiveness of platform operator in each layer⇒ High barrier to entry. Oligopoly with a small number of platform operators
Two different business models

Layer structure and characteristics
OS
vendor's
own apps

Thirdparty apps

OS
vendor's
own web
services

・Network effects
App store

BrowserThird-party
webservices

・Network effects

Operating System
・Economies of scale・High development costs

Native
apps

App
Store

Web
contents

SafariiOS

Otherbrowsers

Nativeapps

Google
Play
Store

Web
contents

Other
app storesApps distributed
outside app stores

ChromeOther
browsers

Android

Devices/Hardware
Apple

user

・Switching costs
・Lock-in

GoogleOEM

Apple : Strength in devices, vertical integration (App store, browser engine)
Google : Strength in searches, etc. , pre-installation and default setting with contracts

Market Share of Mobile OS

4◆ Oligopoly by iOS (Apple) and Android (Google)✔ According to “the White Paper on Mobile Society 2022,” market share of the most frequently used OS is 53.4 % forAndroid and 46.6 % for iOS (2022) [Figure below] * Web survey based on the number of units in operation✔ Oligopolistic state of Android and iOS. No big change in this trend.

Note: Answered by Android or iPhone users
Source: 2011-2022 Mobile Trends Survey to General Use

White Paper on Mobile Society 2022 (Mobile Society Research Institute)Role and Characteristics of Each Layer
layer

example

role
•

OS

iOS , Android••

app store

App Store,
Google Play store••
browser

Safari, Chrome••

searchservice

Google search••

Get softwares in each layer above OS
work to function on mobile devices
Significant influence across whole
Mobile Ecosystem
Gateway for app developers to deliverapps to mobile device users
Platform operator reviews apps basedon its guideline, and decides on
distributable apps

Characteristics•••

Indirect network effect (getting more users leads to more developers, attracting more users)
High barrier to entry (large-scale development resources required, etc.)
Switching cost (UI , replacement cost, data accumulation, etc.)*Questionnaire result: Continued use of the same OS as most recent one
iOS (88.1%), Android (96.8 %)••Indirect network effectHigh barrier to entry (prohibiting other app stores (Apple), preinstallation and default settings
through offering monetary benefits to OEMs (Google), etc.)
Switching cost••

Indirect network effect (Websites tend to adapt their functionality to browser that has acquired
many users (compatibility), making the browser more attractive to users)
High barrier to entry (difficult to enter for browser with limited website compatibility, superiority
of defaulted browsers, large-scale development costs, etc.)
Switching cost (due to data such as ID/ password, bookmarks, etc.)*Questionnaire result: The most frequently used browser
Safari for iOS (66.3 %), Chrome for Android (66.6 %)•Network effect ((The more users for the search service, the more websites focus on
responding to that search service. In addition, accumulation of data ffrom many users
improves search result quality and accuracy, leading to more users acquired.)High barrier to entry (large-scale development and maintenance costs, data accumulation ofquery and index),
Switching cost (advantageous position from pre-installation, default settings)*Statcounter survey: Search service market share in mobile devices
Google (80.7 %), Yahoo! (17.8 %), Bing (0.5 %)Gateway for website operators topresent website to mobile device users•
Browser’s function affects websites’
functions, etc.
•
Influence on development of web
services including as web app

Gateway to web for users
Search results, display, etc. are
critically important for web services toreach users

5••

Vision and Approach to address issues
Recognition of Mobile Ecosystem as a whole
Perspective characteristics of mobile ecosystem◆ Each major layer of ecosystem is an oligopoly of a small number of platform operators✔ Google : Adopt a strategy of widely providing major products such as mobile OS and search engines to third parties,
having a strong position in each layer✔ Apple : Adopt vertically integrated model, determining pre-installed softwares on its devices and OS◆ Platform operators leverage their strengths in each layer to effectively determine various rules that stipulatecompetition conditions in other layers.
✔ Ensure and fortify its position in layer where advantages exist✔ Reinforce its competitiveness of its services in other layers◆ Multiple and synergistic inter-layer-actions of a handful of platform operators enhance their dominant position ineach layer, in conjunction with which, influence in the whole ecosystem is reinforced, and even entrenched

Various competitive concerns in each layer and whole Mobile Ecosystem◆ Deterioration of level playing field (between platforms and third parties, and between third parties)◆ Rising business costs and depreciating commercial viability in each player◆ Exclusion from and supressed entry in each layer as well as whole Mobile Ecosystem, and Elimination of competitionpressure through technological innovations, etc.

6Vision and Approach to address issues
Our vision of whole Mobile Ecosystem, and Direction toward realization
Our vision of whole Mobile Ecosystem◆ Ensure opportunities of innovation by diverse entities and consumer’s choice, in each layer of Mobile Ecosystem✔ Encourage innovation by technology advance, etc., by means of function of competitive pressure to whole Mobile
Ecosystem and to individual layer. Furthermore, Ensure competitive environment not eliminating possibility of
upcoming paradigm shifts by which existing Mobile Ecosystem are changed to considerable degree✔ In cases where one layer affects competition in others, ensure an equitable and fair competitive environment in
the other layers.
✔ Ensure not to impair an equitable and fair competitive environment, which can be influenced by leverage in Mobile
Ecosystem in competition for extending to new customer contact points.
◆ Importantly, Ensure security and privacy .
Direction toward realizing the vision◆ Combine measures according to characteristics of each layer and impact it has on other layers or ecosystem as a whole✔ Measures to increase competitive pressure in the layer✔ Measures to remove concerns due to conducts or influences to other layers◆ Matters to be fully considered✔ As smartphones have become ubiquitous and indispensable for many, and they handle various types of information
including highly sensitives, it is extremely important to ensure security and privacy in Mobile Ecosystem✔ Necessary to give sufficient consideration to impact of competition policy measures on security and privacy

7

Vision and Approach to address issues

Perspectives in addressing issues: Difficulties in solving problems, and Further concerns in the future◆ In transactions using digital technology, cost associated with transaction is generally small, network effect is strong and it functions
rapidly. Therefore, once tipping occurs, it will lead to a monopoly (or oligopoly), and this problem is difficult to solve through themarket function⇒ These digital characteristics are exhibited in multiple layers, resulting in position of platform operators established as extremely
entrenched and fixed◆ Due to use of algorithms, etc., the business decision process becomes untransparent (information asymmetry)⇒ Platform operators can easily exercise influence in each layer of Mobile Ecosystem◆ Transactions using digital technology are likely to form a large two-sided market, consisting of businesses and consumers, due tostrong network effect.
✔ While presenting low-priced or free of charge to consumers , presents conditions unfavorable to businesses. In between,
platform operators can enjoy the rent
✔ As platform operators control access to consumers, businesses are locked in, making it difficult for issues to be cure frombusiness side
✔ As whole picture and issues do not tend to become apparent for consumers, making it difficult for issues to be cure fromconsumer side
⇒Difficult to expect autonomous solution by market function◆ Limited rationality of consumers (Limited recognition of choices, Constraints on rationality of choices and judgments due to status
quo bias)✔ Limitations on screen size of mobile devices, characteristics of usage situations (while moving, etc.) and operability✔ Concerns grow even greater as constant connectivity is linking with purchasing activities and payments⇒ If platform operator restricts or induces consumers choices, more concern arises as to deteriorating rational judgment ofconsumers◆ Expand influence in Mobile Ecosystem by leveraging mobile devices, as powerful and always-connected customer touchpoint⇒ Concerned about deepening influence on activities of consumers and businesses

8Vision and Approach to address issues
Challenges in addressing by existing legal frameworks, and Need for renewed approach◆ Conventional competition law approach
1. Identify theory that a particular conduct causes a harm to competition in a relevant market
2. Specifically prove that the harm is occurring in accordance with the theory, and
3. Implement remedy to eliminate the harm
Challenges of Competition Law Approaches to Mobile Ecosystem◆ Typically, a platform operator in a position, enabling it to exert influence to other multiple layers, causes competition problems by anindefinite and simultaneous (and usually) multiple conducts, implemented at any layer that it can leverage.
✔ Even if competition harm caused by a single conduct is relatively minor, multiple conducts work in a combined andsynergistic manner, to manifest the competition harm.
✔ Impact is brought in on a different layer than the one in which conduct is performed.
◆ Difficult to define market✔ Many zero-price markets and multi-sided markets, making it hard to use conventional methods.
✔ Difficulty in envisioning future competitors, due to difficulty in predicting technological innovations◆ Difficult (1)to identify theories regarding the process by which numerous conducts cause competition harm, (2)to specifically provethat harm is caused in accordance with the theories, and (3)to consider justifications and to make a judgment✔ Information necessary for evaluation is unevenly distributed on the side of platform operator✔ Difficulty in evaluating qualitative factors such as privacy and customer experience, other than price

