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Online Platforms and Competition Law in Japan: A Translation of the DeNA Co. Case [Volume 7-2017]

7 September 2017

(Translated by Steven Van Uytsel and Yoshiteru Uemura)

Cease and Desist Order against DeNA Co., Ltd

Cease and Desist Order, No. 4, Heisei 23 (2011)

Cease and Desist Order

4-30-3 Yoyogi, Shibuya-ku, Tokyo
DeNA Co. Ltd.
Representative: CEO Tomoko Namba

The Fair Trade Commission issues an order against the above mentioned entrepreneur/enterprise pursuant to the provision of Article 20 paragraph 2 of the Act on Prohibition of Private Monopolization and Maintenance of Fair Trade (hereinafter referred to as AML).

In relation to the terminology used in the main text of the judgment and the reasons therefore, the definition of the terms mentioned are described in the addendum.

Main text of judgment

DeNA Co., Ltd. (hereinafter referred to as DeNA) has to take the following resolution at the next scheduled board of directors meeting.

(1)

To confirm that DeNA has terminated the action of forcing the DeNA-selected social game developers to not provide social games through the mobile social network service operated by Gree Inc., by disconnecting website links of the social games the DeNA-selected developers offer through the mobile social network service (hereinafter referred to as Mobage-Town) operated by DeNA if these developers also provide social games through the mobile social network service operated by Gree Inc.(hereinafter referred to as GREE).

(2)

DeNA hereinafter shall never force social game developers to not provide games through other mobile social network services, by disconnecting the website links of the games the developers provide through Mobage-Town if the developers have provided the games through other social network services.

DeNA shall notify the measures taken in the previous paragraph to Gree, Inc. and the social game developers which provide the games through Mobage-Town, and shall have such measures thoroughly disseminated to its employees. Advance approval of the JFTC shall be obtained regarding the form of the notification and dissemination.

DeNA shall take measures necessary to do the following:

(1)	Establish or revise the guidelines for activities with regard to compliance with the AML as to transactions with the social game developers in relation to the mobile social network services that DeNA operates.
(2)	Implement a regular training program for board members and employees, and regular audits by the legal department, with regard to compliance with the AML as to transactions with social game developers in relation to the mobile social network services that DeNA operates.

DeNA shall as soon as possible inform the JFTC about the measures taken based upon paragraphs 1 and 2 above

Reasons

Part 1: The Facts

(1)

DeNA operates in Japan, with its the headquarters at the address noted in this document, in the business of providing mobile social network services to registered users.

(2)

a)	DeNA has been providing Mobage-Town to registered users since around February 2006.
b)	DeNA has been providing social games through Mobage-Town. Upon adopting a policy of openness and concluding a contract with social game providers in order to obtain commissions and other fees (sales are generated by the items that the registered users buy through such social games), DeNA let these social game developers start providing social games through Mobage-Town around January 2010.
c)	The registered users of Mobage-Town could access the website for each social game by choosing the game ‘top page’ of the Mobage-Town website. The links on the game top page of the Mobage-Town website, which are divided into ‘featured games’, ‘highly recommended games’, and ‘newly arrived games’, are the way to reach social games provided by several social game developers and an important channel to attract registered users to such a website.

(3)

Gree Inc., a mobile social network provider in Japan, has been providing GREE to registered users since around June 2005.

Gree Inc. has been providing social games through GREE. Like DeNA, Gree Inc. allowed social game developers to start providing social games through GREE from around June 2010, after concluding a contract with the social game developers to the effect of collecting commissions and other fees. Further, Gree Inc. had planned to let several social game developers provide their social games en masse through GREE on August 10, 2010 (hereinafter referred to as Second Release).

(4)

DeNA has, based upon the revenue of social games, held the largest share of the market since January 2010. Also, since DeNA had implemented a policy of openness earlier than Gree Inc., DeNA has become the most important business partner for many social game providers. Gree Inc. has, based upon the revenues of social games, obtained the second largest share of the market after DeNA.

