What are Damages and Intangible Losses in Defamation Cases Against Companies and Organizations?

When an act that infringe on one’s honor is committed, if the victim is an individual, they are entitled to damages for emotional distress, known as consolation money. However, how should we consider this when the victim is a company or organization?

For companies and organizations, it is impossible to consider emotional distress. Therefore, even if their reputation is tarnished, it is not conceivable to compensate for emotional distress with consolation money. Hence, it may be judged that compensation should only be granted for tangible damages such as a decrease in sales. However, in reality, it is difficult to accurately calculate the decrease in sales due to the infringing act, which would result in no relief for the rights of the company or organization.

Therefore, when a company or organization is subjected to an act of defamation, the issue arises whether damages other than tangible damages, such as a decrease in sales, i.e., intangible damages like consolation money, can be recognized.

Companies and Organizations and Intangible Damages

In January 1964, the Supreme Court of Japan ruled on a claim for damages for defamation sought by a medical corporation. The court stated that it was a complete misconception to conclude that “intangible damages, i.e., mental distress, and hence, since a corporation has no mind, there can be no intangible damages, and apart from compensation for tangible damages, i.e., property damages, no other means of relief are recognized under Article 723 of the Civil Code (Japanese Civil Code) in cases of defamation of a corporation.”

“In cases of defamation of a corporation, it is not absolutely impossible for intangible damages that can be monetarily evaluated to occur, and it is socially appropriate to make the perpetrator compensate for such damages with money.”

Supreme Court of Japan, January 28, 1964 (1964 in Gregorian calendar)

The court indicated that a corporation’s claim for compensation for defamation it suffered as “intangible damages” was recognized. This Supreme Court decision is interpreted as not recognizing the mental distress of a corporation, but it does recognize the existence of intangible damages that can be monetarily evaluated for a corporation. It overturned the original judgment that “a corporation cannot claim compensation for intangible damages caused by defamation,” and remanded the case to the Tokyo High Court.

Since then, intangible damages have been recognized in various corporations, political parties without corporate status, labor unions, business groups, and others.

Defamation Against a Company and Intangible Damages

There have been cases where articles in weekly magazines criticizing the execution of duties by the president of a major well-known company were recognized as defamation against the company, and the magazine was ordered to pay damages and publish an apology advertisement.

The Weekly Shincho reported that ‘I’, who was the chairman of the board of directors of Kanebo and also the chairman of the board of directors of JAL, lacked the ability as a manager, was not only unfit as the chairman of JAL, but also continued to window-dress the accounts at the main body, Kanebo. The Tokyo High Court, in September 1994 (Heisei 6), found no evidence as to whether this article was true or not, and stated,

“The article in question contains extremely serious and grave content for the appellant, including that the appellant had window-dressed the accounts, and it is clear that the appellant’s reputation and credit were significantly damaged by this. Also, there is no dispute between the parties that the circulation of the Weekly Shincho is about 600,000 copies, and the impact that the article in question had on the appellant should be considered significant from this point as well. Therefore, it can be recognized that the appellant suffered considerable intangible damage that cannot be accumulated into a specific count due to the article in question.”

Tokyo High Court Judgment, September 7, 1994 (Heisei 6)

As a result, the Weekly Shincho was ordered to pay 5 million yen in damages for intangible damages and to publish an apology advertisement. On the other hand, regarding the “loss of profits that could have been earned” due to the decrease in sales of the appellant (Kanebo), the court did not recognize it, stating,

“It is recognized that the sales of the appellant’s subsidiary, a cosmetics sales company, and Kanebo Pharmaceuticals Co., Ltd., significantly decreased in July or August of Showa 61 (1986) compared to the same period of the previous year. However, sales fluctuate due to various complex factors such as the economic situation at the time, so it cannot be said that the decrease in sales of the appellant’s subsidiary was due to the publication of the article in question. In addition, it cannot be agreed that the damage to the subsidiary directly becomes the loss of profits that the appellant should have earned.”

Same as above

Property damage such as business losses due to a decrease in sales is theoretically recognized, but it is difficult to prove the occurrence of damage and the causal relationship with the act of defamation, and it is rare for it to be recognized in court.

Intangible Damages and Costs for Reputation Restoration

In several lawsuits, many plaintiffs have claimed three types of damages:

1. Property damage such as business losses due to decreased sales (business damage)
2. Costs incurred to take measures to restore reputation (costs for public announcements and opinion advertisements to prevent the expansion of business damage and restore social credibility)
3. Intangible damages such as loss of social credibility

While it is rare for the first type of damage to be recognized, it is difficult to get the second type recognized. In relation to this, there is a case where an unlawful act of defamation was recognized when an interview with a real estate agent broadcasted on a TV program about the real estate recession after the collapse of the bubble economy was edited to give the impression that the agent was also in a difficult business situation.