Need for renewed approaches◆ Considerable amount of time to reach a final conclusion (during which time competitive environment may change)◆ Even if illegality can be proven, the same kind of harmful effects on competition may be repeated by means ofcircumventing conducts outside the scope pointed out by the enforcement agency

New approach needed different from conventional competition law approach9

Vision and Approach to address issues

10

Approach for consideration of measures
As is seen previously, it is necessary to consider different approach to competition issues in Mobile Ecosystem, other thanconventional competition law approach .
Measures by means of “ex-ante regulation”◆ Once tipping occurs, it leads to a winner-takes-all situation, which is difficult to be overcome through market function◆ It has become clear what types of conducts by platform operators are at high risk of adversely affecting competition⇒Appropriate to address issues by means of prohibiting or obligating certain acts in advance, “Ex ante regulatory
framework”.
◆ Specific conducts by platform operators that may adversely affect competition might be measures taken for ensuring
security and privacy. Such measures are permissible as justifiable ones in certain cases, even though they may haveadverse impact on competition.
Measures through a “co-regulatory framework”◆ There are other issues that should be dealt with “co-regulatory framework, ” adopted by existing “Act on Improving
Transparency and Fairness of Digital Platforms” (“the Transparency Act”)⇒ Such issues is to be dealt with through a “co-regulatory framework”

Policy Mix of two approaches“ Ex Ante regulatory framework” and “Co-Regulatory framework”

Vision and Approach to address issues

11

Major Points of New Frameworks

Business to be regulated◆ Mobile OS providers can acquire a position in each layer by providing a mobile OS or by designing a mobile device
including an OS themselves. They shape, strengthen, and entrench Mobile Ecosystem by exerting a strong influence oncompetitive landscape across layers as well as ecosystem as a whole⇒ Platform operators that provide mobile OS (*)of a certain size or larger should be subject to regulation.
◆ Currently, mobile OS providers are leveraging their positions to gain dominant positions in each layer in Mobile Ecosystem◆ However, depending on type of conducts, even if it is not a mobile OS provider, a platform operator, who has developed aservice of a certain size or larger, can gain its potent position, in backdrop of which it may engage in conduct causing harmful
effects on competition.
◆ Thus, it is also imperative to secure equal footing, in case even operators not providing mobile OS will have solidified
position in certain layer in the future.
⇒Platform operators that provide services of a certain size or larger in app store, browser, or search engine should
also be subject to regulation according to the characteristics of the regulated conducts(*)When use the term “operators that provide OS” without any annotations, “OS” means “mobile OS”.

Submission and publication of compliance report with regulation by platform operators◆ As it may be difficult for enforcement agencies, etc., to grasp the status of compliance, it is important for regulated operators
to explain the status of compliance .
◆ By having regulated operators check their own compliance with new regulations, deterrence of violations is expected.
◆ To ensure effectiveness of regulations, it is important to make the status of compliance known to stakeholders and to createa system that allows stakeholders to check it⇒ Regulated operators shall submit a report to the enforcement agency on status of compliance with new regulations,and the report shall be made publicCountermeasures to circumvention◆ Make sure that conducts outside the scope specified by enforcement agencies do not cause similar harm to competition.
⇒Need for rules to prohibit circumvention

List of Specific Issues

12Specific Issues

Slide #

1. Specification changes, etc. in OS, browser,
etc.

1-1. OS and browser updates, specification changes, and rule changes
1-2. Tracking rule change in OS (representation to end users)
1-3. Standardization of technologies that give the company an advantage in search (changes in othermajor parameters, etc.)

13
15
16

2. Application store related issues

2-1. Mandatory use of payment/billing system
2-2. Restrictions on information provision, steering, etc. of other billing systems, etc. within app
2-3. Establishing competitive environment among reliable application stores (allowing alternative
distribution channels for apps)
2-4. Closed middleware

17
19
20

3. Browser functionality restrictions

3-1. Mandatory use of WebKit and reluctance to support web applications
3-2. Access restrictions on browsers to functions of OS, etc.
3-3. Limitations in browser extensions

25
25
27

4. Pre-installation, default settings

4-1. Pre-installation, default settings
4-2. Preferential treatment of its own services in its own search service

28
30

5. Acquisition and use of data

5-1. Use of acquired data
5-2. Opacity of data acquired, etc.
5-3. Ensuring data portability by end users
5-4. Social Login (" Sign in with Apple ")

31
32
32
33

6. Access to functions of OS, etc.

6-1. Access restrictions on apps to functions of OS, etc.(MiniApp)
6-2. Access restrictions to UltraWideBand
6-3. Access restrictions to NFC (Near Field Communication)
6-4. Time advantage of app development associated with OS updates, etc.
6-5. Access restrictions on voice assistants
6-6. Links with Siri using SiriKit
6-7. Access restrictions to functions of mobile OS, etc, from smartwatch

34
35
36
37
38
39
39

7. Other concerns about voice assistant andwearable devices

7-1. Monitoring scheme

40

24* a part of issues are omitted.

1. Specification change of OS , browser, etc.
1-1. OS and browser updates, specification changes, and rule changes①
Issues◆ Apple and Google provide a system to accept inquiries and feedback from developers, etc. to a certain extent when changing rules, etc. in OS and browser.
◆ However, there are concerns from developers, etc. that sufficient preparation time is not secured, the scope of information provided is insufficient,and responses to inquiries and requests for consultation are insufficient.
✔ Time that should be devoted to quality improvement is deprived due to being busy with responses to rule changes etc. in a short period of time
✔ For major updates, the specifications of the new version are not finalized until just before the release, and a few days after the final update version isreleased, the new version is distributed to users.
✔ Information on when the new OS update is released and how the update would work is not sufficient.
✔ Even if developers make an inquiry or request to discuss the extension of the preparation period, they only receive responses in fixed form, andeffective consultation is insufficient◆ From survey results, problems related to rule changes, etc. in OS and browser have been identified.
✔ Questioned, on OS specifications changes or updates, whether there were problems, such as bugs in apps, delays in apps’ revision or release,and more workload than the initial business plan, more than 60% answered “often” or “occasionally” .
✔ In response to questioning what kind of problem it was (multiple answers allowed), "It is difficult to obtain useful information for responding to thechanges" [iOS : 71.35 % , Android : 69.74 % ] , " Insufficient Japanese versions of documents related to development, including the details ofchanges” [iOS : 40.94 %, Android : 35.53 % ] , “Not enough time to be informed on the details of changes” [iOS : 36.26 %, Android : 36.18 % ] (SeeFigure below)

iOS

Android13

1. Specification change of OS , browser, etc.

14

1-1 . OS and browser updates, specification changes, and rule changes ②
Competition assessment◆ Predictability and transparency of app developers, website operators, etc. may be hindered, resulting in excessive burdens and businessuncertainties and risks for them. This may hinder innovation by developers and reduce consumer choices.

Direction of addressing issues◆ As to rrule changes, etc. in OS and browser ( * ),, to improve fairness and transparency, and to make the process of dialogue with developers more
effective, platform operators that provide operating systems of a certain size or larger or browsers of a certain size or larger shall be
subject to the following co-regulatory framework:✔ Requirement to disclose in advance detailes and reasons for rule changes, etc.
✔ Since the content of rule changes, etc., varies, the timing of disclosure will not be uniform, but will be “a date for ensuring a reasonable
number of days” according to the content of the changes.
✔ As specification changes are frequent and numerous, exceptions are allowed, in case of extremely minor changes, security risks that
require urgent action, etc.
✔ Development of procedures and systems for responding to inquiries and dialogues, to the extent necessary and reasonable✔ Organizations representing developers, etc. are also allowed to become parties for dialogues.
✔ Recommendations and publication by the government regarding the procedures and systems necessary to promote information disclosureand mutual understanding, when deemed particularly necessary✔ Reporting of operational status to the government and monitoring and review by the government* As to browsers, above is not limited to mobile devices, but applicable to PCs , etc.

