Author: Attorney/Patent Attorney Masatoshi Tanaka

1. Amendment to the Act Against Unjustifiable Premiums and Misleading Representations

The law amending the Act Against Unjustifiable Premiums and Misleading Representations (hereinafter “Act”) (Act partially Amending the Act Against Unjustifiable Premiums and Misleading Representations, Act No. 29 of 2023) came into effect on October 1, 2024.

In recent times, there has been an increasing number of cases where businesses exaggerate claims, or make unsubstantiated statements in their advertisements, resulting in violations of the Act and leading to cease-and-desist orders as well as other penalties.

Since April 2024, numerous companies, including RIZAP, Inc., Fujitsu Client Computing Limited, CAREER COLLEGE CO., LTD., Medical Corporation Yushinkai, The Chugoku Electric Power Co., Inc., Naha Chokuso Center, and several others have already received cease-and-desist orders as well as payment orders for surcharges.

The scrutiny from both the government and society regarding the violations of the Act is becoming stricter year by year, making it essential for all companies engaged in the B-to-C(business-to-consumer) sector to exercise caution and establish appropriate preventive measures.

2. Examples of Violations of the Act in Fiscal Year 2024 (Excerpts)

(1) RIZAP Inc.

Regarding the self-care services provided by “chocoZAP”, operated by RIZAP Inc., the company advertised on its website and social media platforms that the services were “available on an unlimited basis for 24 hours a day”. However, in reality, the usage time for specific services was restricted, and the services were not available for 24 hours a day. Additionally, the company engaged third parties to post on Instagram without clearly indicating that the content was an advertisement, which constituted stealth marketing.

In response, the Consumer Affairs Agency issued a cease-and-desist order requiring the company to disclose the details of the violation, implement thorough recurrence prevention measures, and refrain from making similar claims in the future.

(2) Fujitsu Client Computing Limited

Fujitsu Client Computing Limited displayed both a “Web price” and a “campaign price” in advertisements for its notebook laptops. However, the price displayed as the “Web price” was a price at which there were no actual sales on the website. This constituted a dual pricing display that misled the consumers into believing that they could purchase the laptops at a discounted “campaign price” that was cheaper than the regular price. Furthermore, the company continued to sell the laptops at the same discounted price even after the advertised campaign period had ended, which was also deemed to be a misleading advertisement.

In response, the Consumer Affairs Agency ordered the company to pay a surcharge of 42.23 million yen and issued a cease-and-desist order requiring the company to implement corrective measures to prevent similar violations in the future.

3. Key Amendment Details

The amended Act focuses primarily on the following three points:

(1) Introduction of Commitment Procedures

Under the amended Act, a new “commitment procedure” system has been introduced under which companies can potentially avoid cease-and-desist orders and payment orders for surcharge by voluntarily demonstrating their intention to correct the violations and submitting a specific improvement plan. The introduction of this system provides companies with a means to resolve issues quickly while avoiding penalties.

(2) Strengthening of the Surcharge System

The method for calculating the surcharges has also been revised, making it possible to estimate the surcharges based on the sales revenue associated with the violating act and calculate the amount of surcharge. Furthermore, a new provision has been added to increase the surcharge amount by 1.5 times for companies that have received a payment order for surcharge within the past 10 years. Additionally, a direct penalty provision imposing a fine of up to 1 million yen has been introduced for serious violations, strengthening deterrence against companies.

(3) Measures against Misleading Favorable Representation

The amended Act also imposes strict regulations on false representations that mislead consumers into believing that they are getting a “good deal”, particularly those representations related to price or transaction terms. When companies promote the prices or the advantages of their products, any representations that may mislead consumers into believing that the offer is more advantageous/favorable than it actually is, will be strictly regulated. This ensures that consumers can select products based on accurate information.