What Is the Smartphone Act?
Japan's Smartphone Software Competition Promotion Act (Act No. 58 of 2024, informally "Smartphone Act" or "Sumaho Shin-po") is a new statute that prohibits monopolistic conduct by dominant providers of smartphone operating systems, app stores, browsers, and search engines — collectively called "designated undertakings" — in order to foster fair competition.
The law was enacted in June 2024 and took full effect on December 18, 2025. Often dubbed "Japan's DMA," it follows the European Union's Digital Markets Act as one of the most comprehensive platform-regulation regimes anywhere in the world.
Who Is Regulated
The Japan Fair Trade Commission (JFTC) has designated the following companies as "designated undertakings":
| Category | Designated Undertaking |
|---|---|
| Mobile OS | Apple (iOS), Google (Android) |
| App Store | Apple (App Store), Google (Google Play) |
| Browser | Apple (Safari), Google (Chrome) |
| Search Engine | Google (Google Search) |
Because these companies hold overwhelming market positions, they are subject to ex-ante regulation — rules that apply before any antitrust harm has to be proven, which goes further than traditional antimonopoly law.
The JFTC's February 2026 Compliance Report
On February 17, 2026, the JFTC released compliance reports from Apple and Google, disclosing how each company has responded to the Act's obligations. Key findings include:
- Alternative app stores: Apple accepted third-party app marketplaces in Japan for the first time
- External billing: Google removed restrictions on links to outside payment systems
- Browser choice screens: iOS now offers multiple browsers on first launch
- Search engine choice: Android phones present search-engine alternatives to Google
- Data portability: Mechanisms for transferring user data to rival apps have been built
However, the JFTC also demanded further explanation regarding fee levels and the basis for calculating them, giving the compliance reports a mixed reception rather than an outright pass.
Apple's Response: Up to 26% Total Fees
Apple previously charged 30% (standard) / 15% (small developers) on App Store transactions. After the Smartphone Act, rather than dropping fees to zero, Apple introduced the following new structure:
| Item | Apple's New Fee | Notes |
|---|---|---|
| App Store (Core Technology) fee | Up to 21% | For distribution, dev tools, review |
| Payment processing fee | 5% | Only when using Apple's IAP |
| External billing chosen | 21% | No 5% processing fee |
| Distribution via alternative stores | Approx. 13% | When not using Apple billing |
| Small developers (under $1M/year) | Up to 11% | Reduced rate |
Apple has long argued that "fees are the price of an integrated platform." Under the new regime it has separated App Store fees from payment processing fees, letting developers choose their own payment method. Choosing external billing avoids the 5% processing fee, but the 21% App Store fee remains.
Additional Apple Changes
- Alternative app marketplaces: Third-party stores can now operate on iOS
- Browser choice screen: Browsers other than Safari (Chrome, Firefox, Edge) shown by default
- Relaxation of WebKit-only rule: Browsers with their own engines allowed
- NFC API opened: Payment apps other than Apple Pay can access NFC
Google's Response: Billing Choice, but Core Fees Unchanged
Google's approach is in stark contrast.
| Item | Google's Response | Changed? |
|---|---|---|
| Google Play fee (large developers) | 30% | No change |
| Google Play fee (small, under $1M) | 15% | No change |
| Subscription fee | 15% | No change |
| External-billing restrictions | Removed | Liberalized |
| In-game purchases | Billing choice | Liberalized |
| Alternative stores | APK sideloading still allowed | Unchanged |
Google has always permitted APK sideloading, so it was never considered as locked-down as Apple. However, in-game purchases had been required to use Google Play Billing — this restriction has now been removed. Even so, Google has announced that it will collect a separate 10–20% "service fee" when developers use external billing.