1. Specification change of OS , browser, etc.

15

1-2 . Tracking rule change in OS (Representation to end users)
Issues◆ Apple requires developers (1) to display a phrase (ATT prompt) that emphasizes the risk that anunspecified number of other companies will track users, and (2) to obtain permission from theusers to track them, when the app tracks the users using the IDFA (Identifier for Advertisers), which
is a unique ID assigned to each iOS device.
✔ ATT Prompt: “Allow ‘(app name)’ to track your activity across other companies’ apps
and websites ? “ In the case of Apple's own apps, it is not required to display ATT prompts because they do nottrack users using IDFA, and Apple shows another notification for choices. But the tone of that
notification is positive, emphasizing the merits of personalized advertisements compared to
ATT prompts, when asking if they want to "Turn on personalized ads“.
✔ Notifications in Apple‘s own apps: “Personalized ads: Personalized ads in Apple’s apps such as
the App Store and Apple News help you discover apps, products and services that are
most relevant to you. We protect your privacy by using device-generated identifiers and notlinking advertising information to your Apple ID.”
◆ Apple says it doesn't track users, but it may use user account information, App Store information,and other information to assign users to segments in order to display personalized ads .

▼ Apple 's own display▼ ATT prompt(example)app name

app name

Competition assessment◆ While ATT prompts require the text enphasizing the risks of tracking users, Apple emphasizes its benefits in a positive tone when asking for permission forApple's own personalized ads. Although there is no need for the two displays to be the same, it is difficult to say that they are treated fairly.

◆ There are concerns that Apple is using its position as an app store rule maker to determine how the prompt should be displayed, creating a favorable
environment for its own advertising business model. If so, there is a risk that fair competition in the field of advertising business will be hindered.

Direction of addressing issues◆ Apple’s obligation of ATT prompt is a condition of app review or its operation. Therefore, this issue will be dealt with the framework of the obligation
to make the terms of use for business users of app stores fair, reasonable and non-discriminatory, as described in 2-1.

1. Specification change of OS , browser, etc.

161-3. Standardization of technologies that give the company an advantage in search (changes in other major
parameters, etc.)
Issues◆ From February 2016 to May 2020, Google made it a requirement to adopt the AMP ( * ) format for being diplayed in the top news carousel in
Google search.

* Accelerated Mobile Pages : Technology that promotes high-speed loading of content

Competition assessment◆ For website operators, whether or not their own websites are displayed at the upper place in Google search has a great impact.
✔ There is concern that Google has given the competitive advantage to its search business by imposing the above requirements, distributing
news services, etc. via its own servers and spreading the data formats that are easy for its own search engine to handle.
✔ As indicated in the "Final Report on Evaluation of Competition in the Digital Advertising Market" (April 27, 2021 Digital Market CompetitionCouncil), there are concerns about the transparency and fairness of changes to major factors in search engines.

Direction of addressing issues◆ In order to ensure the transparency of changes in major factors in search engines and to ensure the predictability for the business of website
operators, platform operators that provide search engines of a certain size or larger shall be subject to the following co-regulatory
framework: (*)✔ Disclosure of major factors such as search engine parameters used to determine website display rankings(Always keep the description of disclosure up to date. Prior disclosure is not a legally obliged, but is described in guidelines, etc.)✔ Establish a mechanism to respond to complaints and consultations regarding search algorithm changes, etc. to the extent necessary andreasonable✔ Reporting of operational status to the government and monitoring and review by the governmentetc※ Measures in line with the direction of addressing issues to issue 9 (Changes to the Main Parameters of Search Engines) in the "Final Report on Evaluation ofCompetition in the Digital Advertising Market" ( April 27, 2021 Digital Market Competition Council). Accordingly, above framework is not limited to mobile devices, but
applicable to PCs, etc..

2. Application store related issues

172-1. Mandatory use of payment/billing systems①
Issues◆ Third parties that sell in-app content, etc., using the App Store and Google Play Store, are obliged to use Apple and Google's payment/billingsystems and are obliged to pay a certain fee (30%, 15%, etc.) through the systems. (In September 2022, Google launched the pilot program,called User Choice Billing, which allows developers to choose other payment/billing systems under certain conditions.)◆ Apple and Google explain that the fee is the price for using app store, and very few of all developers bear the 30% fee. (Apple: 0.3%, Google:
less than about 0.1%)◆ There are strong complaints from developers about the appropriateness and fairness of fee burden, such as the following:✔ Heavy burden of fees is putting pressure on profits✔ Services received through app stores or payment/billing systems do not match fees paid
✔ Fees are disproportionately borne by a part of developers◆ The followings have been pointed out regarding the mandatory use of Apple and Google's payment/billing systems:✔ Unable to provide diverse price plans and services✔ When using Apple's IAP, flexible pricing is not able to be provided because the price is set by the Tier.
◆ App user information is managed by Apple and Google's payment/billing systems, and developers do not have sufficient information, thefollowings have been pointed out.
✔ Direct communication between users and developers are not smooth regarding refunds, cancellations, etc.
✔ Developers find it difficult to provide attentive customer service
app
Purchasing game items,etc.

Payment/billingsystem provided by
the app store
operator

Forced use of
payment/billingsystems(Fee : up to 30%)

user

Other
Payment/billingsystems2. Application store related issues

18

2-1. Mandatory use of payment/billing systems②◆ From the survey results, as shown below, problems related to fees and payment/billing systems have been identified.
✔ Developers who pay 30% fee were asked how to think of it as a price for the service provided by the app store.
⮚ "Expensive" ( Apple: about 59.5%, Google: about 48.3% )⮚ "Relatively expensive" ( Apple: about 23.8%, Google: about 27.6% )and the sum of the answers, for each company, well exceeds 70%.
✔ When the respondents to the questionnaire were asked why "it's expensive" or "relatively expensive," the following answers (multiple answers
allowed) were chosen by many respondents.
⮚ " I feel that the profit margin of Apple/Google is large" ( Apple: about 73.8%, Google: about 67.5% )⮚ "The grounds for fees are not clear" ( Apple: about 60.2%, Google: about 56.3% )✔ Approximately 60% of developers that pay fees request the use of payment/billing methods provided by companies other than Appleand Google.
✔ Regarding the reasons for this (multiple answers allowed), the following answers were particularly frequently chosen.
⮚ “I want to keep the fees for app sales and in-app purchases low” (90 %)⮚ “I want users to be able to choose from a variety of payment methods” (71.6 %)Competition assessment◆ Mandatory use of payment/billing systems hinders the entry of businesses that provide alternative payment/billing methods, hinders
developers from providing diverse rate plans and services, and reduces innovation. Users are deprived of choices and cannot receive a variety
of services.
◆ Fee burdens can squeeze developers' profits and adversely affect their investment capacity, leading to reduction of new value throughinnovation and competition.

Direction of addressing issues◆ Platform operators that provide app stores of a certain size or larger shall be prohibited from obliging developers who use the app stores touse app store providers’ own payment/billing systems.
◆ They shall be required to apply fair, reasonable and non-discriminatory usage conditions (including fees) for app store business users✔ Although third-party payment/billing systems can be used in other countries, a fee of 30% ⇒ 27% (Netherlands) or 26% (Korea) is collected,
and various other conditions are imposed. This requirement will preclude other payment/billing systems from fully being utilized.
◆ Concerns about impediments to communication regarding refunds, etc. will be addressed by monitoring based on the Transparency Act

2. Application store related issues

192-2. Restrictions on information provision, steering, etc. of other billing systems, etc. within app
Issues◆ Apple and Google restrict information provision, steering, etc. within apps bydevelopers using the App Store and Google Play Store.
✔ Using language, within the app, that encourages users to purchase digital
goods outside of the app.
✔ Posting outlinks within the app or otherwise inducing users to transact outsideof the app.
◆ As a result, users will to make purchasing decisions based solely on information
within the app, without knowing other plans or pricing on the website.
◆ Apple and Google explain the reasons for this restriction as follows:✔ To prevent “free rides” that avoid paying fees while using the app store✔ To prevent users from mistaking external sites that seamlessly migrate from theapp to be safe and leading them to malicious sites

websiteapp
Purchasing game items, etc.

