Key Points to Consider When Opening an Online Shop: An Explanation of the Japanese 'Secondhand Dealer Act'

Nowadays, internet shopping has permeated our daily lives. Consequently, anyone can easily set up an online shop. However, various laws are involved in the operation of an online shop.

Among the laws related to the operation of online shops, there are laws that apply to all online shops, such as the ‘Japanese Act on Specified Commercial Transactions’, ‘Japanese Unfair Competition Prevention Act’, ‘Japanese Act against Unjustifiable Premiums and Misleading Representations’, ‘Japanese Electronic Contract Act’, ‘Japanese Act on Regulation of Transmission of Specified Electronic Mail’, and ‘Japanese Act on the Protection of Personal Information’, and there are laws that apply to specific industries. Here, we will explain the ‘Japanese Secondhand Dealer Act’, which is one of the laws that apply to specific industries.

Secondhand Dealer Act (古物営業法)

The Japanese Used Secondhand Dealer Act applies to auction sites, second-hand goods, and recyclable goods vendors. The purpose of this law is to prevent the sale of stolen goods and to quickly detect such activities by implementing necessary regulations on businesses related to used goods. It aims to prevent theft and other crimes, and to facilitate rapid recovery from such damages.

“Secondhand” and “Secondhand Business”

“Secondhand goods” are defined in Article 2, Paragraph 1 of the Japanese Used Goods Dealer Act as any of the following three:

• Items that have been used once
• Unused items that have been traded for use
• Any of the above that have been repaired or refurbished

Therefore, even if an item is brand new and has not been used, once it has been passed to a consumer, it is considered a “secondhand”.

Furthermore, these “secondhandgoods” are classified into 13 categories. When starting a business with a second hand dealer license, you must choose what you will trade from the following 13 categories listed in the “Classification of Secondhand goods to be Mainly Handled” section of the application form.

1. Artworks
2. Clothing
3. Watches and jewelry
4. Automobiles
5. Motorcycles and mopeds
6. Bicycles
7. Cameras
8. Office equipment
9. Mechanical tools
10. Tools
11. Leather and rubber products
12. Books
13. Vouchers

Multiple licenses can be applied for, but if you have not been in business or have suspended your business for more than six months after obtaining the license, your license may be revoked.

Similarly, in Article 2, Paragraph 2 of the Japanese Used Goods Dealer Act, “secondhand goods business” is classified into the following three types:

• Secondhand goods dealer
• Secondhand goods market operator
• Secondhand goods auction intermediary

A “secondhand goods dealer” makes a profit by buying, selling, or exchanging used goods, or by accepting consignments to buy, sell, or exchange.

A “secondhand goods market operator” operates a used goods market where used goods dealers trade with each other for sourcing for recycle shops, and makes a profit by collecting participation fees from participating used goods dealers or commissions on transactions.

A “secondhand goods auction intermediary” is equivalent to the operator of an online auction. They make a profit by mediating between people who want to sell and buy used goods (including the general public) through “auctions”, and collecting usage fees from service users or commissions on transactions.

If you want to become a “secondhand goods dealer” or a “secondhand goods market operator”, you need to obtain permission from the Public Safety Commission (Article 3 of the Japanese Secondhand Dealer Act).

Also, if you want to operate a “Secondhand goods auction intermediary” business, you need to report to the Public Safety Commission within two weeks from the start of the business (Article 10, Paragraph 2 of the Japanese Secondhand Dealer Act). As long as the necessary documents are in order, you can pass the review, so the review hurdle is lower compared to the permission that cannot pass the review unless the Public Safety Commission gives the OK.

If you fall under any of these three types of used goods businesses, you must comply with the rules set by the Japanese Secondhand Dealer Act, and if you violate them, you may be penalized.

Permission for “Antique Dealers” and “Antique Market Operators”

The Public Safety Commission, under Article 4 of the “Japanese Antique Business Law”, must not grant permission to become an “Antique Dealer” or “Antique Market Operator” to anyone who falls under any of the following categories:

• Those who have been declared bankrupt and have not been rehabilitated
• Those who have been sentenced to imprisonment or fined for specific crimes and less than 5 years have passed
• Those without a fixed residence
• Those who have had their antique business license revoked and less than 5 years have passed
• Minors who do not have the same capacity as adults in business

In addition, people associated with violent organizations, among others, cannot obtain permission.

Three Major Obligations of Antique Dealers for Crime Prevention

Antique dealers are required to adhere to the following rules, referred to as the “three major obligations,” for crime prevention.

1. Verification of the trading partner (Article 15, Paragraph 1 of the Japanese Antique Business Act)
2. Obligation to report illegal goods (Article 15, Paragraph 3 of the Japanese Antique Business Act)
3. Obligation to record in the ledger (Article 16 of the Japanese Antique Business Act)

Regarding the first obligation, the verification of the trading partner, antique dealers must verify the “address,” “name,” “occupation,” and “age” of the trading partner when “purchasing antiques,” “exchanging antiques,” or “accepting the consignment of the sale/exchange of antiques.” Methods for verification, both in person and without face-to-face interaction using mail or the internet, are stipulated.

As for the second obligation, the reporting of illegal goods, antique dealers must immediately report to the police when there is suspicion of illegal goods (such as stolen or counterfeit items) in the transaction of antiques.

