How Far Can We Go with Online Products? Explaining Regulations Under the 'Japanese Prize Indication Act

You may have come across advertising phrases on the internet such as “lose weight easily” or “number one in sales”. However, whether these claims are truly “effective” or genuinely “number one” can be uncertain, and in some cases, they may even be false. So, what legal regulations exist when selling products online using such claims? In this article, we will explain the regulations imposed by the Japanese Act against Unjustifiable Premiums and Misleading Representations for online product advertisements.

According to Article 2, Paragraph 4 of the Japanese Act against Unjustifiable Premiums and Misleading Representations, the term “representation” includes any statements made by a business on the web regarding the content or transaction conditions of their products or services.

Japanese Act against Unjustifiable Premiums and Misleading Representations (Definition) Article 2

4 In this Act, “representation” refers to any advertisement or other display made by a business regarding the content or transaction conditions of the products or services they provide, or any other matters related to these transactions, as a means to attract customers, and includes those designated by the Prime Minister.

So, under what circumstances would representations about the content or transaction conditions of products or services in advertisements made on the web become subject to the regulations of the Japanese Act against Unjustifiable Premiums and Misleading Representations?

The Japanese Act against Unjustifiable Premiums and Misleading Representations and its Regulations on Content

The Japanese Act against Unjustifiable Premiums and Misleading Representations is a law designed to protect consumers’ ability to independently and rationally choose quality goods and services. It does this by regulating false representations of the quality, content, price, etc., of goods and services.

Quality and price are important criteria for consumers when choosing goods or services. Therefore, it is essential that these are represented accurately and clearly. If goods or services are represented as significantly superior or advantageous than they actually are, it can hinder consumers’ appropriate choices. For this reason, the Act prohibits representations that mislead the general consumer into believing that the quality or price of goods or services is significantly superior or advantageous than it actually is (unfair representation). Measures based on the Act will be taken against unfair representations that violate the Act, even if the business operator did not intentionally or negligently make them.

Unfair representations can be broadly divided into three categories: “misleading superior representations,” “misleading advantageous representations,” and “other potentially misleading representations.”

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Misleading Superior Representations

Representations that mislead the general consumer into believing that the quality, standards, etc., of goods or services are significantly superior to those of competing businesses, contrary to the actual goods or facts, are prohibited as misleading superior representations. For example, this includes cases where a computer virus removal software is represented as “compatible with all viruses,” despite not actually being so.

The Consumer Affairs Agency can request business operators to submit documents that provide a rational basis for their representations if there is suspicion of misleading superior representations regarding the effects or performance of goods or services. If such documents are not submitted, the representation is considered unfair.

For example, if a diet food product was represented as “easily lose 5-6kg just by drinking!” implying that significant weight loss can be achieved easily without any special exercise or dietary restrictions, but there were no documents providing a rational basis for this representation, it would be regulated. This is referred to as “unsubstantiated advertising regulation.”

Misleading Advantageous Representations

The Act against Unjustifiable Premiums and Misleading Representations prohibits representations that make the transaction conditions appear significantly advantageous, such as making the price appear significantly lower, as misleading advantageous representations.

For example, this includes cases where a product is represented as having “double the content of other companies’ products,” despite having the same content volume as other companies’ products. Also, unfair double pricing representations, such as representing a price as “regular price 48,000 yen, special price 25,800 yen,” when the price does not correspond to the “price at which it has been sold for a considerable period recently,” or a price that has never actually been set, are also included and prohibited.

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Other Potentially Misleading Representations

Under the Act against Unjustifiable Premiums and Misleading Representations, business operators are prohibited from making representations that may mislead the general consumer regarding matters related to the transactions of goods or services they supply, in addition to misleading superior representations and misleading advantageous representations. The Fair Trade Commission has established six notices prohibiting representations such as “representations about non-fruit juice soft drinks,” “unfair representations about the country of origin of goods,” “unfair representations about the cost of consumer credit,” “representations about bait advertising for real estate,” “representations about bait advertising,” and “unfair representations about paid elderly homes.”

For example, representations about paid elderly homes’ facilities, equipment, and services, such as “representations where the conditions for changing rooms after moving in are not clearly stated” or “representations where the minimum number of care workers or nurses at night, etc., is not clearly stated,” are prohibited as “unfair representations about paid elderly homes.”