Payment/billing systemprovided by the appstore operator

App store operator

prohibits developers fromproviding information, within
apps, about discounted
purchase options on thewebsiteuser

Competition assessment◆ For users, the options of payment/billing service to use and the options of using an app or a service on the web are narrowed, and the user's
interests will be damaged.
◆ Opportunity for transaction of any payment/billing service of other than Apple and Google have significantly limited, adversely affecting
efforts by developers to provide a variety of services, such as improving user convenience.
◆ The reasons explained by Apple and Google lack validity and rationality as follows.
✔ The purchase of digital content within downloaded apps is largely dependent on content development by developers, and thecontribution of app store operators is relatively small, compared to the purchase of apps themselves. Under such circumstances, restricting theprovision of information to users is highly detrimental in the sense that it impairs the opportunities for users’ choices.
✔ Risks such as users being redirected to malicious sites can be dealt with through app revier, bridge pages, etc.

Direction of addressing issues◆ Platform operators that provide app stores of a certain size or larger shall allow developers, for free, to provide information or offertransactions, including different purchase conditions (including outlinks, and including within the app), to users acquired on the app store.
✔ Various restrictions are imposed on outlinks currently approved by Apple, which hinder smooth use. Therefore, such restrictions can be dealt
with by prohibiting anti-circumvention measures.

2. Application store related issues

20

2-3. Establishing competitive environment among reliable application stores (allowing alternative distribution channels for apps)
Issues◆ In principle, Apple does not allow installation of apps other than via App Store on the iPhone.
◆ On the other hand, as seen in “2-1”, regarding App Store fees, various points have been pointed out, such as (1) heavy burden, putting pressure on developers’ profits,(2) beared by a part of developers, (3) App Store operator's profit margin seems to be too high, and (4) the rationale for the fee level is opaque.

◆ For app developers, whether or not to be posted on App Store is virtually a decisive factor in whether or not they can provide services. Accordingly, developers areforced to be conservative, and this hinders innovation◆ Survey to consumers indicates alternative distribution channels for apps will be used if they are beneficial to users and ensure security and privacy.
✔ "I like to use it if it is more secure than App Store" (34.9%), "I would like to use it if the price of the apps is cheaper than in App Store" (32%)
 Developers pointed out that if they can provide apps for both iOS and Android through official third-party application stores under the multi-platform trend, it will open up avariety of possibilities.

Competition assessment◆ Restrictions on alternative distribution channels for apps have created various competition issues;✔ Loss of opportunities for the companies other than Apple to enter iOS application store business✔ No competitive pressure on App Store fees
✔ App review in App Store is not always transparent and fair, hindering innovation and user choices◆ Effectiveness is ensured by designing a system enabling emergence of alternative app distribution channels which can be used by users anddevelopers.
✔ Provided in a manner that demonstrates benefits to users and ensures security and privacy◆ It is important that apps are reviewed by third parties that operate alternative distribution channels to ensure security and privacy (See P.21-23).

Direction of addressing issues◆ Platform operators that provide OS of a certain size or larger shall allow effective use of alternative app distribution channels which ensure

security and privacy.
✔ OS providers can take necessary and proportional measures to ensure security and privacy, etc... A framework for the regulatory authorities todetermine whether the measures are excessive, when there is concern that alternative app distribution channels are not being used effectively✔ OS providers shall not be obliged to allow direct downloads of apps from websites.
 Application stores that ensure security and privacy, etc. are allowed to enter the market, aiming at creating “competitive environment among
reliable application stores”※ It would also be useful to have a certain guideline for app reviews, etc. that should be handled by application stores. Such guidelines, etc., may be presented by security
expert groups, etc. (See P.23)

2. Application store related issues

21

2-3. Examples of threats posed by apps and risk assessment for each type of app alternative distribution channel◆ Effective defense methods differ depending on the threat✔ Malicious apps attacking other apps and storage can be protected to some extent by sandbox.
✔ Sandbox is difficult to defend against certain threats, such as data being stolen as a result of the user granting an app access permission tovarious types of data, or placing an unnecessary load on the device. Those threats can be dealt with by app review by application store.

✔ Attacks that exploit unknown vulnerabilities are difficult to deal with in advance through application store reviews. It can be dealt with by ex-post OS
update or removing them from the application store.

⇒ Dealing with a combination of sandbox, app review by the applicaion store, and ex-post measures, etc. (see below left table)◆ Following types are assumed as alternative distribution channels for apps other than the App Store on iPhone (types other than these are not excluded)
1. App distribution through alternative application stores downloaded through the App Store subject to review by Apple
2. App distribution through alternative application stores pre-installed on the iPhone
3. App distribution through alternative application stores that are downloaded using a browser
4. App distribution by downloading the app itself via a browser without going through any application store⇒ In order to assess the risks in each type of alternative distribution channel for apps, sort out responses to threats based on whether third-party stores
and apps can be reviewed and how they can be (see below right table).
Examples of threats posed by smartphone apps
Threat (broad classification)
Attacks on other apps andstorage (Note 1)
Data theft with user's
permission, unncecessary
resource load
Criminal assistance(prohibition of use ofmatching apps under the age of18, etc.)
The app store itself is fake,etc.
Advanced attacks that exploit
unknown vulnerabilities, etc.

abbreviatio
n forconvenience

sand
box

Risk assessment for each type of application alternative distribution channel

a current response
which is supposed

Potential Actions byStores When Third-Party
Stores Are Allowed

simpleattackDefendable (Note 2)

dealt withby sandbox

dealt with by sandbox

theft

not
defendable

dealt with
by app review

dealt with
by app review

Aidingnotdefendable

Dealt with
by app review

Dealt with
by app review――

Post-incident
response

Post-incident response

fake store
advanced
attacknotdefendable
notdefendable(Note 1) Excludes other threat items in the table.
(Note 2) Note that sandbox has also vulnerabilities.
It is appropriate to conduct the risk assessment based on the people with low literacy.
In particular, there were opinions from consumer groups that the attention should be paid to the fact thatsmartphones, unlike PCs, have many elderly users.

Types of alternative
distribution channels for apps

(2) App distribution throughalternative app stores pre-installedon the iPhone(1) App distribution throughalternative app stores downloaded
through the App Store subject toreview by Apple3) App distribution throughalternative app stores that are
downloaded using a browser④ App distribution by downloading
the app itself via a browser without
going through any app store

Screening of thirdparty stores
Reviewer

App review

threatthreat

Apple

fake
store

Reviewr

Yes

Defendable

third
party store

Defendable

Yes

Defendable

third
party store

Defenda
ble

*

*

third
party store

Defenda
ble

―

―

*

Defendable

simpleattacktheft

AidingDepends
on appreview
Depends
on appreview
Depends
on appreview

Depends
on appreview
Depends
on appreview
Depends
on appreview

Difficult todefend*Difficult todefend*Advanced
attackPostincident
response
Postincident
response
Postincident
responsedifficul
t to
deal
with

*On macOS, Apple provides a "notarization" process even if it is installed via a browser. As for app screening, thecurrent notarization system does not support defense against theft or aiding, and it is thought that some additional
measures are necessary.

2. Application store related issues
2-3. From the perspective of ensuring security and privacy ①
Perspectives of ensuring security and privacy◆ There are two main points of view for ensuring security and privacy regarding alternative distribution channels for apps.
✔ Vulnerability verification perspective to prevent apps from being exploited✔ Perspective of preventing distribution of malicious apps that fraudulently use user data, devices, etc.
◆ In principle, vulnerability verification should be performed by the app developer themselves or by being outsourced.
◆ Application store operators need to take action to prevent the distribution of malicious apps
✔ Due to its nature, it cannot be expected that it will be handled by the app developer (creator of the malicious app).

Measures that application store operators themselves can take from the perspective of ensuring security and privacy◆ Examples of mesures for vulnerability verification (*In principle, efforts should be made by the app developers themselves)✔ Provide app developers with secure coding guidelines for their apps
✔ Actively share critical vulnerability information with app developers◆ Examples of measures to prevent distribution of malicious apps
✔ Effective dynamic analysis for verification of malicious apps
✔ In order to further improve the validity and effectiveness of verification, conduct static analysis; such as listing the APIs used by partiallyanalyzing the binary of the application.
◆ Examples of measures other than technical verification✔ As application store policy, security and privacy are ensured by limiting the apps they distribute to the ones developed by app
developers who can be trusted, toghether with some contractual requirements✔ Streamline app reviews by means of limiting apps to specific categories

222. Application store related issues

23

2-3. From the perspective of ensuring security and privacy ②
Measures that can be used as a reference◆ It would also be useful to present a certain guideline for app reviews, etc. that should be handled by applicaion stores. The guidelines, etc.,
can be presented by security expert groups, etc.
✔ As similar effort, Android Application Secure Design/Secure Coding Guidebook is published by the Japan Smartphone Security Association.
✔ Code of Practice for application stores, etc. published by DSIT (Department for Science, Innovation and Technology) in the UK (seebelow)※ The Secretariat of the Digital Market Competition Headquarters, Cabinet Secretariat, and the UK's DSIT have issued the "Japan-UK Joint Statement on Ensuring App

Security and Privacy" (February 28, 2023), which states cooperation as to sharing insights to ensure protections when users access and use apps and application stores.

