What are the Cases Where Online Defamation Falls Under the Japanese 'Credit Damage Crime' and 'Business Obstruction Crime'?

In order to remove web pages or bulletin board posts that constitute defamation on the Internet, or to identify the poster, it is necessary to claim that “the article is illegal”. The first reason to consider for this “illegality” is defamation (infringement of the right to honor).

However, if the act is such that it damages business reputation, it may fall under the crimes of credit defamation or business obstruction under the Japanese Penal Code, and for such posts, claims of credit defamation or business obstruction will be made.

Japanese Penal Code Article 233

Anyone who spreads false rumors or uses deception to damage a person’s credit or obstruct their business shall be punished by imprisonment for up to 3 years or a fine of up to 500,000 yen.

Such acts are illegal and constitute torts in civil law.

Japanese Civil Code Article 709

Anyone who intentionally or negligently infringes on the rights or legally protected interests of another person is liable for the damages caused by this.

In addition to the general tort liability under the Civil Code, under Article 2, Paragraph 1, Item 14 of the Unfair Competition Prevention Act (UCPA), you can request a stop, prevention, or damages for unfair competition that announces or spreads false facts that harm business reputation. However, the parties involved in credit defamation under the UCPA must be in a competitive relationship. So, when is it judged that “credit has been defamed”? Let’s look at typical cases where “credit was defamed”.

https://monolith.law/reputation/netslander-against-companies[ja]

Case of a Post on mixi Community Alleged to Have Defamed Credit

A self-proclaimed “professional producer of osteopathic acupuncture and moxibustion clinic establishment, judo orthopedic school establishment, health insurance handling, and insurance handling organization setting” posted on the “Thinking about the Management of Osteopathic and Orthopedic Clinics” community within the social networking site “mixi”. The post stated, “Prosecutors have stepped in on the judo orthopedic organization itself in Osaka, revealing a massive insurance fraud of 2.1 billion yen. This has led to the start of police inspections of dark osteopathic and orthopedic clinics by each judo orthopedic therapist’s affiliation. In fact, the clinics that received this will go bankrupt,” and “Members are unknowingly adding receipts to their membership claims and receiving benefits. In this situation, once an inspection is conducted, the compensation return money demanded by the insurer from the members becomes a huge amount, leading to a miserable reality of bankruptcy and either family suicide or running away at night.”

The plaintiff, commonly known as “Zenjukyo”, is a cooperative association that has judo orthopedic therapists and acupuncturists as union members, and has also established the Heisei Medical Academy (平成医療学園), a training school for judo orthopedic therapists and acupuncturists. They filed a lawsuit seeking payment for intangible damages due to defamation of honor and credit based on Article 709 of the Japanese Civil Code (民法709条), and business defamation based on Article 2, Paragraph 1, Item 14 of the Japanese Unfair Competition Prevention Act (不正競争防止法2条1項14号). In response, the Osaka District Court (大阪地方裁判所) ruled,

“If we base it on the normal attention and reading of general readers (members of this community), it can be recognized as indicating the fact that an investigation by the prosecutor’s office is being conducted against the plaintiff, and that belonging to the plaintiff will result in disadvantage. Therefore, the fact indicated by the post in question can be said to lower the social evaluation and credit of the plaintiff, and it can be recognized that the plaintiff’s honor and credit have been defamed by the post in question.”

Osaka District Court, October 21, 2010 (2010年10月21日) Judgment

The court ordered the defendant to pay 500,000 yen in intangible damages and 50,000 yen in attorney’s fees. However, it did not acknowledge that the defendant was in a competitive relationship with the plaintiff, and therefore did not accept the plaintiff’s claim based on the Japanese Unfair Competition Prevention Act.

https://monolith.law/reputation/honor-infringement-and-intangible-damage-to-company[ja]

Case Where Unauthorized Access Was Deemed as Defamation

A former employee of an online game provider illegally accessed the game’s management program, increased the amount of virtual assets in the game, and sold it to a dealer who trades virtual assets and items for real money. This act was deemed to defame the provider’s reputation and was considered an illegal act. The provider sought damages from the former employee. This former employee had already been prosecuted for violating the Japanese law prohibiting unauthorized access, and had been sentenced to one year in prison with a four-year suspended sentence. In this civil lawsuit, the Tokyo District Court stated,

“The plaintiff had the right to maintain and manage the system of the online game. The defendant illegally accessed the management program, tampered with the data, increased the amount of virtual assets, and sold it to RMT dealers. This significantly increased the circulation of virtual assets, which functions similarly to real currency, in the online game. Such actions by the plaintiff can be said to constitute an illegal act in relation to the plaintiff, as they defame the plaintiff’s management rights of the online game, the game system including the virtual assets, and the plaintiff’s management system.”

