Operating an Online Shop and the Law: The Japanese Act on Specified Commercial Transactions & The Unfair Competition Prevention Act
Online shopping has now become a part of our daily lives. Not only can we purchase items, but anyone can easily set up an online shop. However, there are various laws related to the operation of online shops. If you do not comply with the relevant laws in terms of display and site structure, you may be deemed illegal. So, what specific laws could potentially be an issue?
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Laws Pertaining to Online Shops
There are several laws that relate to the operation of 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 Act on Electronic Contracts’, ‘Japanese Act on Regulation of Transmission of Specified Electronic Mail’, and ‘Japanese Act on the Protection of Personal Information’. In this section, we will explain the ‘Japanese Act on Specified Commercial Transactions’ and the ‘Japanese Unfair Competition Prevention Act’.
Japanese Act on Specified Commercial Transactions
The Japanese Act on Specified Commercial Transactions is a law aimed at preventing illegal and malicious solicitation by businesses and protecting the interests of consumers. It sets out rules that businesses must follow and rules to protect consumers, focusing on types of transactions that are prone to consumer issues, such as door-to-door sales and mail-order sales.
Online shops fall under this law as “mail-order sales” because they are transactions where the business advertises on the internet and accepts orders via internet communication methods.
There are various administrative regulations for mail-order sales under the Act on Specified Commercial Transactions, and violations can result in administrative measures such as business improvement orders, business suspension orders, business prohibition orders, or penalties.
Advertisement Display (Article 11 of the Act on Specified Commercial Transactions, Articles 8 to 10 of the same regulations)
Mail-order sales are transactions between distant parties, and advertisements are the only source of information for consumers. Therefore, detailed regulations have been established on what should be displayed in advertisements to avoid problems arising from insufficient or unclear descriptions.
Items that should be displayed include “sales price and shipping cost”, “payment method”, “product delivery time”, “matters concerning the withdrawal or cancellation of the application for a sales contract”, “business operator’s name, address, and telephone number”, and “if there is a hidden defect in the product, the content of the provision on the seller’s responsibility when there is one”, and “if it is necessary to conclude a sales contract two or more times continuously, that fact and the sales conditions”.
For example, if you go to the “Help & Customer Service” section of an online shop and look at the “Security and Privacy Policy”, you will see a section titled “Display based on the Act on Specified Commercial Transactions”, which displays the seller’s name, address, telephone number, sales manager’s name, etc., along with the above items.
Prohibition of Exaggerated Advertising (Article 12 of the Act on Specified Commercial Transactions, Article 11 of the same regulations)
To prevent consumer problems before they occur, displays that “significantly differ from the facts” or “mislead people into believing that they are significantly superior or advantageous than they actually are” are prohibited.
Email Advertising to Non-consenting Persons (Article 12-3 of the Act on Specified Commercial Transactions, Article 12-4 of the same Act, Articles 11-2 to 11-7 of the same regulations)
As a general rule, businesses are prohibited from sending email advertisements unless the consumer has given prior consent.
However, this does not apply to cases where part of an email notifying the conclusion of a contract contains an advertisement.
Prohibition of Non-performance of Obligations in Case of Contract Cancellation (Article 14, Paragraph 1, Item 1 of the Act on Specified Commercial Transactions)
When both parties to a contract have an obligation to restore the original state, such as in the case of withdrawal of an application for a sales contract, the business operator is prohibited from refusing or delaying the performance of obligations such as refunding the money.
Prohibition of Acts to Make a Contract Application Against the Customer’s Will (Article 14, Paragraph 1, Item 2 of the Act on Specified Commercial Transactions, Article 16 of the same regulations)
In internet mail-order sales, the following acts to “make an application for a sales contract, etc. against the customer’s will” are prohibited and are subject to administrative measures:
- Not displaying in a way that consumers can easily recognize that clicking a certain button will result in a paid application
- Not taking measures to allow consumers to easily check the contents of the application when applying, and to correct them
Administrative Measures and Penalties
Business operators who violate the above administrative regulations may be subject to administrative measures such as business improvement orders (Article 14 of the Act), business suspension orders (Article 15 of the Act), business prohibition orders (Article 15-2 of the Act), as well as penalties.
In addition to administrative regulations, the following civil rules must also be observed.
Withdrawal or Cancellation of Contract Application (Article 15-3 of the Act on Specified Commercial Transactions)
Even if a consumer applies for or enters into a contract in mail-order sales, if it is within 8 days from the date of receipt of the delivery of the product related to the contract (transfer of specified rights), the consumer can withdraw or cancel the contract application to the business operator and return the product at the consumer’s shipping cost (however, if the business operator has displayed a special contract regarding this contract application withdrawal or cancellation in advance in the advertisement, it will be according to the special contract).