Code of Practice for application stores, etc. published by DSIT in the UK (partial excerpt)
The roles of application store operators and app developers in app distribution are listed from the perspective of ensuring security and privacy (published in
December 2022)◆ Application store operator role (summary)✔ Application store operators shall clearly set out and publish security and privacy requirements for apps posted on the application store.
✔ Application store operators shall have a vetting process which includes security checks in which the above requirements are reviewed prior toapproving app submissions and updates. Operators shall notify the developer if an app or update is rejected for security reasons.
✔ Application store operators shall provide an overview of the security checks that are undertaken for apps and updates in a publicly accessible
location.
✔ Application stores shall have an app reporting system so that users and security researchers can report malicious apps, and developers can reportfraudulent copies of their own apps to the application store.
✔ Once an application store operator verifies that an app is clearly malicious, they shall make the app unavailable on the application store assoon as possible but no later than 48 hours. Operators shall notify the developer that their app has been mad unavailable✔ Once an application store operator verifies that an app or an update is malicious, they should initiate a proportionate review of other apps that havebeen produced by the same developer.
✔ Application store operators and developers should consider working with independent parties to assess app security and privacy.
[Examples of information provided by an operator on their security checks]
Apps undergo security check which consists of both automated and manual activities. The following activities will be undertaken• Use of static analysis tools• Confirmation of requirement of permission• Confirmation of Software Development Kit versions• Scanning for default credentials• Sharing of submission with a third party for further static analysis and vulnerability scanning2. Application store related issues

242-4. Closed middleware
Issues◆ Android Open Source Project (AOSP) is open source for mobile devices. Google Play
Services (GPS) is not open source, and it was pointed out that some of GPS shouldbe open source.
◆ It is unavoidable that there is a high risk that GPS will not function properly on
devices that do not comply with the Android Compatibility Definition Document(CDD).
◆ On the other hand, app stores other than the Google Play store pre-installed in CDDcompliant devices can also use some functions of GPS (solid red arrow in the rightfigure), but there is no clear line of demarcation of functions that can beused/cannot be used.
◆ On CDD-compliant devices, GPS also has features necessary for app stores. Thus, togenerate competition among app stores, it is necessary to provide such functions.
✔ When an app developer selects a store to distribute its app, it is important whether
the app store provides payment functions and ID linkage as GPS functions
necessary for the app to function.

CDD-compliant device

CDD non-compliant device

Android OS

Android fork

3rd Store

Play Store

GPS
app1

3rd Store

Play Store

GPS

app2

app1

app2

Competition assessment◆ If OS providers refuse to provide APIs required for app stores to third-party app store operators, a fair and equitable competitive environment
among app stores will be hindered.

Direction of addressing issues◆ Concerns pointed out in the competition assessment may become apparent, when other app stores are allowed by framework described in "2-3"✔ This concern will be addressed by the framework described in “ 2-3.” Under that framework, providing a development environment thatenables apps to be posted on app stores is one of the considerations regarding whether it is possible to "effectively use" of other app
stores.
✔ Depending on the specific case, the obligation to allow equivalent access to functions of OS, etc., described in "6-1“, will be applied3. Browser functionality restrictions25

3-1. Mandatory use of WebKit and reluctance to support web applications ①
3-2. Access restrictions on browsers to functions of OS, etc. ①
Issues◆ Apple restricts browser engine on iOS to WebKit provided by Apple◆ Safari or WebKit has many unavailable features and poor performance✔ Slower to respond to bugs when compared to other browser engines✔ Due to the mandatory use of WebKit, browsers other than Safari on iOS are forced tohave the same bugs and functional defects as Safari, and users are exposed tosecurity risks.
◆ On iOS, some features are available only for Safari, and are/were not available for 3rdparty browsers✔ Full-screen video, web/app installation capabilities, access to Apple Pay, etc.
◆ Safari lags behind web app support✔ The install prompt function is more than 7 years behind native apps in Safari✔ PWA can be posted on the app store on Android, but iOS does not support this function✔ Notifications are 7+ years behind other browsers on Android and 13+ years behindiOSnative apps
Rank
Features
NativeA graph showing
the number ofdays taken to fix
issues bybrowser(Source: Metrics
about bugs
reported by
Google's Project
Zero team)

Status of support for web apps by browsers(Source: Open Web Advocacy)

1
2
3
4
5
6
7
8
9
10

Install Prompts
NotificationsFirst Class Web Apps
App Store Support
Fullscreen API
Badging
Deep Links
Screen Orientation Lock
Bluetooth
NFC

Yes
2009
N/A
2008
2008
Yes
Yes
Yes
Yes
Yes

SafariRejected (7+Years)
In Development (7+Years)
No Signal (5+ Years)
Rejected (14+ Years)
Rejected (11+ Years)
No Signal (5+ Years)
No Signal (7+ Years)
No Signal (10+ Years)
Rejected (5+Years)
Rejected (1+Years)

Chrome#AppleBrowserBan#AppleBrowserBan#AppleBrowserBan#AppleBrowserBan#AppleBrowserBan#AppleBrowserBan#AppleBrowserBan#AppleBrowserBan#AppleBrowserBan#AppleBrowserBan

Firefox#AppleBrowserBan#AppleBrowserBan#AppleBrowserBan#AppleBrowserBan#AppleBrowserBan#AppleBrowserBan#AppleBrowserBan#AppleBrowserBan
Rejected
Rejected

Edge#AppleBrowserBan#AppleBrowserBan#AppleBrowserBan#AppleBrowserBan#AppleBrowserBan#AppleBrowserBan#AppleBrowserBan#AppleBrowserBan#AppleBrowserBan#AppleBrowserBan

Rank
1
2
3
4
5
6
7
8
9
10

Android
Features
Install Prompts
NotificationsFirst Class Web Apps
App Store Support
Fullscreen API
Badging
Deep Links
Screen Orientation Lock
Bluetooth
NFC

Native
Yes
Yes
N/A
Yes
Yes
Yes
Yes
Yes
Yes
Yes

SafariApple chose not to port browser
Apple chose not to port browser
Apple chose not to port browser
Apple chose not to port browser
Apple chose not to port browser
Apple chose not to port browser
Apple chose not to port browser
Apple chose not to port browser
Apple chose not to port browser
Apple chose not to port browser

Chrome
2015
2015
2017
2019
2011
2020
2015
2014
2017
2021

Firefox
No Signal
2016
Google Web APK
Rejected
2011
Google Web APK
2017(?)
2012
Rejected
Rejected

Edge
2020
2016
Google WebAPL
2020
2015
Google Web APK
2017(?)
2015
2017
2021

3. Browser functionality restrictions

26

3-1. Mandatory use of WebKit and reluctance to support web applications ②
3-2. Access restrictions on browsers to functions of OS, etc. ②

Competition assessment◆ Mandatory use of WebKit impedes fair and equitable competition between Safari and third-party browsers✔ It is difficult to provide functions of third-party browsers, including security, and the opportunity to select other browsers with excellent
security, etc. is deprived✔ Users lose the choice of browsers that use browser engines other than WebKit, and are exposed to security risks.
※ Requiring the use of WKWebView for native apps other than browsers is justified to a certain extent in light of security risks.
◆ Hindering the development of web apps, the competition between web apps and native apps is not working well, adversely affecting thecompetitive environment in entire mobile ecosystem.
◆ If there are features that are only available to OS provider's browser, it prevents equal footing of competition among browsers, even if thosefeatures become available for the third-party browsers in the future.

