This article was written as of January 2024.

1. Overview

On May 10, 2023, the Act on Partial Revision of the Act against Unjustifiable Premiums and Misleading Representations (the "Amendments") was enacted. The purpose of the Act against Unjustifiable Premiums and Misleading Representations is to protect consumers by limiting or prohibiting enterprises from offering excessive premiums or making misleading representations that portray goods or services to general consumers as being significantly superior to that of the actual goods or services. The Amendments create provisions for fines and other provisions for unscrupulous enterprises because the development of digital platforms has led to problems arising, for example, from misleading internet advertisements. The main points of the Amendments are as follows:

(a) Introduction of a commitment procedure system and flexible refunding in the surcharge system;
(b) Changes in the surcharge system and expansion of penalty provisions; and
(c) Improvement of procedures for smooth law enforcement.

The effective date of the Amendments has not been determined as of January 2024, but they are expected to come into effect in 2024.

2. Introduction of a Commitment Procedure System and Flexible Refunding in the Surcharge System

With the aim of encouraging enterprises to make voluntary efforts to correct violations and recover damages to consumers, the following amendments were made to provide incentives for enterprises to do so.

2.1. Commitment Procedure System

The commitment procedure system is a process where an enterprise, who receives a notice from the authority that it is suspected of violating the Act against Unjustifiable Premiums and Misleading Representations, submits a corrective action plan to the authority. If the authority certifies that the content of the plan is sufficient for correction and that the plan will be implemented with certainty, the authority promises not to take any further action under the Act against Unjustifiable Premiums and Misleading Representations, such as an order for action or a payment order for surcharge (Articles 26 to 33 of the Amendments). The commitment procedure system was introduced to the procedure under the Act on Prohibition of Private Monopolization and Maintenance of Fair Trade in 2018, and this Amendment will also be introduced to the procedures laid out in the Act against Unjustifiable Premiums and Misleading Representations.

2.2. Flexible Refunding in the Surcharge System

Electronic money, etc., as well as money, are allowed as a method for an enterprise who receives a draft of payment order for surcharge due to misrepresentation to refund transactions with consumers during the period subject to the surcharge (Article 10, paragraph 1 of the Amendments).

3. Changes in the Surcharge System and Expansion of Penalty Provisions

The following Amendments were made to strengthen sanctions against violations of the Act against Unjustifiable Premiums and Misleading Representations.

3.1. Changes in the Surcharge System

If an enterprise makes misleading representations with respect to goods or services, the enterprise is obliged to pay a surcharge calculated based on the sales amount of the goods or services during the period in which the misleading representation was made. However, the amount of the surcharge cannot be accurately calculated if the enterprise does not keep sufficient data on the amount of sales. In order to address this situation, the authority shall be able to estimate the amount of sales from the relevant data even if there is no direct sales amount data and to order the payment of a surcharge (Article 8, paragraph 4 of the Amendments). In addition, in the case of repeated violations, the amount of the surcharge will be increased by one-and-a-half times (Article 8, paragraph 5 of the Amendments).

Many of the changes to the surcharge system in these Amendments, including those mentioned above, are based on the surcharge system of the Act on Prohibition of Private Monopolization and Maintenance of Fair Trade.

3.2. Expansion of Penalty Provisions

Penalties under the Act against Unjustifiable Premiums and Misleading Representations could only be applied in cases where the enterprise violated an order for action issued by the authority. Under the Amendments, a fine of up to one million yen may be imposed directly on a malicious enterprise, who makes a representation while recognizing or accepting that it is an improper representation, without an order for action being issued by the authority (Article 48 of the Amendments).

4. Improvement of Procedures for Smooth Law Enforcement

The Act against Unjustifiable Premiums and Misleading Representations applies to enterprises located outside Japan. In order to strengthen the enforcement of this Act for foreign entities, provisions allowing Japanese authorities to provide information to foreign authorities have newly been prescribed for the purpose of strengthening cooperation with foreign authorities (Article 41 of the Amendments). In addition, provisions for service procedures were improved and expanded to facilitate enforcement by Japanese authorities against foreign entities (Article 7, paragraph 3, and Articles 42 to 45 of the Amendments).

Furthermore, a new procedure has been established under which a Specified Qualified Consumer Organization certified by the relevant governmental authority under the Consumer Contract Act may request that an enterprise suspected of making misleading representations submit materials on which the representations are based (Article 35 of the Amendments).

Key Contacts

Takeshi Ishida

Partner

Tokyo Office

Takeshi Ishida is a Japanese qualified lawyer, and a partner at Anderson Mori & Tomotsune. He specializes in competition law, including defense against agency investigations into cartel, bid-rigging and unfair unilateral conduct, antitrust litigations and merger control, with special expertise in issues involving information technologies and intellectual property rights, based on his practical insight gained from first-hand experiences of handling leading cases in the Japan Fair Trade Commission (JFTC).

Prior to joining the firm, he was appointed as a deputy director at investigation bureau in the JFTC for 3 years. During his tenure, he was a lead case-handler in the Intellectual Property Task Force at the investigation bureau, dealing with investigations and litigations against IT major companies over cutting-edge cases. Moreover, he also acted as a chief investigator responsible for investigating on a wide range of infringement cases such as cartel, bid-rigging and unfair unilateral conduct, conducting dawn raids over more than a dozen cases, and also representing the JFTC before the Tokyo district court and administrative hearings. Before serving for the Japanese agency, he practiced with Blakemore & Mitsuki as a senior associate, advising mainly on competition law issues to clients, such as a patent pool company and major IT companies, and dealing with merger control and litigations.

Besides his competition law expertise, his practices encompass the full range of general corporate issues, with considerable experience in litigations and white crime matters, and he also has a deep knowledge of information and communication technology sector.

Trending News: Japan Legal Update

Authors Key Contacts	Takeshi Ishida
Issue	Mar 13, 2024
Practice Areas	Competition/Antitrust Distribution and Other Competition Law Matters