Policy Update 031
Japan's Consumer Policy
Senior Fellow, RIETI
In Japan, consumer policy is increasingly important and has become a topic with an increasingly broad scope. Among a wide variety of policy areas related to consumers, this paper focuses upon certain consumer policies encompassing different industries, so as to avoid detailed discussions on a specific industry.
This paper has four pillars; general consumer policy, protection of consumers from fraudulent sales, product safety, and dissemination of information to consumers. This means that any policy measure which focuses upon a specific industry, such as housing, finance, medicine, medical services, transport, energy, food or electric appliances is not covered, regardless of the fact that consumers are important stakeholders in such a policy.
This is to give a simple overall picture of consumer policy to readers who have interest in Japanese administration in general, and not to offer advice on specific regulations. Those who wish to obtain information on each regulation for more specific purposes such as for concluding contracts should read the original regulations and guidelines, not depend on this paper.
Japan experienced an increase in consumer problems during the 1950s and 1960s as its economy grew rapidly. Thus, several important steps were taken in terms of formulating consumer policy in 1960s, such as the establishment of the Installment Sales Act in 1961 and the Act against Unjustifiable Premiums and Misleading Representations in 1962.
Consumer policy has continued to develop since then. The Consumer Protection Fundamental Act, first legislated in 1968, was amended to become the Consumer Basic Act in 2004. In 1973, the Consumer Product Safety Law was legislated. An act first created in 1976 as an act to regulate door-to-door sales, has been amended several times to include provisions over other sales transactions and became the Act on Specified Commercial Transactions. The Consumer Contract Act was legislated in 2000 with provisions on civil rules for relations between consumers and business enterprises.
1. General Consumer Policy
The Consumer Basic Act sets the basic framework for Japan's consumer policies. The Act also sets out the responsibilities of the government, local governments, business operators and consumers.
For example, the Act states that there is a discrepancy in quality and quantity of information and the negotiating power between consumers and business operators. It then states that consumer rights are respected as the basic concept of consumer policies. It also states that business enterprises must secure the safety of consumers and fairness in contracts with consumers, and provide necessary information to consumers in a clear and plain manner.*1
The Consumer Policy Council, established by the Consumer Basic Act, discusses basic items concerning the promotion of consumer policies. It drafts the basic consumer plan, and monitors the actions taken in accordance with the plan.*2 The Quality-of-Life Bureau in the Cabinet Office works as the secretariat of the Council, and carries out general coordination of basic consumer policies in the Government.
2. Protect Consumers from Fraudulent Sales
2.1 The Consumer Contract Act
The Consumer Contract Act was legislated in 2000, setting civil rules on consumer contracts. A consumer contract is a contract between a consumer and a business operator, but it does not include a labor contract.
Under the Act, a consumer can cancel his or her will to conclude a contract under certain conditions. For example, a cancellation is possible if the consumer decided to conclude the contract because the seller had intentionally lied on an important matter or had failed to represent important disadvantageous facts to the consumer. Here, the "important matter" includes information on the goods such as quality and use, and conditions of the contract such as price and terms of payments. A cancellation is also possible if the consumer decided to conclude the contract because the seller had distressed the consumer either by refusing to leave the place even though having been told to go away, or by not allowing the consumer to leave the place.
The Act also includes a rule to nullify unfair provisions in consumer contracts. One example of such an unfair provision is a provision which excludes a business operator from liability to compensate damage to a consumer arising from the business operator's default.*3
In 2006, an amendment was made to the Consumer Contract Act to allow consumer organizations to file injunctions against inadequate business actions. Under the new provisions in the Act, a certified consumer organization can file lawsuits to stop a business operator's solicitation or provision of contracts that are disadvantageous to many consumers.
2.2 Act against Unjustifiable Premiums and Misleading Representations*4
The Act against Unjustifiable Premiums and Misleading Representations has provisions for administrative regulations. The Fair Trade Commission (FTC) is responsible for enforcing the administrative regulations under the Act. The Act aims at preventing inducement of customers by means of unjustifiable premiums and misleading representations.