The program depicted the miserable situation of condominiums forced to stop selling, agents forced to stop selling, and sales offices after the collapse of the bubble economy, and through narration, it gave the impression that the plaintiff company, which was selling a condominium called “Hightown Yoshikawa”, was in a very difficult financial situation like other real estate agents, unable to withstand dumping competition, unable to sell inventory, and increasing borrowings.

However, the Tokyo District Court in November 1994 (Heisei 6) ruled that the plaintiff company was actually in a very good business situation, stating, “It is clear that the plaintiff had a considerable social evaluation before the broadcast of this program. Therefore, the broadcast of this part of the program, which gives the impression to the temporary viewers as mentioned above, should be recognized as defaming the plaintiff’s credit.” The court ordered the TV station and the program production company to pay 3 million yen for intangible damages.

On the other hand, the plaintiff company claimed that “due to the broadcast of this part of the program, the plaintiff’s credit was damaged, and fearing that this would negatively affect the sales of Hightown Yoshikawa, we distributed an additional 620,000 flyers, which would normally require at most 400,000, and placed two advertisements in the Yomiuri Shimbun, incurring an additional advertising cost of 7,419,347 yen for credit recovery and suffering the same amount of damage.” However,

Considering the market conditions of real estate at that time, it cannot be recognized that if the program had not been broadcasted, the sales would have been definitely possible. Rather, it is considered that the sale of condominiums such as Hightown Yoshikawa was in a very difficult situation, and despite this, it is recognized that all 33 units of Hightown Yoshikawa were sold out about six months after the broadcast of the program. Therefore, it cannot be recognized that if the plaintiff had not conducted the additional advertising, Hightown Yoshikawa would not have been sold. In that case, even with all the evidence in this case, it is impossible to recognize a causal relationship between the damage claimed by the plaintiff and the joint tort of the defendants regarding the additional advertising costs incurred by the plaintiff.

Tokyo District Court, November 11, 1994 (Heisei 6)

The court did not accept the claim. However, even if it is said that “it cannot be recognized that if the plaintiff had not conducted the additional advertising, Hightown Yoshikawa would not have been sold,” if Hightown Yoshikawa had not been sold without the additional advertising, there would be no need to claim additional advertising costs, which is a strange logic.

Defamation Against Companies and Their Representatives

When slander or defamation is directed at a company or organization, it can also be considered as being directed at its representatives. In addition to the reputation of the company or organization, the reputation of the individuals involved in its activities can also be considered.

Weekly Bunshun reported that the reason why Non (known as Rena Nōnen when she was affiliated with a talent agency) disappeared from the public eye was due to the treatment she received from her talent agency, LesPros Entertainment. The article detailed her situation after 2013, stating that her monthly salary during the “Amachan” era was 50,000 yen, she couldn’t afford to buy underwear due to lack of money, and her on-site managers kept changing. The article seemed to be based on specific content from interviews with people close to the parties involved.

In response to the article, LesPros and its president sued the publisher Bungeishunju and the then editor-in-chief of the magazine for defamation in June 2015 (Heisei 27), claiming that the article was “contrary to the facts”. The verdict was handed down by the Tokyo District Court in April 2019 (Reiwa 1). In the verdict, the Tokyo District Court denied most of the content of the article, stating, “The defendants, forgetting their mission as a news organization, prioritized spreading content that was nothing more than subjective assertions without any verification from an objective viewpoint, and without any substantiation, and thus we must conclude that they proceeded with the reporting of this article.”

If the reputation spreads in society that the plaintiff company, which is a talent agency, only pays low wages to its affiliated talents and does not give them work without a rational reason, the credibility of the plaintiff company will be greatly damaged, and it will become a major obstacle to its business of discovering and nurturing talents. Also, as for plaintiff A, who is the representative director of the plaintiff company and also serves as a standing director of the Music Affairs Association, if the reputation spreads in society that he is a person who engages in power harassment by making statements that deny the personality of the talents affiliated with the plaintiff company, it can be considered that plaintiff A’s honor and credibility will be damaged, and it will also become an obstacle to his business.

Tokyo District Court, April 19, 2019 (Reiwa 1) Verdict

As a result, the court ordered Weekly Bunshun and Bungeishunju to pay a total of 660,000 yen, including 1 million yen in damages for the representative director, 5 million yen in intangible damages for the talent agency, and attorney’s fees.

It should be noted that Weekly Bunshun and Bungeishunju have immediately appealed this verdict.

Summary

When a company or organization’s reputation is damaged, the right to remedy can be claimed not only for tangible damages but also for intangible damages.

Article 710 of the Japanese Civil Code (Minpō) states, “Regardless of whether the person has infringed upon the body, freedom, or honor of another person, or has infringed upon the property rights of another person, the person who is liable for damages under the provisions of the preceding article must compensate for damages other than property.” This provision is interpreted to allow compensation for intangible damages, and a realistically reasonable conclusion has been drawn for companies and organizations as well.

In the case of individuals, claim for consolation money, and in the case of companies or organizations, claim for intangible damages, and let the offender compensate for the damage.