The following cases are applicable to transactions suspected of involving illegal goods:

• When the same person repeatedly sells a large number of items in a short period
• When high-value items are sold that do not match the customer’s income, assets, transaction purpose, occupation, etc.
• When the seller is in a hurry to sell, even at a price significantly below the market price

Furthermore, according to Article 20 of the Japanese Antique Business Act, if there are stolen or lost items among the antiques purchased or exchanged by the antique dealer, the victim or the owner of the lost item can demand the recovery of the item free of charge from the antique dealer, even if the item was purchased or received in good faith from a dealer who handles similar items in a public market. However, this does not apply after one year has passed since the theft or loss.

Regarding the third obligation, the recording in the ledger, antique dealers must record the transaction date, the type and quantity of antiques, the personalityistics of the antiques, the address, name, occupation, age of the other party, and the method of identity verification of the other party in a ledger or similar when receiving or delivering antiques.

This record must be kept for three years from the date of recording, and if the ledger kept is lost or data on the computer is deleted, it is necessary to report to the police.

Common Rules for Antique Dealers and Antique Market Operators

There are rules that are commonly imposed on antique dealers and antique market operators, the main ones being the following six:

1. Display of signs and obligation to carry a permit
2. Obligation to appoint a manager
3. Restrictions on transaction locations
4. Obligation to preserve and report lost property
5. Obligation to comply with storage orders and inspections
6. Prohibition of lending names

Regarding the first rule, the display of signs and obligation to carry a permit, antique dealers must display a sign indicating their permit at each business location or temporary store, and antique market operators must do the same at each antique market. They must explicitly show to the other party in the transaction that they have received an antique dealer’s permit.

Also, when an antique dealer conducts transactions of antiques on a website, they must display the “name of the antique dealer”, “name of the Public Safety Commission that granted the permit”, and “permit number” at a designated place on the website.

Furthermore, when an antique dealer conducts transactions at a place other than their business location, such as during a home visit purchase, they must carry their “antique dealer’s permit” and present it when requested by the other party.

Regarding the second rule, the obligation to appoint a manager, antique dealers and antique market operators must appoint one manager at each business location (or antique market) to properly carry out their operations.

Regarding the third rule, restrictions on transaction locations, the places where antique dealers can trade with the general public are limited to “business locations”, “addresses of the other party in the transaction”, and “temporary stores reported in advance to the Public Safety Commission”.

When an antique dealer conducts transactions of antiques on a website, there are no such restrictions on transaction locations, but they must report the URL of the site to the police station where they applied for the antique dealer’s permit within 14 days of launching the website.

Regarding the fourth rule, the obligation to preserve and report lost property, “lost property” refers to wanted posters sent from the local police station, also known as “lost property documents”. These are sent when necessary for the discovery of stolen goods, and they list the items and personalityistics of the lost property. The following rules apply:

• Write the date of receipt on the lost property and keep it for six months from that date
• If you have any antique that matches the lost property on the day you received it, report it immediately
• If you receive any antique that matches the lost property during the preservation period, report it immediately

Regarding the fifth rule, the obligation to comply with storage orders and inspections, when there is suspicion that an antique in the possession of an antique dealer is stolen goods, the chief of the police headquarters can order the antique dealer to store the antique for up to 30 days. During the period when storage is ordered, the antique dealer cannot sell the antique. Also, if they are holding it on consignment for sale or exchange, they cannot return it to the consignor.

Also, police officers can enter and inspect the business locations, temporary stores, storage locations of antiques, and antique markets of antique dealers when necessary, and can question related parties. Antique dealers and antique market operators have an obligation to comply with these orders and inspections.

Regarding the sixth rule, the prohibition of lending names, antique dealers and antique market operators are prohibited from allowing others to operate their antique business under their own name. If someone who has not received permission from the Public Safety Commission borrows a name and pretends to have received permission to operate, it nullifies the purpose of the permit system and could become a loophole for crime. The penalties for lending names can be as severe as those for operating without a permit or obtaining a permit unfairly, and furthermore, you will not be able to receive an antique dealer’s permit for five years afterwards.

Rules for Antique Auction Agents

There are three main rules that antique auction agents must adhere to:

1. Verification of the other party
2. Reporting obligation
3. Record creation and preservation

Regarding the first rule, verification of the other party, when an application for auction is received from someone intending to sell an antique, the agent must make an effort to verify the applicant. As the phrase “make an effort” suggests, this is a duty of effort, not an absolute requirement. However, rather than thinking that it’s okay not to comply because it’s only a duty of effort, it should be adhered to as much as possible in the spirit of compliance.

As for the second rule, the reporting obligation, if there is any suspicion that the antique the other party intends to sell is stolen or otherwise illicit, the agent must immediately report this to the police.

Regarding the third rule, record creation and preservation, when conducting an auction for someone intending to buy or sell an antique, records such as “listing date”, “listing information”, “user ID of the lister and winning bidder”, and “information to identify the lister and winning bidder (name, address, age, etc.)” must be created and preserved. These records should be kept for a period of one year.

Summary: Opening an Online Shop needs Consideration of Secondhand Dealer Act or Antique Dealer Act

If you are buying or selling used items on online auctions for personal use, not for profit, and only on an occasional basis, you do not need a ‘Japanese Antique Dealer License’. However, if you are repeatedly buying and selling used items on online auctions for profit, you will need a ‘Japanese Antique Dealer License’.

Guidance on Measures by Our Firm

Monolith Law Office is a legal office with high expertise in both IT, particularly the internet, and law. In recent years, the need for legal checks surrounding online shopping has been increasing. Taking into account various legal regulations, our firm analyzes the legal risks associated with businesses that have already started or are about to start. We aim to legalize the business as much as possible without stopping it.