The FTC may restrict the maximum value of a premium or the total amount of premiums under the Act. For example, the total amount of premiums that a business can offer is restricted to be within 2% of the expected total sales of the goods.*5
The act also contains regulations to prohibit misleading representations. For example, a seller is prohibited from making any representation by which the quality or standard of goods is shown to general consumers to be much better than the actual one so as to unjustly induce customers to purchase. Any representation by which price or any other trade terms of goods will be misunderstood by general consumers to be much more favorable than the actual one is also prohibited.
If there is a violation of the restriction or prohibition mentioned above, the FTC may order the entrepreneur concerned to cease the act of violation. The number of orders issued by the FTC under the Act against Unjustifiable Premiums and Misleading Representations has been increasing as shown in Table 1.
Table 1: Number of orders issued by the FTC under the Act against Unjustifiable Premiums and Misleading Representations*6
|Year||FY 2004||FY 2005||FY 2006||FY 2007|
2.3 Act on Specified Commercial Transactions*7
The Act on Specified Commercial Transactions is an act that is frequently used to protect consumers from fraudulent sales. The Act has gone through several amendments to enlarge its mandates, as complaints from consumers have increased.
2.3.1 Categories of sales under the Act on Specified Commercial Transactions
In 2008, the Act covers the following six categories of sales:
(1) Door-to-door sales
Typical cases are those in which sellers conclude sales contracts in a place outside of a store, such as at the home of a consumer. It also includes cases in which sellers call consumers at somewhere outside of their stores, such as at roadsides, and take them to the stores where sales contracts would be concluded.
(2) Mail order sales
They include not only cases in which consumers send their orders by postal mails but also cases in which consumers send their orders by e-mail.
(3) Telemarketing sales
These include cases where sellers make telephone calls to consumers and solicit them to conclude sales contracts.
(4) Multilevel marketing transactions
The legal definition is rather complicated, but one of their characteristics is what the act calls as "specified profit", which is a transaction fee provided by another person engaged in the resale.
(5) Specified Continuous Service Offers
The services under this category are specified by an ordinance. The ordinance lists services on which a substantial number of complaints were filed from consumers. In 2008, offers of the following services with prices higher than 50,000 yen are in the ordinance:
- Aesthetic services for a period longer than one months
- Language education for a period longer than two months
- Private teaching for a period longer than two months
- Cram school for a period longer than two months
- Personal computer school for a period longer than two months
- Services to introduce marriage partners for a period longer than two months
(6) Business Opportunity Related Sales Transactions
An example of sales transaction under this category is sales of a PC by a seller who induces a consumer to buy the PC by telling him or her that he/she may receive a profit from using the PC.
2.3.2 Administrative regulations by the Act on Specified Commercial Transactions
The provisions of the Act on Specified Commercial Transactions can be categorized into administrative regulations and civil rules. Administrative regulations set a number of obligations and prohibitions applicable to businesses that sell goods (including services) to consumers. If a minister or a prefectural governor finds that a business acted against the regulation, he/she can issue orders, including those to suspend its business.
For example, a door-to-door seller must clearly indicate to the person solicited, prior to the solicitation, the name of the seller, the fact that the ?purpose of the seller is to solicit a sales contract, and the type of the goods that are being sold. If a consumer says that he/she is willing to buy the goods, the seller must immediately deliver a document containing the details such as the price, the time and method of payment, the time of delivery, and additional matters stated in the ordinance such as information on the cooling-off period. Such a seller is prohibited from misrepresenting information on matters such as quality, price, the time and method of payment and the time of delivery. Also, such a seller is prohibited from intimidating a consumer in order to make him/her conclude a sales contract.
In the case of mail order sales, the Act has provisions on advertisements, among others. For example, a mail order seller must indicate information such as the selling price and the time and method of payment. Misleading advertising, such as those misleads consumers into believing that the product is vastly better than it is in reality, is prohibited. The Act also has provisions on advertisements by e-mails.
The Act also has provisions to prevent fraudulent sales in other categories of sales transactions.