Direction of addressing issues◆ Platform operators that provide OS of a certain size or larger shall be prohibited from requiring app developers to use OS providers’ ownbrowser engines✔ For apps other than browsers, it is acceptable to take necessary and proportional measures to ensure OS and hardware security and privacy.
✔ It is expected that the problem of insufficient support to web apps will be solved by a level playing field among browsers by this obligation.
◆ Issues that platform operators that provide OS of a certain scale or larger may not allow (or delay allowing) other browser vendors to access tothe functions of OS, etc. used for their own browsers is to be dealt with by obligation to allow equivalent access to the functions of the OS,
etc., as described in "6-2"

3. Browser functionality restrictions

27

3-3. Limitations in browser extensions
Issues◆ Extensions to Chrome are not supported on Android (Nevertheless, third-party browsers other than Chrome are not prevented from supporting
extensions)◆ On iOS, extensions to Safari can be installed through App Store, but third-party browsers are not allowed to support extensions.
✔ Apple explains that there are time and technical constraints to the testing required to deliver extensions for third-party browsers at present

Competition assessment and Direction of addressing issues◆ For Android, there are third-party browsers with extensions and users already have choices, thus no particular framework is needed◆ For iOS, for the following reasons, this issue is to be dealt with by framework of the obligation to make the terms of use for business users ofapp stores fair, reasonable and non-discriminatory, as described in 2-1✔ While supporting extensions to Safari, not supporting them to third-party browsers hinders fair and equitable competition among browsers
on iOS.
✔ It is not reasonable explanation that, for extensions to be allowed, Safari is handled by App Store review and third-party browsers cannot be
reviewed due to lack of resources.

4. Pre-installation, default settings

28

4-1. Pre-installation, default settings ①
Issues[Android]◆ Google concludes license agreements, etc. with OEMs, etc., and Google’s own browsers, search engines, voice assistants, etc. are preinstalled and are set as defaults, through the decisions of OEMs to which the monetary incentive are offered by Google based on a large
amount of advertising revenue, etc.
◆ OEMs, abiding by contracts with Google, are required to have certain apps non-deletable, while users can remove or disable all pre-installed apps
[iPhone]◆ Apple pre-installs its own apps, including Safari, and sets them as defaults. Apple adopts Google search as default search engine for iPhone
through a revenue sharing agreement with Google◆ About 40 built-in apps are preinstalled, about a third of which are "operating system apps" that users cannot remove.
◆ When updating iOS, Apple’s apps are sometimes added automatically without asking for user’s consent. Recently, there are many cases where
third parties’ apps exist, competing Apple’s apps being added when updates (fitness, whiteboard apps, etc.)[Impact on users]◆ Users can switch their default browser or search engine◆ However, according to the survey results, the status quo bias tends to work on mobile devices, and the default settings tend to be difficult tochange.
✔ Browser: As for reason for using the most Safari or Chrome, over 80% answered “since it was installed from the beginning of use on
smartphones” (see graph on next page).
✔ Voice assistant: As for reason for using Siri or Google Assistant, over 60% answered "since it was installed when purchased the device"✔ Search engine: Over 70% answered they never changed their default search engine on their browsers. As for the reason, about 50%
answered “since it is hassle to switch to another search engine.”[Impact on businesses]◆As for reason for conceiving that the apps provided by Google or Apple have competitive advantages over other apps, about 55% answered“because they are pre-installed.“

4. Pre-installation, default settings

29

4-1. Pre-installation, default settings ②Competition assessment◆ SInce (1) Contracts, etc. concluded by OS providers have an exclusive effect on competitors, and (2) Users tend to continue to use default
services due to the status quo bias, services set as defaults have competitive advantages, hindering user's autonomous decision-making
and choice opportunities.
◆ Automatically installing their own apps without clearly asking users whether or not to install the apps puts third parties at a competitive
disadvantage, hindering user's autonomous decision-making and choice opportunities.
◆ If applications cannot be uninstalled and there is not enough data space, it becomes difficult for third-party applications to be installed. This
directly or indirectly causes disadvantageous situations for third parties.

Direction of addressing issues◆ Platform operators that provide OS or browser of a certain size or larger shall be obliged to do as follows:✔ Shall allow and technically enable users to easily change default settings on their OS or browser, that direct or steer users to their services✔ Shall display choice screens for ① browser, search engine and voice assistant set as default on OS, ②search engine set as default onbrowser (regardless of whether these apps are theirs or not).
◆ Platform operators that provide OS of a certain size or larger shall display a screen that allows users to choose whether or not to install OS
providers’ own apps when installing them at the time of OS update.
◆ Platform operators that provide OS of a certain size or larger shall allow and technically enable users to easily uninstall pre-installed apps (Incertain cases, restrictions on uninstallation are allowed.)

4. Pre-installation, default settings30

4-2. Preferential treatment of its own services in its own search service
Issues◆ When searching by query including a certain name of place in Google Search, the search results on Google Map may bedisplayed at the top or its vicinity of the search results.
◆ Majority of users are directed from Google search to Google Maps, putting competing maps at disadvantage◆ Currently, search results from various Google’s own services (maps, videos, finance, flights, etc.) are displayed at the
top or its vicinity of the organic search results in a separate frames, making it possible to transition to those services.
◆ Google explains that it displays search results in different formats to provide more relevant and useful answers. It also
explains that this will improve the quality of search services and bring benefits to users and businesses.

Competition assessment◆ Google Search are set as default and has about 77% market share on the devices including non-mobile devices. In suchcircumstances, favoring its own services over others of the same type may have effect of excluding competing
services, which tend to significantly reduce the competition.
◆ While Google has a monopoly position in the field of search services, it is in a state of conflict of interest in that it provides
its own products and services that compete with other companies. Therefore, it is highly necessary to deter preferential
treatment for its own services◆ Differentiation by means of showing a different frame besides the organic search results will contribute to user's
interests in terms of improving quality of search results.
◆ However, if only the search results of the company's own service are displayed in a separate frame and there is noroom for other similar services to be selected, there is a risk that competition with competing services will besignificantly reduced.

Direction of addressing issues◆ It is necessary that platform operators that provide search engines(*) of a certain size or larger should not give their own services any
advantage over similar third-party services in displaying search rankings.
✔ Concrete framework should be further considered, based on how to evaluate the display of search engine providers’ own services taking
into consideration characteristics and display methods of each service.
◆ Considering the convenience of users, while allowing Google Map search results to be displayed by default in a different frame in search result
showings, measures making it easier for users to choose and access other maps are required * not limited to mobile devices, but applicable to PCs , etc.

5. Acquisition and use of data

31

5-1. Use of acquired data
Issues◆ Platform operators that provide OS, app stores, or browsers are in a position to be able to accumulate, use, and retain data generated on platforms.
◆ Both Apple and Google explain that they do not use data generated or provided by third-party developers to compete with third parties.
◆ On the other hand, the Apple Developer Program License Agreement prescribes “Apple will be free to use and disclose any Licensee Disclosures on anunrestricted basis without notifying or compensating You”.

◆ It is pointed out that platform operators developed and provided apps that have functions equivalent to those provided by third parties’ apps, and incorporated
them as OS function, having a significant impact on the third parties‘ business✔ iPhone's "Find" and "Screen Time", Android's "Step count"◆ From survey results, many developers have concerns about the use of data.
✔ As for reason for conceiving that apps provided by OS providers have competitive advantages over other apps:• “Not only data obtained from app users, but also data (location information, etc.) obtained from OS users can be used” (50%)• “They are in a position to be able to easily develop apps using their app store usage information (such as data about top-selling apps)” (35%)

Competition assessment◆ In case platform operators, that provide OS, application store, or browser, acquire and use data on third-party services and compete with the third parties
by providing their own services on their own platforms, those platform operators can compete with the third parties on more advantageous conditions,hindering a fair and equitable competition environment.
◆ Although Apple and Google acknowledge data should not be used to compete with third parties, concerns remain unresolved for the following reasons;.
✔ Uncertainty due to the reliance on voluntary governance by Apple and Google✔ Difficult to verify the effectiveness of their policies not to use data, from the outside.
✔ Agreement with the developers states that the use of the data is not restricted

Direction of addressing issues◆ Platform operators, that provide OS, application store, or browser of a certain size or larger, shall be prohibited from using non-publiclyavailable data generated or provided by third party developers, obtained when the third party developers use the platform provided by the platform
operators, to provide services in competition with those third parties.
◆ Platform operators that provide OS or browser(*) of a certain size or larger shall be required to disclose the following:✔ Disclosure to third parties: Data acquisition and use conditions related to products and services provided by third parties, and governancesystem for data acquisition and use✔ Disclosure to end users: Data acquisition and use conditions related to use of OS or browser by users, and management system for data
* As to disclosure obligation of browser, it is not limited to mobile devices, but applicable to PCs, etc.
acquisition and use

5. Acquisition and use of data

32

5-2. Opacity of data acquired, etc.
Issues◆ Apple and Google feedback data to a certain extent to third parties◆ On the other hand, many developers pointed out that the types and scope of data acquired by platform operators cannot be seen from outside.
◆ As developers are forced to use the app store provider's payment/billing system, they are unable to obtain sufficient information about
users, making it difficult to smoothly respond to users’ requests such as refunds.

