Apple changes App Store in Japan

Imagine it’s possible to balance regulatory desires to limit Apple’s market power with the welfare of the company’s existing customer base. Imagine a regulatory environment characterized by mutual respect and a willingness to collaborate on solutions, a place where Apple is forced to change some of its business practices, but in ways that benefit both competitors and customers.

That’s what you get in Japan.

How has Apple changed the App Store in Japan?

Following years of resistance and in order to bring its service in line with the Japanese equivalent of Europe’s Digital Markets Act (DMA) — Japan’s Mobile Software Competition Act (MSCA) — Apple has introduced a variety of changes to the way it runs its App Store. Described in depth on Apple’s own developer page, the changes made to iOS in Japan include:

App distribution

App Store payment options on the App Store

Distribution on alternative app marketplaces

Creation of an alternative app marketplace

Prioritization of child safety with alternative payments on the App Store

New business terms

iOS capabilities

Browser and search engine choice screens

Default app controls

Alternative web browser engines

Side button access for voice-based

Conversational apps

Requests for additional interoperability.

What’s noteworthy about all these changes is that while Apple inevitably sees almost all of them as potentially threatening the existing App Store experience, the way in which they are being applied at least recognizes the need to protect customers.

That’s because, unlike in Europe, Apple says conversations with regulatory authorities have been constructive and collaborative, with respect given to the needs of customers, Apple’s own need to protect and benefit from its own IP, and the needs of competitors. 

The problem with Europe

European regulators, on the other hand, seem determined to apply the DMA in the toughest way possible and seem completely oblivious to what customers want and the need to maintain a unique platform experience. 

As a result, Apple believes the MSCA does a significantly better job protecting consumers than what other regulators have done.

There are significant examples that illustrate this.

Take the idea of “additional interoperability.” In Europe, whenever Apple introduces a new feature, it must now make access to those features available to third parties from day one. It cannot control what is done by those companies with those features, and cannot prevent access in the event a developer abuses such access to the detriment of customers. It’s different in Japan; there developers can request access to Apple APIs. That means Apple can deny access to developers (such as Meta) who seek access to people’s private data for advertising or worse.

When it comes to app distribution, while developers can choose to use Apple’s systems, their own systems, or a combination of systems — and have great freedom in terms of payment systems, web links and more — all apps made available to iOS must go through Apple’s App Notarization process. While this process isn’t as rigorous as App Store review, it does provide some oversight.

In-app payments: It is always possible for customers to default to Apple’s payment system, no matter what system they have used before, while developers continue to pay fees for apps they sell. (Apple says 87% of developers distributing apps via the Japanese App Store pay nothing today, and will continue to do so). 

Child safety in the digital age is a major issue for most parents. That’s why it’s such a surprise that the EU’s DMA introduces no explicit protection for children, while the MSCA allows Apple to try to protect kids. That means in Japan, age ratings mut be included for apps distributed outside the App Store, software in the Kids category can’t include transaction links, and Apple will integrate parental control in in-app purchases from all sources in future. Europe’s children have no such protection, though I suppose some clumsy legislation will deliver yet more damage to the existing user experience.

There are many additional differences between the collaborative Japanese approach and the fanatical steps put in place in Europe, Apple has pointed out. In Europe, regulators have adopted the toughest possible adoption of the rules, and have refused to even consider consumer welfare, says Apple. And while it is true that the company never wanted to accept these changes and still thinks they risk customer privacy and security, it also seems much more satisfied that even if they didn’t agree, the regulators in Japan were prepared to listen, learn, and develop positive compromise.

For the benefit of everyone?

Apple characterizes Japanese regulators as accepting the need to strike a balance between loosening Apple’s market power with the needs of customers. That’s not the same in Europe, where the hardline approach means some features might never appear as larger competitors seek to use the DMA to undermine Apple’s privacy and security protections. 

That’s the nub, really, as the European approach means only a very small number of wealthy competitors are really seeing any benefit, while customers suffer weaker privacy, security, and erosion of the user experience they chose. 

Perhaps the EU should adopt the Japanese approach? Doing so might not make Apple much happier, particularly as it doesn’t seem to have any intention to extend any of the changes to other jurisdictions unless forced. But it would at least deliver a better compromise between the needs of Apple, well-financed competitors and their political lobbyists, and consumers. Though it’s possible that once different approaches are in place in different markets, it will become easier to see which models deliver the best overall results.

It seems unlikely that benefit will come from Europe.

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