Ministry of Economy, Trade and Industry (METI) has been strengthening enforcement of the Act both by itself and through the actions of local governments to which the enforcement authority of a number of provisions has been delegated. METI has been encouraging local governments to step up their enforcement activities by carrying out trainings of local administrators and sending out messages to encourage enforcements. Thus, orders to suspend business and other administrative orders under the Act have been increasing, as shown in Table 2.
Table 2. Number of enforcement of administrative regulations in the Act on Specified Commercial Transactions
|Year||FY 2003||FY 2004||FY 2005||FY 2006||FY 2007|
|Type of orders||A*||B**||A*||B**||A*||B**||A*||B**||A*||B**|
|By local governments||0||19||0||24||3||42||11||43||79||61|
A*: Orders to suspend business
B**: Other administrative orders The Act also has provisions on punishments for violation of its regulations, such as imprisonment with work and a fine. The government sometimes discloses violations of the regulations to the police, which enforces punishments.
2.3.3 Civil rules in the Act on Specified Commercial Transactions
The Act has provisions on civil rules. The most commonly used provisions are those on cooling-off periods.
For example, in the case of door-to door sales, telemarketing sales or specified continuous service offers, a consumer may withdraw his/her application for a sales contract or rescind such a sales contract within 8 days from the date on which he/she received a document containing the details of the sales, which is mentioned in 2.2.2. However, there are some goods for which cooling-off periods cannot be applied.
In the case of multilevel marketing transactions and business opportunity related sales transactions, the cooling-off period is longer, 20 days. There is no provision for cooling-off in the case of mail order sales.
2.3.4 Amendments of the Act on Specified Commercial Transactions and the Installment Sales Act
In recent years, an increasing number of consumers, especially elderly consumers, have become victims of fraudulent sales such as door-to-door sales using pressure sales tactics. In many of these cases, consumers were forced to sign contracts to purchase large amounts of goods, and credit companies issued credits to be used for such purchases. Also, as Internet-based marketing and sales grow rapidly, trouble has also increased.
Thus, amendments were made to the Act on Specified Commercial Transactions and the Installment Sales Act. The Installment Sales Act is an act that has provisions to regulate sales credits. The amendments passed the Diet in June 2008.
The amendments include provisions for the plugging of legal loopholes and the reinforcement of regulations concerning door-to-door sales, credit and Internet-based commerce.
For example, the existing provisions on door-to-door sales are applicable to only those goods listed in the ordinance. Although the list is quite extensive, malicious sellers found legal loopholes to avoid regulations by selling new goods not yet included in the list. The amendments would change the ordinance to be negative lists; for example, cooling-off would not be applicable to sales of funeral service.*8
3. Product Safety
3.1 Reporting of Serious Accidents
In order to prevent serious accidents associated with consumer products, Consumer Product Safety Law requires the reporting on such accidents. Every manufacturer or importer of a consumer product must report to the Minister of economy, Trade and industry, if the manufacturer of importer obtains information that a serious accident happened when a consumer was using the product. This requirement covers all consumer products except automobiles, medicine and other products that are regulated by other laws and rules. "Serious accidents" include accidents causing death, amputation of body parts, carbon monoxide poising and fires. *9
The information on accidents thus obtained is publicized through the website of the government on product safety in Japanese.*10 When necessary, the Minister may order manufacturers or importers to recall products in order to prevent further accidents.
Retailers and persons engaged in the repair and installation of consumer products who obtain information on a serious accident associated with the product are to notify manufacturers or importers of such a product. Retailers/distributors should cooperate with the manufacturer or importer for preventing further accidents in the case of a product recall ordered by the Law.
3.2 Safety Measures on Accidents by Age-related Deterioration of Consumer Products
Amendments were made to the Consumer Product Safety Law for the enhancement of safety measures concerning age-related deterioration of consumer products in November 2007. The amendments, which will take effect in April 2009, will introduce a maintenance support system for products used over the long term.