Tokyo District Court, October 23, 2007 (2007 in Gregorian calendar) Judgment

The court ordered the payment of a total of 3.3 million yen, including 3 million yen as damages for defamation and 300,000 yen for attorney fees. This is a case where defamation was recognized, considering that the game’s revenue from in-game purchases and other sources would have been adversely affected by the defamation, and that there was a certain impact on people other than the users of the online game due to extensive media coverage on this matter.

https://monolith.law/reputation/unauthorized-computer-access[ja]

Precedent Regarding the Scope of Credit in Defamation of Credit

There was a case where a person injected household detergent into a paper-packed orange juice purchased at a convenience store, falsely reported to the police that foreign substances had been mixed in, and had the media report that orange juice with foreign substances had been displayed and sold at the convenience store. Although this was a criminal trial, it is a judgment that is cited in various places as one that expanded the scope of “credit” in defamation of credit. The Supreme Court stated,

The crime of defamation of credit stipulated in Article 233 of the Japanese Penal Code is intended to protect a person’s social evaluation in economic aspects, and the “credit” referred to in the same article should not be limited to social trust in a person’s ability or intention to pay, but should reasonably be interpreted to include social trust in the quality of products sold.

Supreme Court Judgment, March 11, 2003 (2003)

and dismissed the appeal against the first trial, which sentenced the defendant to one year and six months in prison with a three-year suspension, stating, “The defendant spread false rumors that he was selling inferior products, thereby damaging the social trust in the products sold by the above-mentioned convenience store.” Until now, it had been held that the crime of defamation of credit would not be established unless “social trust in a person’s ability or intention to pay” was damaged (Judgment of the Grand Court, December 18, 1916 (Taisho 5) and Judgment of the Grand Court, April 12, 1933 (Showa 8)), but there is no reason to limit credit to credit related to payment. In light of this judgment, it is now held that the crime of defamation of credit can be established even in the act of transmitting false information that degrades the quality of products or services sold or provided by a company.

Case Study: Defamation on a Website Recognized as an Act of Credit Damage

A customer who purchased a boat for sea fishing, dissatisfied with the response of the boat manufacturing company and its representative regarding a boat sinking accident, posted comments attacking the boat manufacturing company on a bulletin board of a website he created. Readers who responded to this posted defamatory comments one after another, which were left unattended. The company and its representative, C, claimed damages for defamation against the reader B who made the comments and the website administrator A who left them unattended.

A, the boat purchaser, claimed that the cause of the sinking was a defect in the boat. However, in reality, the cause of the accident was that A had installed an auxiliary engine on an unreinforced part of the boat’s stern without consulting the manufacturing company or its representative. Moreover, the sinking accident occurred about three years and four months after the boat was delivered. Considering that it is common to specify a one-year warranty period in a sales contract for a boat of the same size, it is reasonable to assume that the warranty period for this boat was about the same. The court ruled that under the special circumstances of the installation of the auxiliary engine, the manufacturing company had no responsibility for the quality guarantee.

A was found to have “concealed the most important fact about the sinking accident, misled many readers who were unaware of the circumstances, and induced them to participate in the writing act, which is contrary to fairness and fairness, which are indispensable factors for the free and healthy development of the society of speech on the Internet.”

B, who responded to A, was found to have “written aggressive and radical critical words to incite readers to attack the plaintiffs without trying to accurately grasp the facts about the cause of the sinking accident, and influenced the continuation of the writing by using the escalating effect of personal attacks on the Internet.”

As a result of their articles, not a single boat for sea fishing was sold, and the boat manufacturing business was effectively forced to close down. The Tokyo High Court ordered on June 17, 2009 (Heisei 21),

• A to pay 500,000 yen as compensation for the mental anguish C suffered due to the comments posted on the bulletin board and the neglect of B’s comments, 50,000 yen for attorney’s fees, 1 million yen for the intangible economic damage caused by credit damage suffered by C’s company, and 100,000 yen for attorney’s fees.
• B to pay 150,000 yen as compensation for the mental anguish C suffered due to the comments posted on the bulletin board, 10,000 yen for attorney’s fees, 300,000 yen for the intangible economic damage caused by credit damage suffered by C’s company, and 30,000 yen for attorney’s fees.

The judgment recognized defamation and credit damage and acknowledged intangible damage.

https://monolith.law/Japanese reputation/defamation[ja]

https://monolith.law/Japanese reputation/expressions-and-defamation[ja]

Summary

The easiest way to damage a company is to “ruin its reputation”. For companies struggling with cash flow, if rumors start to circulate that “the company is about to go bankrupt”, it can be devastating. It takes time to build a reputation, but it’s easy to destroy. Defamation has been carried out in various ways even before the internet, but with the spread of the internet, the method of “spreading rumors on the net” has become common. Online defamation can spread widely and quickly, so if you don’t respond immediately, it can become irreparable. Unlike defamation or insult, defamation of credit is not a complaint-based crime, and the police can act even without a complaint. However, in reality, the police rarely act without a report, and even if they do, it takes time, so it needs to be treated similarly to a complaint-based crime. Before it’s too late, it’s necessary to consult with a lawyer promptly and take appropriate action.