On August 29, 2019, the Japan Fair Trade Commission (the JFTC) announced its draft “Guidelines Concerning Abuse of a Superior Bargaining Position under the Antimonopoly Act on the Transactions between Digital Platformer Operators and Consumers that provide Personal Information, etc. (the Draft Guidelines)” and requested public comments on the Draft Guidelines. The Draft Guidelines will be finalized and be enforced after considering comments from general public but no specific date of enforcement has been announced yet.
Under the Act on Prohibition of Private Monopolization and Maintenance of Fair Trade (the Act), if a business operator has a superior bargaining position over the counterparties to transactions, such superior party shall not take advantage of its superior position to cause unreasonable disadvantages to other parties. Such an abusive method of business is prohibited by the Act as “unfair trade practices.” Recently, it is said that digital platform operators*, such as a major online shopping site, a major social network service etc., are in a superior bargaining position over the consumers, and they unjustifiably acquire and utilize their consumers’ personal information, including other information such as personal attributes, purchase history and activities (the Consumers’ Information) by making use of such position over them. Such collection and use of Consumers’ Information cause consumers’ disadvantage and also cause adverse effects on fair and free competition. Specifically, the Draft Guidelines indicate that there is such risk in the business model that digital platformers provide certain benefits or services for free to users in exchange for collecting and using the Consumers’ Information. In the Draft Guidelines, JFTC identifies what digital platform operators’ conduct to collect and/or use Consumers’ Information should be regarded as abuse of their superior bargaining position.
Under the Draft Guidelines, certain digital platform operators’ conducts towards consumers (acquiring and utilizing the Consumers’ Information) could be a violation of the Act. Therefore, once the Draft Guidelines are finalized and enacted, there will be a lot of impact on the operation of digital platform operators’ business. As such, it is advisable for digital platform operators which acquire and utilize the Consumers’ Information to understand the contents of the Draft Guidelines.
The outline of the Draft Guidelines is as follows.
Scope of Regulation
The Act prohibits business operator’s conducts which cause disadvantages to the counterparty in continuous transactions (Article 2 Paragraph 9 Item 5 (i) and (ii) of the Act) or the counterparty (Article 2 Paragraph 9 Item 5 (iii) ) by making use of its superior bargaining position unjustly in light of normal business practices as “abuse of superior bargaining position.” So far, JFTC has applied this rule only to transactions between the business operators. However, under the Draft Guidelines, JFTC clearly mentions that this rule may be applicable to transactions between business operators (e.g. digital platform operators) and consumers as well. According to the he Draft Guidelines, if consumers provide Consumers’ Information in exchange for a use of services provided by a digital platform operator, such consumers fall within the definition of a “counterparty (in continuous transactions)” of the digital platform operator under the Act. Thus abuse of superior position over such consumers is prohibited.
Scope of Superior Bargaining Position
The Draft Guidelines stipulate that a digital platform operator is considered to be in a superior bargaining position over consumers who provide the Consumers’ Information if the consumers, even though suffering detrimental treatment from the digital platform operator, are compelled to accept this treatment in order to use services provided by the digital platform operator. The Draft Guidelines also indicate benchmarks as follows: A digital platform operator is normally in a superior bargaining position over the consumers in case where (i) there is no other digital platform operator that provides alternative services for the consumers; (ii) it is practically difficult to stop using the service provided by the existing digital platform operator even if an alternative service exists; or (iii) the digital platform operator is in a position to control somewhat freely the trade terms, such as prices, qualities and quantities. The Guidelines indicate that it is necessary to consider that there is the disparity in the quality and quantity of information and negotiating power between consumers and a digital platform operator upon considering if the benchmarks mentioned above are satisfied.