Request to Stop Business Operator’s Actions (Article 58-19 of the Act on Specified Commercial Transactions)
When a business operator is or is likely to make exaggerated advertisements, etc. to unspecified and numerous persons in advertisements for mail-order sales, a qualified consumer organization (a consumer organization that has received certification from the Prime Minister as having the right to request an injunction to protect the interests of consumers, such as the “Consumer Organization Japan, a Specified Nonprofit Corporation”) can request the business operator to stop the action or take other necessary measures.
The above is an outline of the Act on Specified Commercial Transactions, but in addition to these, there are rules that business operators must follow and rules to protect consumers, and the Act on Specified Commercial Transactions is the most important law for all people and business owners involved in running an online shop.
Unfair Competition Prevention Act (Japanese Unfair Competition Prevention Act)
The Unfair Competition Prevention Act aims to prevent unfair competition among businesses, establish measures such as damage compensation, injunction requests, and criminal penalties for those whose business profits have been infringed upon, and contribute to the healthy development of the national economy.
“Unfair competition” as defined by Article 2 of the Unfair Competition Prevention Act refers to the following, among others:
Causing confusion with well-known product indications (Article 2, Paragraph 1, Item 1 of the Unfair Competition Prevention Act)
The act of using the same or similar indications widely recognized among consumers as those of another person’s products or business, causing confusion with that other person’s products or business.
Imitation of well-known product indications (Article 2, Paragraph 1, Item 2 of the Unfair Competition Prevention Act)
The act of using the same or similar indications as those of another person’s well-known products as one’s own product indications, or transferring products using such indications.
Note that “product indications” is a concept that includes trademarks, so if a trademark is misused, it will also be regulated by the Trademark Law.
Offering products that imitate the shape of another person’s products (Article 2, Paragraph 1, Item 3 of the Unfair Competition Prevention Act)
The act of transferring products that imitate the shape of another person’s products (excluding shapes essential for ensuring the function of the product).
Note that the act of imitating the shape of a product is also regulated by the Design Law.
Infringement of trade secrets (Article 2, Paragraph 1, Items 4 to 10 of the Unfair Competition Prevention Act)
The act of acquiring trade secrets by theft, fraud, coercion, or other unfair means, or using or disclosing trade secrets acquired by such unfair means.
Unfair acquisition of limited provision data (Article 2, Paragraph 1, Items 11 to 16 of the Unfair Competition Prevention Act)
The act of acquiring limited provision data by unfair means such as theft and using it oneself or disclosing it to a third party.
Offering devices that hinder the effects of technical restriction measures (Article 2, Paragraph 1, Items 17 and 18 of the Unfair Competition Prevention Act)
The act of providing devices, programs, instruction codes, or services that enable the viewing or recording of content restricted by technical restriction measures, the execution of programs, or the processing of information (i.e., invalidating the effects of technical restriction measures).
Unfair acquisition of domain names (Article 2, Paragraph 1, Item 19 of the Unfair Competition Prevention Act)
The act of acquiring or holding the right to use a domain name identical or similar to the indication of another person’s products or services (specific product indications) for the purpose of obtaining unfair profits or causing damage to others, or using that domain name.
Misleading indications about the origin, quality, etc. of products and services (Article 2, Paragraph 1, Item 20 of the Unfair Competition Prevention Act)
The act of making misleading indications about the origin, quality, content, etc. of products, services, or their advertisements, or transferring products with such indications.
Acts of discrediting (Article 2, Paragraph 1, Item 21 of the Unfair Competition Prevention Act)
The act of announcing or spreading false facts that harm the business reputation of another person with whom one is in competition.
Trademark infringement by agents (Article 2, Paragraph 1, Item 22 of the Unfair Competition Prevention Act)
The act of an agent, representative, or person who was an agent or representative within the previous year in a country of the Paris Convention, the World Trade Organization, or the Trademark Law Treaty, without a legitimate reason and without the consent of the person who has the rights to the trademark in that country, using a trademark identical or similar to the one related to those rights for products or services identical or similar to those related to those rights.
For these unfair acts, civil measures such as injunction requests, damage compensation claims, and credit recovery measures can be taken based on the Unfair Competition Prevention Act.
Note that a claim for damages (Article 4 of the Unfair Competition Prevention Act) refers to claiming damages against a person who has infringed upon another person’s business profits by intentionally or negligently engaging in unfair competition. However, since it is difficult to prove the amount of damage caused by the infringement of business profits due to unfair competition, a provision for presuming the amount of damage has been established to reduce the burden of proof on the victim (Article 5 of the Unfair Competition Prevention Act).
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Summary
In this section, we have explained the “Act on Specified Commercial Transactions” and the “Unfair Competition Prevention Act,” which are laws related to the operation of online stores and are generally applicable to all aspects of online store operations.
Both of these can be considered particularly important laws.
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Introduction to Our Firm’s Measures
Monolith Law Office is a legal office with high expertise in both IT, particularly the internet, and law. In recent years, online shopping has become an indispensable part of our lives, and the need for legal checks is increasingly growing. Our firm provides solutions related to online shopping. Details are provided in the article below.
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