Direction of addressing issues◆ Platform operators that provide OS or browser (*) of a certain size or larger shall be obliged to disclose the following::✔ Disclosure to third parties: Whether data related to products and services provided by third parties can be obtained by the third parties, thecontent of the data that can be obtained, the method and conditions for obtaining* it is not limited to mobile devices, but applicable to PCs, etc.

◆ Concerns about barriers to communication regarding refunds, etc. is to be addressed by monitoring based on Transparency Act

5-3. Ensuring data portability by end users
Issues◆ Asymmetrical design regarding data portability between OSs: Such as iCloud cannot be accessed from Android, and Safari only available on iOS.
◆ Browser related data emigration cannot be completed within a smartphone: Such as the fact that it is necessary to use a PC to transfer
bookmark data in the case of Safari on iOS, and Chrome on iOS and Android◆ Lack of data portability for data related to application store: Such as data on app purchases from application stores◆ Questionnaire results show lack or insufficiency of data portability is one of the bottlenecks in switching between OSs.
✔ As for reasons why chose another smartphone with the same OS (multiple answers allowed), 34% answered, "it will take time and effort totransfer data if change OS ."Competition assessment◆ To facilitate switching and promote competition between OSs, current state of data portability is lacking in simplicity and sufficiency.

Direction of addressing issues◆ Platform operators that provide OS, application store or browser of a certain size or larger shall provide end users and third parties authorized by
end users, at their request and free of charge, with tools to facilitate the effective exercise of data portability, and continuous and real-timeaccess to data, for enabling effective portability of data provided or generated through the activity of end users in OS, etc.

5. Acquisition and utilization of data
5-4. Social Login (“Sign in with Apple”)
Issues◆ Apple requires app developers to display Apple's social login option, “Signin with Apple” (SIWA), only if the app developers offer social login
service provided by other than themselves.
◆ Apple explains that SIWA is a privacy-friendly login option such that it
minimizes the amount of data users need to share and it prevents users frombeing tracked.
◆ On the other hand, regarding SIWA, there are concerns that maintenancecosts have increased due to the mandatory display of SIWA, that the ID
service is a key for locking in users and users are prevented from migrating
to other services, etc.
◆ Survey results from developers show that more than half answered that
“Developers should be free to choose which social login services to display”(see graph on the right).

Competition assessment◆ This Apple’s conduct is to use the position of an app store operator to give preferential treatment to its own service.
◆ Social login is a key factor in locking users into its own service, and forcing to display its own social login service benefits to Apple◆ Considering the limited display area on smartphone, mandatory display of it also hinders opportunities for other service to provide services
with distinctive privacy functions.

Direction of addressing issues◆ Platform operators that provide app stores of a certain size or larger shall not require developers using their app stores to use, to offer, or tointeroperate with the platform operators’ own identification service.

33

6. Access to functions of OS, etc.

34

6-1. Access restrictions on apps to functions of OS, etc. (MiniApp)
Issues◆ Apple prohibits apps that are subject to app reviews from implementing MiniApp that call native OS functions for third parties.
◆ It is difficult to interpret the guidelines accurately. For example, there is the term "third parties" in the prohibited clause, but the “third parties” forwhom is not clear. Furthermore, what specific technical implementations are prohibited are not clear. It leads to taking time for implementation incase of such as rejection in app review process.
◆ There are also voices of doubt that "a certain first party is allowed to access the functions that native apps are allowed to use, by using
MiniApp."Competition assessment◆ If the description of the rules and the judgment of permission are unclear, there is a possibility of arbitrary application of the rules and/or
differences among app developers, which may hinder a fair and equitable competition environment among app developers.

Direction of addressing issues◆ Request clarification of guidelines, fair application review, and appropriate response to inquiries, through the enforcement of the Transparency
Act◆ As an issue of fairness of app store operation rules, this issue can be dealt with by framework of the duty to make the terms of use forbusiness users of app stores fair, reasonable and non-discriminatory, as described in 2-1

6. Access to functions such as OS

35

6-2. Access restrictions to UltraWideBand
Issues◆ Apple owns its own U1 ultra-wideband chip (UWB), and uses it to recognize nearby devices◆ Apple introduced UWB to iPhone 11 in 2019, but at that time, a developer asked for UWB access, but Apple did not approve it.
✔ Later, in 2021/2022, access to UWB was granted to third parties, with a several years gap until the access was allowed for third parties

Competition assessment◆ For several years, only Apple has been able to release apps that use the iPhone's UWB chip, and receive feedback to improve and revamp theapps, resulting in that equal footing is hindered by Apple's apps gaining a competitive advantage as first movers, putting others at a disadvantage◆ If there are no effective measures to prevent conducts that impede equal footing, restricting access to other functions will be possible, further
strengthening competitive advantage of OS providers.
◆ Survey results show that app developers conceive that there is a difference in terms of competition condition with Google or Apple.
✔ As for reasons why competition conditions for the apps provided by Google or Apple are more advantageous (multiple answers allowed), 53.3%
answered “(Google and Apple apps’) the functionality is better, as they have easier/smoother access to OS functions than apps ofothers.”Direction of addressing issues◆ Platform operators that provide OS of a certain size or larger shall allow third parties, interoperability with, and access for the purpose ofinteroperability to, the same functionalities of OS, etc., as are available to their own services.
✔ It is permissible for OS providers to take necessary and proportionate measures to ensure that security of the OS, etc. is notcompromised , or, depending on the functionalities, to ensure privacy.
✔ From the perspective of equal footing, whether or not to oblige free of charge access is to be further considered6. Access to functions such as OS

36

6-3. Access restrictions to NFC (Near Field Communication)
Issues◆ While technical specifications for near-field communication (NFC) chips are open for Android devices, in case of iPhone, they are not open. Also,Apple Pay must be used when accessing iPhone's NFC chip.
✔ Developers cannot create their own apps for touch payments, and when making touch payments, payment data always goes via Apple Pay.
◆ There are voices of concern from developers:✔ Unable to provide users with payment services using NFC chips at stores not accepting Apple Pay, losing an opportunity to enter businessareas where Apple has not entered.
✔ Diversity of payment methods offered to users is hindered✔ Difficult to develop various services such as campaigns that could be brought if NFC chip were to be accessed directly without via ApplePay.
✔ Since NFC specifications have not been disclosed, developers must continue negotiations and development investments while it is unclear
whether payments using NFC chips can be technically implemented.
◆ Apple explains the reasons for such restrictions, such as allowing unrestricted access may leads to impairing security, stealing user credentials
information, etc.
✔ In this regard, there is an opinion that other measures, less anti-competitive than the current one that do not uniformly allow third parties
to make payments directly using NFC chips, can be taken. Such as, in order to deal with the security risk when allowing third parties to use
payment services using NFC chips without going through Apple Pay, access is limited to only third parties that ensure security andprivacy.
✔ In Germany, under the Payment Services Supervision Act, payment service providers, who pay usage fees that do not exceed the actual costof access, should be granted access to technological infrastructure such as NFC chips.

Competition assessment◆ For payment app developers, opportunity to compete on equal footing with Apple Pay on iPhone is hindered, reducing user choice.
◆ Unclear business operations in the process of allowing use of NFC may become a factor of increasing risks and costs for payment app developers
in their businesses, hindering competition between existing businesses, and adversely affect on incentives of new entrants.

Direction of addressing issues◆ This issue is dealt with by the obligation to allow equivalent access to functions of OS, etc., described in "6-2"

6. Access to functions such as OS

37

6-4. Time advantage of app development associated with OS updates, etc.
Issues◆ For OS providers, it is possible for their own app development teams to acquire information on OS updates and specification changes aheadof time, and use that information to develop their own apps.
✔ Apple's pre-installed apps on iPhone have been updated along with beta version of iOS, and it is presumed that OS update information isprovided preferentially to its own app development teams◆ OS provider's in-house apps are also widely tested before release of OS update, and enjoy benefits of receiving feedback and evaluation.
◆ Survey results show that app developers conceive that there is a difference in terms of competition condition with Google or Apple✔ As for reasons why competition conditions for the apps provided by Google or Apple are more advantageous (multiple answers allowed), 38.3%
answered “(Google and Apple apps’) can respond quickly to OS updates.”

