Affiliate Advertising and the Japanese Consumer Safety Law: Explaining Cases of Falsehood and Exaggeration

On March 1, 2021, the Japanese Consumer Affairs Agency issued a statement titled “Alert on False and Exaggerated Affiliate Advertising”.

The trigger for this alert was two incidents deemed to fall under “false or exaggerated advertising”.

The “affiliate business” market is said to exceed 300 billion yen annually and is attracting attention as a growth market. In order for the market to continue to expand smoothly, correct affiliate advertising that ensures consumer safety is necessary.

Therefore, in this article, we will explain in detail about advertising regulations under the “Japanese Consumer Safety Law”, based on actual cases.

The Mechanism of Affiliate Advertising

Affiliate advertising is a system where you can earn rewards when a product is sold through banner ads or links placed within your own blog. Those who conduct this type of business are referred to as “affiliates”.

The general workflow is carried out through the following process:

• The advertiser requests advertising to the affiliate through an intermediary business called an ASP (Affiliate Service Provider).
• The affiliate creates an introductory article about the product or service, places the advertiser’s banner ads or links, and uploads them to their own blog.
• When blog visitors click on the banner ads or links, register as customers, or purchase products or services, the affiliate is paid a predetermined reward through the ASP by the advertiser.

Because the affiliate business doesn’t require much start-up capital, it’s attracting attention as a side job for business people. Some affiliates even earn more in a month than their main job.

About the Japanese Consumer Safety Act

The Japanese Consumer Safety Act was enacted in 2009, concurrently with the establishment of the Consumer Affairs Agency, with the aim of “preventing harm and ensuring safety in consumer life”.

Under this law, measures to “prevent the occurrence or expansion of consumer harm” include the “public announcement” of fraudulent practices by advertisers, such as the “alert” by the Consumer Affairs Agency introduced at the beginning of this article. Once such an announcement is made, it naturally leads to a loss of trust in the company or product, causing significant damage.

Alerts and Announcements under the Japanese Consumer Safety Act

Article 38, Paragraph 1
The Prime Minister, upon receiving a notification under the provisions of Paragraph 1 or 2 of Article 12 or Paragraph 1 or 2 of Article 29, or upon obtaining information about the occurrence of a consumer accident, etc., shall provide information to prefectures and municipalities about the manner of the consumer accident, the situation of the damage caused by the consumer accident, and other information that contributes to the prevention of the occurrence or expansion of consumer harm, and shall make this information public when it is deemed necessary to alert consumers to prevent the occurrence or expansion of consumer harm (hereinafter referred to as “the occurrence or expansion of consumer harm”).

In order for the Consumer Affairs Agency to issue an alert or announcement like this, the following two requirements must be met:

• The Prime Minister receives a notification about a “consumer accident, etc.”
• It is deemed necessary to alert consumers in order to prevent the expansion of damage caused by a “consumer accident, etc.” or the occurrence of a similar or related accident

In other words, such measures are taken when a “consumer accident, etc.” occurs or there is a risk of expansion or occurrence. Therefore, advertisers need to correctly understand the content of a “consumer accident, etc.” when conducting affiliate advertising.

Consumer Accidents, etc.

Article 2, Paragraph 5
In this Act, “consumer accident, etc.” refers to the following accidents or situations:
1. An accident that occurs in conjunction with the use of a product or service provided by a business operator, a product, facility, or structure provided or used for the business, or a service provided for the business or for the business, and that causes damage to the life or body of a consumer to the extent specified by Cabinet Order (excluding those that are clearly not caused by the lack of consumer safety of the product or service involved in the accident).
2. A situation in which a consumer uses a product or service that lacks consumer safety and meets the requirements specified by Cabinet Order as having the potential for an accident as described in the preceding item to occur.
3. In addition to the items listed above, a situation in which a business operator has committed an act that is false or exaggerated advertising or other acts that unfairly harm the interests of consumers or have the potential to inhibit consumers’ autonomous and rational choices, as specified by Cabinet Order.

When we organize the above clauses, we can divide “consumer accidents, etc.” into the following three categories:

• Those where actual harm to the life or body of consumers has occurred (Article 2, Paragraph 5, Item 1)
• Those where there is a risk of harm to the life or body of consumers (Article 2, Paragraph 5, Item 2)
• Those related to consumer property damage as specified by Cabinet Order (Article 2, Paragraph 5, Item 3)

Among these, “consumer accidents, etc.” related to advertising fall under the third category of “those related to consumer property damage as specified by Cabinet Order”. The Cabinet Order specifies the following seven acts:

• False or exaggerated advertising or display
• Acts that hinder the withdrawal, cancellation, or termination of a contract with a consumer
• Acts that deceive, intimidate, or confuse consumers in relation to contract conclusion or performance, or withdrawal, cancellation, or termination of an application
• Unfair contract conclusion or solicitation
• Non-performance of debt
• Provision of illegal prizes
• Other acts that violate regulations that contribute to the protection of consumer interests

False and Exaggerated Advertising

From here, I would like to explain in detail about “false and exaggerated advertising” based on actual violation cases related to affiliate advertising.

