13 Asian Legal Business | October 2024 Technology Japan is also currently proposing new regulations that will subject some advanced technologies, in which the country has a high market share and which are not currently regulated, to prior reporting. “The targets will be decided in consultation with companies and industry associations. The prior reporting list is intended to cover advanced equipment and materials that can be used for civilian purposes but can also be converted to military use, and which other countries are interested in acquiring,” explains Takashi Nakazaki, special counsel at Anderson Mori & Tomotsune. South Korea’s Ministry of Science and ICT is developing the Framework Act on Artificial Intelligence, focusing on high-risk AI applications. The Personal Information Protection Commission (PIPC) has also issued AI-related guidelines to address privacy issues in AI deployment. “Future regulations may enhance data portability, interoperability, and fair competition,” says Doil Son, the head of intellectual property and technology practice at South Korean Big Six firm Yulchon. “The Korean government is also likely to increase collaboration with international regulatory bodies to address global tech challenges, indicating a proactive yet cautious approach to tech regulation,” Son adds. Global context As the global tech landscape evolves, Japan and South Korea find themselves at a crossroads, particularly when compared to the European Union’s comprehensive Digital Markets Act (DMA). The EU employs a centralised enforcement approach through the European Commission, which can levy hefty fines and mandate structural changes. The DMA specifically targets “gatekeeper” platforms, whereas Japan and South Korea’s regulations encompass a wider range of digital activities. “Japan has no laws or regulations equivalent to the DMA. If there is a violation of existing laws and regulations, such as the APPI or the TBA, the authorities take individual enforcement actions,” Ishikawa says. “The APPI and the TBA do not provide for administrative fines. Instead, the authorities take corrective action through administrative guidance and corrective recommendations,” he adds. Japan has introduced the “Act on Promotion of Competition for Specified Smartphone Software,” a targeted piece of legislation focusing on key digital platforms such as smartphone operating systems, app stores, browsers, and search engines. Like the DMA, the Smartphone Act is applicable to designated businesses that meet a certain threshold to be set by a Cabinet order, explains Takashi Nakazaki, special counsel at Anderson Mori & Tomotsune. South Korea, home to several tech giants, has opted for a broader regulatory approach, with the Korea Fair Trade Commission (KFTC) and Korea Communications Commission (KCC) playing pivotal roles in monitoring compliance and enforcing regulations across the digital sector. South Korea’s tech regulations and the DMA share similarities in their scope and intent to regulate large tech platforms but differ in enforcement mechanisms and specific impacts. The DMA’s specific focus on “gatekeepers” and stringent obligations on data sharing, interoperability, and antiself-preferencing could conflict with South Korean companies’ operations if similar stringent rules are not simultaneously enforced in Korea, Son explains. “This discrepancy might lead to regulatory arbitrage, where companies exploit differences between jurisdictions to minimise compliance burdens,” he says. Industry challenges Tech companies in Japan and South Korea face a complex regulatory environment. In Japan, industry leaders often form collaborative groups to engage with regulatory bodies. In South Korea, large tech conglomerates, known as chaebols, leverage their significant influence in regulatory discussions. Both nations’ tech sectors face similar challenges, including compliance with stringent data protection laws, adapting to rapidly changing regulatory landscapes and balancing innovation with regulatory requirements. “The current preference in Japan is not to avoid market intervention as much as possible, as in the U.S., but to introduce necessary regulations steadily, albeit gradually, while referring to foreign laws and regulations in the EU and other countries,” Ishikawa says. With Japan’s prior reporting list in the works adding compliance burdens on larger companies, affected technology companies are currently seeking to limit its impact on their businesses by asking the government, in consultation, to minimise and clarify the scope of technology transfers subject to prior reporting, explains Nakazaki. Navigating South Korea’s regulatory landscape poses several challenges for technology companies explains Son. First, compliance with the stringent PIPA demands robust data protection measures, including securing user consent and ensuring data minimisation and anonymisation. Second, the Network Act requires vigilant content monitoring and cybersecurity practices, necessitating substantial investment in technology and manpower. The Telecommunications Business Act’s focus on fair competition may challenge dominant market players to reassess their business strategies. Another critical consideration is the growing scrutiny of digital monopolies by regulators like the KFTC and KCC, which could lead to increased legal and compliance costs. “Moreover, international tech companies must navigate cultural and linguistic differences, understanding local consumer behaviours and regulatory expectations. Effective stakeholder engagement, including with regulators, industry associations, and consumers, is crucial for navigating these complexities and ensuring regulatory compliance,” Son adds.
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