Japan: an antitrust case with an impact on algorithms used by the companies

The Tokyo District Court rulled that a restaurant review platform's unilateral change to its rankings algorithm violated the Japanese antitrust law that prohibits abuse of "superior bargaining power."
The decision shows that, even if Big Tech groups have long argued that their algorithms should be considered trade secrets in all circumstances, courts and regulators across the world have begun to challenge that position.

In the case, the platform - an important restaurant review website in Japan - updated its algorithm, applying a "discount" to chain restaurants.

This change lowered the ranking on the plaintiff's chain, a pay membership of the platform, who claimed it suffered a loss of customers due to the updated evaluation scheme.

The Court stated the plaintiff was right.

The decision is relevant as it is the first time where a court has requested a digital platform to disclose its algorithm and, according to japanese legal experts, this could change how large platforms operate in the country, forcing them to reveal their secret algorithms as well.

While platforms have provided some information on how their algorithm-based services work, Big Tech companies have generally argued against disclosure.

However, it has to be noted that regulations are providing for an ever-increasing obligation of transparency, information and communication, including on the modalities and purposes of the use of algorithms. The EU’s “platform to business” regulation came into effect in 2020 and requires platforms to give businesses more information about how their ranking algorithms work.

The Act on Improving Transparency and Fairness of Digital Platforms in Japan requires internet platforms to communicate how algorithms work at a basic level.

In Spain, as we reported here, the Ministry of Employment and Social Security published guidelines on “Algorithmic data in a labor environment,” setting out the main obligations companies must comply with when using automated decision-making systems and algorithms in the workplace.

The Japanese ruling confirms the tendency not only of the legislature, but also of case law, to consider the right to transparency and information increasingly important.