Violation Case Regarding Efficacy

< Advertisement Display >

In an affiliate advertisement for cosmetics, it was displayed as if the spots on the skin would definitely disappear in a few days if the product was used.

Example: “With this formulation, your spots will disappear. I think it surpasses laser treatment. (Endorsed by a real doctor)”

< Fact >

As a result of an investigation led by the Consumer Affairs Agency, in reality, the product did not have the effect of definitely resolving skin spots in a short period of time as advertised.

< Violation under the Consumer Safety Act >

This violation, despite the fact that skin spots do not disappear in a few days, is considered to fall under “false and exaggerated advertising” regarding efficacy, as it made expressions as if they would definitely disappear, which could hinder consumers’ voluntary and rational choices.

Violation Case Regarding Stock Quantity

< Advertisement Display >

In an affiliate advertisement for cosmetics, it was displayed as if the product would not be available for a long period of time if it sold out due to a small stock quantity.

Example: “Please note that it will take 3 months to restock if sold out. 【Caution】 This product often sells out due to high demand.”

< Fact >

As a result of an investigation led by the Consumer Affairs Agency, in reality, the product was still being sold after this day, and the stock was not low.

< Violation under the Consumer Safety Act >

This violation, despite having stock, is considered to fall under “false and exaggerated advertising” regarding stock status, as it made expressions as if the stock quantity was small and it would not be available for a long period of time if sold out, which could hinder consumers’ voluntary and rational choices.

Violation Case Regarding Testimonials

< Advertisement Display >

In an affiliate advertisement for cosmetics, testimonials were introduced through images and user comments indicating that skin wrinkles had improved.

Example: “I highly recommend it to anyone struggling with spots and aging skin problems!! It drastically changed in less than a week.”

< Fact >

The testimonial was not from a real consumer, but was a fictitious one created by the affiliate based on “SNS post images” and “posts”.

< Violation under the Consumer Safety Act >

This violation, by fabricating testimonials about wrinkle improvement that do not actually exist, is considered to fall under “false and exaggerated advertising” regarding testimonials, as it could hinder consumers’ voluntary and rational choices.

Violation Case Regarding Discount Price

< Advertisement Display >

In an affiliate advertisement for cosmetics, it was displayed that the product could be purchased at a significantly discounted price for that day only.

Example: “Special sale is being held on ○○ month ○○ day only, where you can get it for 2,980 yen, 69% OFF the regular price of 9,800 yen!”

< Fact >

In reality, the product was still being sold for 2,980 yen after that day.

< Violation under the Consumer Safety Act >

This violation, by falsely stating that a product that was always sold for 2,980 yen was being sold at a bargain price of 69% OFF for that day only, is considered to fall under “false and exaggerated advertising” regarding limited-time prices, as it could hinder consumers’ voluntary and rational choices.

Who are the Implementers of Consumer Accidents in this Case?

In this case, the parties involved are ① the manufacturer (advertiser), ② the ASP that intermediated the advertisement, and ③ the affiliate who fabricated the testimonial, but the Consumer Affairs Agency’s warning was targeted only at the manufacturer.

There are two reasons for this.

• In this case, it was found that the manufacturer was involved in the decision of the content of the affiliate advertisement, and the advertiser had approved the content of the advertisement created by the affiliate, or it is considered that the affiliate created the advertisement according to the advertiser’s intention.
• Under the Consumer Safety Act, the “implementer of consumer accidents” is defined as a business operator who provides goods or services, and in this case, only the manufacturer falls under the regulation target.

Summary

In this article, we have discussed the regulations related to ‘affiliate advertising’ under the ‘Japanese Consumer Safety Law’, based on actual violation cases.

There are other related laws and regulations besides the ‘Japanese Consumer Safety Law’ and the ‘Japanese Premiums and Representations Act’ that apply to affiliate advertising. Therefore, rather than making judgments on your own, we recommend consulting with a lawyer who has extensive knowledge and experience in this field before proceeding.

If you are interested in issues related to the ‘Japanese Premiums and Representations Act’ in affiliate sites, please refer to the following article for a detailed discussion.

https://monolith.law/corporate/affiliate-law-media[ja]

Introduction to Our Firm’s Measures

Monolith Law Office is a legal office with high expertise in both IT, particularly the internet, and law. Recently, affiliate business, which is popular as a side job, can become a legal violation if not careful. Our firm provides specialized IT solutions. Details are described in the article below.