Competition assessment◆ OS providers are in an advantageous position compared to third-party developers due to a time advantage in developing apps, etc.
✔ In case, while OS providers can develop apps in-house and respond quickly, they do not provide third-party developers access to the samelevel of functionalities at the same time.
◆ A fair and equitable competition environment between OS providers, who are in a position to determine OS specifications, and third-party
developers is hampered※ Nevertheless, for apps that are essential to functionalities of OS or device and cannot be technically provided independently by third parties,
in order to prevent problems with apps due to OS updates, early access to functionalities is permissible.

Direction of addressing issues◆ This issue is dealt with by the obligation to allow equivalent access to functions of OS, etc., described in "6-2"

6. Access to functions such as OS

38

6-5. Access restrictions on voice assistants
Issues◆ Restrictions on access to functions related to how voice assistants areactivated [Table on the right]◆ With release of Android 12, Google grants special permissions to wake word
API, limiting access to wake word function to Google, OEMs, and any third
party that OEMs choose.
◆ Apple, Google and OEMs indicates security, privacy and battery
consumption issues as reasons for restrictions of wake word activation✔ These issues can be solved, by means of, in addition to current efforts (suchas, discarding fragments of voice collected in stand-by before activation,and prior verification by OEMs, app review, etc.), taking advantage of acommon platform such as Matter, and limiting voice assistants, safety ofwhich have been confirmed, etc.
◆ In addition, on iPhone, Siri can make use of text message reading functions,calendars, etc., but third parties’ voice assistants cannot access them.

For iOS

Activation
by wakeword

Activation bypressing andholding abutton, etc.

Activation bytapping theapp icon

Siri

○

○

―

Third-party voiceassistant installed
later

×

×

○

For Android
pre-installedvoice assistantThird-party voiceassistant installed
later

Activation by
Activation bypressing andtapping the app
holding a
iconbutton, etc.
○―
However, how to be activateddepends on the model.
○
Possible bychanging×○
settings later(depending on
the model)
Activation
by wakeword

Competition assessment◆ Wake word activation is an important feature from user needs, which is shown from survey results:✔ About 60% answered that they activated by speaking to them, and about 51% answered that the reason why using voice assistant is “since
they are operational even when their hands are unavailable.”◆ Voice assistants installed later cannot be activated by wake word, leaving competitive disadvantage, hindering equal footing with OS providers.

Direction of addressing issues◆ This issue is dealt with by the obligation to allow equivalent access to functions of OS, etc., described in "6-2"✔ Regarding whether to allow third-party voice assistants to access functions for activation by wake word, there are concerns about privacy, so
it is assumed that necessary and proportionate measures can be taken to ensure privacy.
✔ In case, while it seems that implementation of function is left to decision by OEM, OS provider effectively influences OEM's decision by meansof contracts, etc., this issue can be dealt with by prohibiting anti-circumvention measures

6. Access to functions such as OS

39

6-6. Links with Siri using SiriKit
Issues◆ Apple provides "SiriKit", a mechanism that enables third-party developer apps to interact with Siri✔ "SiriKit" has only 12 categories, such as messages and workouts✔ In case of Apple‘s apps, in addition to above 12 categories, a part of iPhone‘s standard built-in apps (weather, translation, find, maps, etc.) can beinteracted with Siri.

Competition assessment◆ Equal footing is hindered by limiting the scope of third-party developer apps’ ability to interact with Siri, compared to Apple's apps’ ability to interact
with Siri.

Direction of addressing issues◆ This issue is dealt with by the obligation to allow equivalent access to functions of OS, etc., described in "6-2"

6-7 Access restrictions to functions of mobile OS, etc, from smartwatch
Issues◆ When connecting iPhone and a Wear OS smartwatch using, the usage of Bluetooth Classic is limited to, for example, hands-free calling.
Also, iPhone does not provide a profile for serial communication using Bluetooth Classic for a Wear OS smartwatch.
✔ As a result, large-capacity data transfer, etc. is restricted. As an alternative, users have no choice but to choose a method consuming a lot ofelectricity, such as Wi-Fi, affecting product specifications.
◆ Pairing between Apple Watch and iPhone can be easily performed using Apple's automatic detection function, etc., which is a proprietary
protocol developed by Apple exclusively for communication between Apple devices and is not offered to third parties.

Competition assessment◆ For peripherals, including smartwatches, it is important that they can work closely with smartphones. In such a situation, if Apple Watch can
do what a third-party smartwatch cannot do to connect and work with iPhone, equal footing between the third party and Apple is hampered,making it difficult for the third party to compete on par with Apple.

Direction of addressing issues◆ This issue is dealt with by the obligation to allow equivalent access to functions of OS, etc., described in "6-2"✔ Including an obligation to allow equivalent access by third-party peripherals in case OS provider’s peripherals are allowed to access to the functions

7. Other concerns about voice assistant, wearable

40

7-1. Monitoring scheme

Background of consideration◆ Concerns identified in the “Interim Report on Competitive Assessment of New Customer Contact Points (Voice Assistants and Wearables)" are:
 Concerns between voice assistant providers and app developers / device vendors that work with voice assistants✔ Concerns about rule setting, interpretation, and operation within the ecosystem, such as opacity of app reviews and how to deal with specification changes, etc.
✔ Concerns about advantages in the order to present choices by voice✔ Concerns about data acquisition and use, including the handling of raw data, and restrictions on access to data Concerns between smartwatch providers and app developers / device vendors that work with smartwatches✔ Concerns about self-preferential treatment regarding restrictions on third parties in links of healthcare data
✔ Concerns about self-preferential treatment regarding data handling through restrictions on third parties’ access to platform operators' data
✔ Concerns about self-preferential treatment by means of pre-installation and default settings of Apple Healthcare◆ These concerns shall be improved via competition, by bringing competitive environment among voice assistant providers, and amongsmartwatch providers (*).
◆ On the other hand, even now, these concerns cannot be overlooked, and expected harm will become more serious as the market develops.
◆ Thus, it is necessary to build a framework (=monitoring scheme) that allows (1) relevant authorities to monitor the situation closely, and (2) in* by frameworks related to pre-installation and default settings, obligations of equivalent access to functions, etc.
case problems become serious, to respond swiftly.

Specific measures[Establish information collection system]◆ By posting items to be monitored closely and related information on the website, receive information, and conduct hearings as necessary◆ Information collection, surveys and research as necessary, as to changes in competitive environment and trends in new tech with a huge impact◆ Cabinet Secretariat, in cooperation with relevant ministries, analyzes the situation and reviews the necessity of actions (report to WG, etc.)✔ Accelerated development and implementation of generative AI, which might lead to changes in the role and value of voice assistants[Countermeasures in case problem becomes serious]◆ Upon collecting information and analyzing, promptly address, in case problems become serious, by the following measures.
✔ To the extent necessary in light of their jurisdiction and roles, relevant ministries’ prompt policy proposals to encourage relevantbusinesses’ voluntary improvement✔ The Fair Trade Commission’s prompt, strict, and appropriate actions with specific cases that are problematic under the Antimonopoly
Act, including use of emergency suspension orders.

Conclusion◆ This final report presents policy mix of two approaches to address competitive concerns in the mobile

ecosystem.
 The first one is a regulatory framework (co-regulation) that respects the voluntary efforts of platform
operators, while the government establishes a general framework of discipline, to improve transparency andfairness regarding rule changes, etc..
 The other one is a regulatory framework (ex ante regulation) that prohibits or obligates certain types ofconduct.

◆ Subsequent step is, based on this final report, to consider the legal framework necessary to ensure a fairand equitable competition environment in the mobile ecosystem, while assessing the situation in othercountries such as Europe and the United States.

◆ For this reason, public comments on this final report is to be commenced for soliciting opinions from both

inside and outside the country. Dialogues with relevant stakeholders as well as cooperation with relevant
authorities in other countries will be continued.

◆ In these ways, by realizing a fair and equitable competition environment while ensuring security andprivacy, it will be aimed to activate innovation by various entities and ensure opportunities for
consumers’ choices in Mobile Ecosystem.

◆ It would be grateful to have continued cooperation from stakeholders involved.

41