Japanese Premiums and Misrepresentation Act and Display Methods

With the proliferation of PCs and the expansion of smartphones, there are certain personalityistics to note in the rapidly increasing consumer-oriented electronic commerce (BtoC transactions), such as:

1. Contracts can be easily established by following instructions and clicking on web pages
2. Due to screen constraints, it may not be possible to view the entire content without scrolling
3. Techniques such as hyperlinks are often used to provide a large amount of information

As a result, in BtoC transactions, there is a tendency for consumer damage to increase due to misunderstandings in product selection and ordering.

Furthermore, in BtoC transactions, businesses have the ability to easily change the content displayed on web pages regarding product/service content and transaction conditions.

Therefore, the Fair Trade Commission, in its “Issues and Points to Note on Displays in Consumer-Oriented Electronic Commerce under the Premiums and Misrepresentation Act” (June 5, 2002 (Heisei 14)), urges caution in display methods in BtoC transactions.

When Using Hyperlinks

In BtoC transactions, there are cases where the entire content cannot be viewed due to it being displayed on a PC or other display, and techniques such as scrolling and hyperlinks are used.

In particular, hyperlinks are an effective means of providing a lot of information on a display. However, if a hyperlink is used to display important information about the content of a product/service or transaction conditions on a web page other than the one the consumer is currently viewing (the “link destination”), the consumer must click on the “hyperlink string” embedded in the web page, such as colored text, underlined text, or colored framed images, to obtain the information. If, for example, the hyperlink string does not clearly indicate that it is the location of important information, the consumer may overlook it and fail to obtain important information for product selection. As a result, if it is misunderstood by the general consumer to be significantly superior or advantageous to the actual product or a competitor’s product, it will be a problem as an unfair display under the Premiums and Misrepresentation Act.

For example, if you emphasize “Lose 10kg in one month with 3 diet supplements a day” and display the conditions for losing weight, such as “A certain amount of exercise therapy and dietary restrictions are necessary,” on the link destination, this is a major problem. If the hyperlink string is placed on a different web page, the consumer may overlook the hyperlink string, not click on it, and not be able to obtain information about the conditions for losing weight by moving to the link destination. As a result, there is a possibility that they may misunderstand it as if they can lose weight just by drinking it without any conditions.

When using a hyperlink to display important information about the content of a product/service or transaction conditions at the link destination, the hyperlink string should use a specific expression such as “Return Conditions” that clearly shows what is displayed at the link destination, rather than an abstract expression such as “Additional Information”. In order to prevent consumers from overlooking it, it is necessary to consider the size of the text, the color scheme, etc., and display it clearly.

Display of Information Update Date

In BtoC transactions, the content displayed on web pages can be easily changed, and the content of products/services or transaction conditions can be easily changed. Therefore, if the update date of the information is not displayed, it is difficult to understand when the displayed content is from.

For example, if you emphasize the newness of a product by displaying “New Product” or “Top Model” without displaying the update date of the information, even if it is no longer a “New Product” or “Top Model”, it may be misunderstood as still being a new product. Also, if you continue to display “Last Year’s Net Sales No. 1” after several years have passed since you became No. 1 in net sales, consumers may misunderstand that the time when you became No. 1 in net sales is recent.

For the update date of the information, it is necessary to list the latest update date when the display content is changed, and to display the changed parts accurately and clearly. If the display content is from the past and differs from the current facts, such as a product that is no longer a “new product”, you must immediately correct the content of the web page, otherwise it will be a problem as an unfair display under the Premiums and Misrepresentation Act.

Summary

In BtoC transactions, which tend to easily lead to consumer misunderstandings in product selection and ordering, and as a result, tend to easily expand consumer damage, it is necessary to provide important information about the content of products/services or transaction conditions to consumers more than in transactions centered on existing stores.

The healthy development of rapidly expanding BtoC transactions and the proper conduct of consumer transactions are desired.

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, violations of the ‘Japanese Premiums and Representations Act’ related to online advertising have become a significant issue, and the need for legal checks is increasingly growing. Our firm analyzes the legal risks associated with businesses that have already started or are about to start, based on various legal regulations. We aim to legalize the business as much as possible without stopping it. Details are described in the article below.