Four Types of Abuse of a Superior Bargaining Position
The Draft Guidelines illustrate four types of conducts to be regarded as abuse of a superior bargaining position by a digital platform operator over consumers. These four types of abuse are examples and there may be other types of abuse:
- Acquiring personal
information without stating the purpose of use to
consumers
When a digital platform operator acquires consumers’ personal information, it shall post the purpose of use on its webpage or disclose such purpose by other appropriate measures. Even though a digital platform operator posts the purpose of use, it may be considered that the business operator acquires personal information without stating the purpose of use to consumers if the contents of the posted purpose of use are difficult for consumers to understand (for example, using a lot of unintelligible terminology). Therefore, a digital platform operator shall set the purpose of use in a way that is easy to understand for general consumers using clear, plain, and simple terms.
- Acquiring or using personal
information against consumers’ intention beyond the scope
necessary to achieve the purpose of use
For example, if the purpose of use of consumers’ personal information is “sale of goods,” asking consumers’ gender or occupation is beyond the scope necessary to achieve the “sale of goods.” Further, for example, using the personal information for targeting advertisement is beyond the purpose of use . Please note that even if certain personal information is acquired or used beyond the scope necessary to achieve the purpose of use, it will not generally cause the breach of the Act1 as long as the digital platform operator acquires proper consents from the consumers. Provided, however, that if consumers are compelled to give such consents because the consumers have no other alternative but to use the services by the digital platform operator, the consents may be regarded as being made involuntarily and therefore such consents may be void. In case the digital platform operators acquire/use beyond the scope necessary to achieve the purpose of use, the business operators shall (i) obtain consents from consumers by indicating the information is not necessary to achieve the purpose of use and (ii) give consumers options that they can use the operators’ service without providing such information.
- Acquiring and using personal
information without taking the precautions necessary and
appropriate for safe management of personal
information
The Draft Guidelines do not stipulate details of the “precautions necessary and appropriate for safe management of personal information”. Therefore, digital platform operators shall take measures that they reasonably consider necessary and appropriate. In this respect, we are of the view that as this is a measure to protect consumers’ personal information, if a digital platform operator takes measures in accordance with the guidelines stipulated by Personal Information Protection Commission2 , the risk of violation of this requirement should be low.
- Causing consumers who
continuously use digital platform operator’s services to
provide economic interests like additional Consumers’
Information in addition to certain Consumer’s Information
which have been provided as compensation for the use of
services
We are of the view that in case the digital platform operators acquire additional Consumers’ Information (such as web browsing data) from consumers, it shall provide additional service to the consumers in exchange for such additional Consumers’ Information.
In addition to the above (1) – (4), the Draft Guidelines also stipulate that provision of personal information to third parties without obtaining the consumers’ consents is another example of abuse of a superior bargaining position. As such, digital platform operators shall acquire consents from their consumers to provide their personal information to third parties. Provided, however, that as discussed above, if consumers are compelled to give consent, such consent may be determined as made involuntarily and be void.
Therefore, digital platform operators shall take measures to obtain consumers’ voluntary consents for the provision of personal information to third party. In other words, digital platform operators shall clearly notify the consumers (i) that operators may transfer the consumers’ personal information to third party and (ii) that the consumers are able to continue the use of the digital platform operator’s service even if they refuse to give such consents.
The Draft Guidelines will be finalized after the JFTC considers the public comments it received, but no specific date of enforcement has been announced yet.
*“a digital platform operator” means an enterprise that provides digital platforms, such as online shopping malls, apps markets, search services, digital content (image, video, music, e-book, etc.) distribution services, and social networking services. And “digital platforms” has the characteristics of providing third parties with platforms for the various services by using information and communication technologies and data for creating multi-sided markets with multiple user segments.
Footnotes
1Please note that separate from the requirements under the Act, the Act on the Protection of Personal Information requires a personal information handling business operator (the PIHBO) to specify the purpose of use and notify to the data subjects or publish when the PIHBO acquires personal information. Also, if a PIHBO uses personal information beyond the purpose of use, the PIHBO is required to obtain consents from data subjects.
2The guidelines stipulated by Personal Information Protection Commission is available in the Personal Information Protection Commission’s website https://www.ppc.go.jp/files/pdf/190123_guidelines01.pdf (in Japanese only)
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
