Mobile App Law Changes: Distribution, Payments & Linking 2024

Japan’s New ‘Smartphone Law’ Aims to Level the Playing Field for app Developers

Japan’s recently enacted “Smartphone law,” officially known as the Act on Promoting Competition in Specific Software Used on Smartphones, is poised to reshape the mobile app ecosystem by curbing the power of dominant platform holders and fostering a more competitive environment while maintaining robust security measures.

The legislation doesn’t simply “unlock” choice app stores, but rather prohibits major players from actively hindering their emergence. As one analyst noted, the focus is on preventing designated major businesses from engaging in practices that stifle competition, such as limiting app stores to their own or imposing conditions that make it virtually impossible for others to operate.

Did you know? – the law targets practices that *prevent* the emergence of competing app stores, not necessarily mandating their acceptance.

While the law doesn’t mandate allowing direct app downloads from websites, it does require a reassessment of existing restrictions. Developers should anticipate the potential for expanded avenues for distribution, but must continuously monitor platform-specific implementations and conditions. Security and youth protection remain paramount, with justifications for restrictions permissible onyl when other, less restrictive measures prove insufficient. “Developers should move beyond simply assuming what’s ‘forbidden’ and instead analyze the rationale behind platform constraints and explore potential alternatives,” a senior official stated.

Pro tip – Focus on understanding the *reasoning* behind platform policies, not just the policies themselves, to anticipate changes.

Impact on In-App Purchases and Link-Out Policies

the most immediate impact of the Smartphone Law will likely be felt in the realm of in-app purchases.The law explicitly prohibits companies from blocking the use of third-party payment systems, potentially altering the cost structure for businesses across “payment fees,” “chargeback handling,” and “fraud prevention.”

Furthermore, guidelines suggest a move away from blanket restrictions on providing details within apps about prices or benefits available on external websites, or directing users to external purchase pages – a practice known as “link-out.” Imposing technical limitations or failing to provide necesary advancement tools to facilitate link-out could be deemed problematic.However, this isn’t a free pass. Reasonable measures, such as neutral pop-up warnings about the risks of navigating away from the controlled app environment, are permissible as a safeguard against fraud and phishing. Developers will be required to design user flows that balance user protection with the promotion of competition.

Reader question – The law allows for warnings about leaving the app environment. These must be neutral and focus on fraud/phishing risks.

Preparing for Changes in Contracts and Technology

The core of the Smartphone Law lies not in directly obligating app developers, but in prompting designated businesses to revise their terms of service, review processes, and API provision policies, ultimately expanding developer choices. Consequently, planning should focus on understanding why key platform policies regarding developer agreements, review guidelines, payment policies, and link-out implementation rules are changing, rather than simply memorizing the law itself.

Practically, key considerations include the extent to which in-app purchases will be externalized, ensuring synchronization between payments and content delivery, and establishing clear procedures for refunds and cancellations. When utilizing alternative payment methods, addressing user concerns about security, refunds, and subscription management – all central to the law’s focus on crime prevention and data protection – through clear explanations and user interface design will mitigate long-term risks. .

Another crucial area is access to data and functionality. If OS features become available on a level playing field, it could pave the way for innovative services beyond payments. Though, developers must remain vigilant, as OS updates and API specification changes are constant, requiring ongoing verification of performance guarantees.

Ultimately, the Smartphone Law provides developers with increased “negotiating leverage.” When encountering rules perceived as disadvantageous, the ability to articulate the competitive restrictions, the justification for those restrictions, and potential less restrictive alternatives will be critical.