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Century of Data

Apple probed in Japan over anti-competitive behavior

Fair Trade Commission looks into alleged pressure to quash Yahoo's game platform

Apple's App Store is a large source of income for the tech giant.   © Reuters

TOKYO -- Japan is investigating allegations that pressure from Apple forced Yahoo Japan to pull back from a game platform that competes with the App Store, Nikkei has learned, in the latest effort by regulators to address potentially anti-competitive behavior by American tech behemoths.

The Fair Trade Commission and the industry ministry began the investigation last fall upon receiving reports from Yahoo about issues surrounding its Game Plus platform. The web-based service, launched in July 2017, lets users play games without needing to download apps. For developers, the service features much looser restrictions surrounding sales, fees and software updates than Apple's App Store.

A total of 52 companies agreed to participate, including famed role-playing game maker Square Enix Holdings, with more expected to get on board. Yahoo could bring together data from its more than 60 million monthly active users -- such as search history, ads and payment information -- to help game publishers sell merchandise and create new titles. It envisioned expanding the platform into other areas such as business software, building a data economy unique to Japan.

But Yahoo abruptly slashed its budget for Game Plus last fall and has now all but stopped promoting the service. Square Enix in April pulled "Antique Carnevale," a new title developed specifically for Game Plus, off the platform.

Yahoo told multiple business partners that it was forced to cut back because of pressure behind the scenes from Apple. The Japanese company relies on the U.S. tech giant for part of its profits in the form of sales through the App Store.

Yahoo Japan's Game Plus service lets users play titles from Square Enix Holdings' popular "Final Fantasy" series on the web. (Photo by Yuichiro Kanematsu)

Japan's app market reached 1.44 trillion yen ($13 billion) last year, according to American research company App Annie. For Apple, the App Store is not only a cash cow, but also a way to build an ecosystem of software developers and advertisers. Yahoo's strategy posed a direct threat to this model.

The FTC has been gathering information on the situation, which it believes may constitute interference in Yahoo's business prohibited by the Anti-Monopoly Act. But its investigation seems to be getting bogged down.

SoftBank Group has stepped in to mediate, a source with knowledge of the situation said. The investment powerhouse, Yahoo's largest shareholder, collects payments made by its cellphone subscribers to the App Store for Apple and keeps a portion of the revenue for itself. This intermediary role leaves SoftBank's position with regard to the situation unclear.

In many cases like this, businesses often hesitate to work with authorities, prioritizing their own interests instead. "If the parties involved don't cooperate, it's hard to prove" wrongdoing, said an attorney with experience at the FTC.

The agency said it does not comment on individual cases.

The Yahoo case is just one example of the FTC's recent heightened scrutiny of the big four U.S. tech companies: Google, Apple, Facebook and Apple moved last month to amend agreements with Japan's three largest wireless carriers after the watchdog found that it forced them to accept unfavorable terms.

But the big four have deftly used their ample cash and industry influence to quash competitors before they can pose a threat. The quartet has together spent more than $80 billion on acquisitions, with potential rivals making up many of their targets. Facebook acquired Instagram and popular messaging service WhatsApp, while Amazon snapped up rising shoe seller Zappos back in 2009 while it was still small.

Antitrust authorities around the world are taking a harder line against the big four, but there has been little they can do about this trend of quickly absorbing or crushing competition. If Apple did pressure Yahoo over Game Plus, it would fit right into this playbook. Apple and Yahoo did not immediately respond to requests for comment, while SoftBank responded with "no comment."

The big four have become barriers to competition rather than innovators, argued Scott Galloway, a marketing professor at New York University, adding that halfhearted regulation will not be enough to address the problem.

The Nikkei's ongoing series Century of Data was a 2019 winner of the Japan Newspaper Publishers & Editors Association (NSK) Awards, the country's most prestigious journalism prizes.

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