Following the news that Senator Maria Cantwell called for an investigation into Sony’s alleged anti-competitive practices in Japan, eleven members of the US Congress have made the same appeal.
These Congresspeople come from both sides of the aisle, Republicans and Democrats, and they sent letters with the same message as Senator Cantwell’s to U.S. Trade Representative Katherine Tai, as well as Commerce Secretary Gina Raimondo.
As reported by Stephen Totilo on Axios, this was the substance of the letter from the Republican Congresspeople:
“Today, we write to bring to your attention the imbalanced Japanese video game market, which we are concerned may be a result of a discriminatory trade practice that could violate the spirit of the U.S.-Japan Digital Trade Agreement.
The Japanese government’s effective policy of non-prosecution when it comes to Sony appears to be a serious barrier to U.S. exports, with real impacts for Microsoft and the many U.S. game developers and publishers that sell globally but see their earnings in Japan depressed by these practices.”
The letters also cites the same argument made by Senator Cantwell, that Sony has 98 % of the Japanese high-end console market.
Some fans seem to have been arguing about the source of this figure. It’s true that Sony, and separately, the FTC, have adopted this idea of the high-end console market, to exclude the Nintendo Switch in their arguments against the Microsoft-Activision deal.
But it seems more likely these US officials found the source that Atty Curt Levey used, in his article arguing that the US FTC was colluding with Japan’s regulator to favor Sony over the US-based company Microsoft.
Some gamers also use the argument that Nintendo’s dominant position in Japan actually means that Sony doesn’t really have that 98 % control over the market, but that argument itself is flawed. Nintendo and Sony do compete harder than Microsoft does in the Japanese console market, but there are years when Nintendo does not enjoy the success it has now. In those years, Sony does take that dominant position in Japan. Whether that 98 % figure is true or not, it is definitely true that Xbox is in an extremely poor position in Japan.
While it’s also easy to accuse the Congresspeople of bias or ulterior motives, it’s important to look at the basis of their argument. The US-Japan Digital Trade Agreement is bigger than video games.
This agreement, signed in 2019, was a formalization of existing alliances and convergences between the two countries, partly because they are already in a close working relationship, and partly to counter the threat posed by China. That agreement can’t be enforced in earnest if one side is not doing its part to help the other.
Article 8 of the agreement, about the Non-Discriminatory Treatment of Digital Products, says this on page 10:
“Neither Party shall accord less favorable treatment to a digital product created, produced, published, contracted for, commissioned, or first made available on commercial terms in the territory of the other Party, or to a digital product of which the author, performer, producer, developer, or owner is a person of the other Party, than it accords to other like digital products.”
As you can read, there is enough leeway in these provisions to cover video games, but also conditions like video game exclusivity or partial exclusivity, exclusive content and timed content.
It’s certainly a strange situation as the lawsuit FTC chair Lina Khan has filed vs the Microsoft-Activision deal is set to go to court. These Congresspeople’s actions definitely undermine Lina’s actions, and that may be factored in to FTC judge Michael Chappel’s considerations on the case.
As for this investigation, U.S. Trade Representative Tai and Commerce Secretary Raimondo may really follow through on this. If Sony has any more dirty laundry to air about their practices in Japan, we may find out about it soon enough.