Apple vs. Google: Side-by-Side Comparison
| Item | Apple | |
|---|---|---|
| Total headline fee | Up to 26% (21% + 5%) | 30% (large) / 15% (small) |
| External billing | Allowed (21% App Store fee remains) | Allowed (10–20% service fee) |
| Alternative app stores | Newly accepted | APK sideloading long allowed |
| Browser choice screen | Added on iOS first launch | Already implemented |
| Search engine choice | Default changeable | Initial screen offers choice |
| Small-developer rate | Up to 11% | 15% (unchanged) |
Impact on App Developers
In theory the Smartphone Act delivers major benefits to smaller developers and startups. In practice, several issues remain:
Benefits
- Using external billing cuts the 5% processing fee
- Alternative stores allow independent marketing
- Browser choice frees developers from Safari-only limits, expanding PWA capabilities
- Data portability makes user migration easier
Challenges
- Total fees do not drop as much as hoped (minimum 21–26%)
- External billing still means refunds and support are the developer's burden
- Alternative-store distribution requires contracts and review from Apple
- Multiple payment methods complicate accounting and tax handling
- Designing UIs for multiple payment options adds cost
Industry Criticism: "De-Facto Nullification"
Four months after implementation, industry groups and app makers have voiced strong criticism:
- "A 10–20% fee on external billing is de-facto nullification." Critics say charging far more than the ~3–4% actual payment-processing cost eliminates the benefit of external payment
- "Fee calculations lack clear basis." Neither Apple nor Google has adequately disclosed how fee levels are justified
- "Even the 11% / 15% small-developer rates are still high." The EU's DMA uses "effective competition" as a yardstick, and Japan should follow suit
- "The bar to enter as an alternative store is high." Each platform has its own security and contractual requirements, and few real entrants have emerged
The JFTC has stated that it will "continue to study the reasonableness of the fees," leaving room for further investigations and guidance.
Prohibited Conduct and Penalties
What gives the Smartphone Act teeth is its surcharge regime. When a designated undertaking violates a prohibition, the JFTC may impose:
| Conduct | Penalty |
|---|---|
| Prohibited acts (exclusionary tying, self-preferencing, etc.) | Surcharge up to 20% of sales |
| Violating a cease-and-desist order | Up to 2 years' imprisonment or ¥3M fine |
| False reporting | Up to 1 year's imprisonment or ¥3M fine |
| Failure to report | Fine up to ¥1M |
| Obstruction of inspection | Up to 1 year's imprisonment or ¥1M fine |
A 20% surcharge is double the maximum under the traditional Antimonopoly Act (10%) and is among the highest anywhere in the world. If Apple's Japanese App Store revenue were, say, ¥1 trillion per year, a maximum surcharge would reach ¥200 billion.
Consumer Benefits
End users may notice the following changes:
- Room for lower app prices, as developers pass through savings
- More external payment options: PayPay, Rakuten Pay and other Japanese wallets in apps
- Browser choice: Chrome on iPhone finally running its own engine
- Search diversity: Bing, Yahoo! and DuckDuckGo appearing as initial options
- Easier account migration thanks to data portability
That said, external billing can also complicate refunds and raise fraud risk. The JFTC is pressing developers to maintain robust refund and support channels in parallel.
What to Expect Going Forward
The law is still new. Likely developments include:
Short term (within 2026)
- The JFTC may issue further information orders on fee levels
- Alternative app stores (Epic Games Store, Microsoft Store, etc.) begin meaningful operation
- Pilot deployments of external billing by Netflix, Spotify and major game publishers
Mid term (2027–2028)
- Actual surcharge orders over fee structures could appear
- Court decisions in administrative appeals against Apple and Google build up a body of case law
- International coordination with EU DMA and US equivalents deepens
Long term (2030 onward)
- Independent Japanese app stores may emerge and accelerate competition
- Regulation likely expands to next-generation technologies — AI agents, Web3
- A "platform tax" could take shape as new tax rules catch up
Conclusion
The Smartphone Act is a landmark statute that finally tackles the long-standing monopoly structure of Japan's app economy. The full enforcement on December 18, 2025 and the JFTC's February 17, 2026 compliance report have crystallized Apple's and Google's responses, but the industry continues to criticize the fee levels as effectively nullifying the law.
Developers gain real new options in external billing and alternative stores, yet the reduction in total cost is limited. Watching the JFTC's next moves — further guidance, possible surcharge orders — and rethinking your distribution strategy accordingly is now essential.
Platform regulation is a global trend, and responding to the Smartphone Act will affect the global competitiveness of Japanese companies as well. If you need help with contract changes, introducing external billing, data-protection or consumer-facing compliance, please consult a lawyer with expertise in technology and platform regulation.