(1)

Around July 2010, DeNA, selected a group of social game developers that were assessed as influential players with high revenue at Mobage-Town (hereinafter referred to as Specified Social Game Developers), and has requested them to not provide new social games through GREE. If these specified social game developers offered new social games through GREE, the website links of the games the specified social game developers provide through Mobage-Town would be disconnected. As of July 2010, the specified social game developers obtained most of the revenue generated through Mobage-Town and GREE by all social game developers.

(2)

The specified social game developers were instructed by DeNA after around the end of July 2010, that they would be given support from DeNA for developing or providing social games if they decided not to offer new social games through GREE. In addition, according to the policy mentioned in 2(1) above, DeNA told the specified social game developers that DeNA would not add the website links of the games the developers provide through Mobage-Town if they offered new social games through GREE after around August 10, 2010.

At least the majority of the specified social game developers that had received the request from DeNA mentioned in (2)a) above, did not provide new social games through GREE after the second release except for the social games DeNA permitted. Among them, there were some developers that had created new social games to provide through GREE. However, the developers gave up offering their new social games through GREE for fear that the website links of their social games would be disconnected from the Mobage-Town website of DeNA.

(3)

If DeNA discovered after August 10, 2010 that such specified social game developers were providing new social games through GREE, and so infringing the request described in 2 a) above, then DeNA would not publish the links of the social games provided by these game developers through Mobage-Town on the Mobage-Town website’s ‘recommended games’, ‘newly arrived games’, ‘category search’ and so on. DeNA stopped such measures when the entrepreneurs cancelled the provision of social games through GREE.

Due to DeNA’s conduct described in 2 above, Gree Inc. has had difficulties since its second release in offering new social games by at least over half of the specified social game developers that received a request according to 2 (2) a) above.

The Fair Trade Commission conducted an on-the-spot investigation into this case on December 8, 2010 in accordance with Article 47 paragraph 1 (4) AML. On December 15, DeNA indicated it will terminate the policy of the request described above in 2 (3) at a meeting where many social game developers were present. Since that day, there has been no situation where DeNA forces specified social game developers to not offer their social games through GREE by not listing the website links of the games the developers provide on the Mobage-Town website.

Part 2: Application of the Law

Based upon the facts above, DeNA had unjustly interfered with the transactions between Gree Inc., who was in a domestic competitive relationship with DeNA, and the specified social game developers. This kind of conduct falls within paragraph 14 of the Designation of Unfair Trade Practices (Fair Trade Commission Public Notice No. 15 of 1982). In this case, DeNA is an entity corresponding to the provision of Article 7 paragraph 2 (1) AML, which is applied mutatis mutandis in Article 20 paragraph 2 AML. Moreover, taking various circumstances into consideration, such as the fact that the violating act was not committed anymore with the on-the-spot investigation by the JFTC, it may be found particularly necessary to issue a cease and desist order. Accordingly, pursuant to the provision of Article 20 paragraph 2 AML, an order as per the main text of the judgment is given against DeNA.

June 9, 2011

Fair Trade Commission
Chairman Kazuhiko TAKESHIMA
Commissioner Akira GOTO
Commissioner Seisui KAMIGAKI
Commissioner Michiyo HAMADA
Commissioner Kiyoshi HOSOKAWA

Addendum

#Terms & Definitions

1. Mobile social networking service
Service which provides a mobile website, which is equipped with a communication function for the users, and which enables the use of this function in software applications including games, etc.
2. Registered user
A person who is registered as a member of a mobile social networking service.
3. Social games
Games which are provided to users through the mobile social networking service. Users are able to use the communication function with other users in the games.
4. Social game developers
Social game developers except for DeNA and Gree Inc.
5. Policy of openness
For entrepreneurs providing mobile social networking services, to allow social game developers to provide social games through their own mobile social networking service, by disclosing the information of a program called ‘API’.