The products to be regulated under the system include instantaneous gas water heaters, bath water heaters, kerosene fan heaters and bathroom dryers, among others. Such products are difficult for consumers to perform maintenance on and they have a high potential risk of causing serious accidents as a result of aging. Therefore, the manufacturers and importers of such products are required to provide maintenance information for consumers as appropriate and to set up a system to offer inspections.*11
4. Disseminating Information to Consumers
Consumers are likely to have less information than businesses, which tends to create disadvantages on the part of consumers. Thus, the government has been making efforts to provide information to consumers, as an important part of its consumer policy. In order to make sure that information effectively reaches consumers, it is necessary to be aware of the fact that most consumers do not have enough knowledge or time to digest a large amount of information, and make efforts to translate legal or technical terms into words used in daily lives. Thus, a number of institutions collaborate to provide appropriate information to consumers in accessible ways.
The Cabinet Office provides information to consumers through its website. It also has implemented several programs, such as dispatching experts in consumer education, and activities in "Consumer Month" every May.*12
The National Consumer Affairs Center of Japan (NCAC) provides information useful to consumers through its website. *13 NCAC works as the core of a network of consumer centers run by local governments across Japan. NCAC gathers information from the consumer centers, analyze it, and publicize it to consumers. In addition to its website, it issues publications including a monthly mazagine called "Kokumin Seikatsu", in which information such as recent consumer problems and policy measures are publicized in Japanese. *14
Other Ministries also have websites for consumers. For example, the Ministry of Economy, Trade and Industry (METI) has websites for product safety*15 and for preventing consumer fraud*16, both in Japanese. METI also distributes leaflets, sometimes in collaboration with consumer organizations.
In the area of product safety, the National Institute of Technology and Evaluation (NITE) collects information on accidents, carries out testing safety of some products, and transmits it to consumers and businesses.*17 NITE has a website to provide information including recent accidents, recall and other company announcements related to product safety.*18 NITE also issues periodical publications in Japanese which contain technical analysis and some testing of product safety.*19
Figure 1 shows some parts of leaflet on product safety for children created by METI and translated into English by NITE.
Original draft by METI
Translated by the Nippon Association of Consumer Specialists
Local governments play an important part for providing information to consumers and their consumer policy sections sometimes collaborate with other sections such as welfare and education. For example, the Tokyo Metropolitan Government is active in creating a website with a variety of interesting contents for consumers.*20
In early 2008, Prime Minister Fukuda announced that he was determined to build a powerful organization for administration within the Government to "protect consumers", and inaugurated the Council for Promoting Consumer Policy to discuss the matter. The Council compiled a report in June 2008.
Following the report, the Prime Minister made the following remark in his E-mail Magazine on 19 June 2008:
"Last Friday, the Council for Promoting Consumer Policy compiled their discussions into a report.
In line with the report and the commitment I made, I will establish an Agency for Consumer Affairs. This will provide a single, centralized point of contact for the consumers, rather than the maze of uncoordinated, compartmentalized ministries and agencies, so that the people will be able to enquire about any problem they may have without feeling at a loss as to where to go. I intend to create an organization in which top priority is accorded to convenience and user-friendliness for the consumers.
Needless to say, I will ensure that the organization is an efficient one. Moreover, where laws and jurisdiction have been transferred from ministries, personnel and budgetary allocations will be shifted away accordingly, so that the establishment of the new agency will not result in bloated government.
I will also enhance the operations of the consumer centers, which provide services to the people in respective local communities and with which the people feel more familiar, from the perspective of convenience and user-friendliness for each one of the consumers.
The Agency for Consumer Affairs will drive the complete shift toward an administration that shares the standpoint of the people.
We are currently getting down to the various tasks in preparation for the new agency's opening during the coming fiscal year. The Diet is to deliberate the bills pertaining to the establishment of the new agency. The path to its establishment is, at last, open before us.
I am determined to make the very fullest efforts, with the people's understanding and cooperation, to see to it that the new organization will act in the best interests of the consumers. "*21
The Cabinet decided upon the proposal of the laws related to the creation of the Agency for Consumer Affairs before Prime Minister Fukuda resigned in September 2008. Consumer policy remains a priority in the government.
- Cabinet Office (2006). Consumer Policy Regime in Japan. Retrieved in August 2008. from http://www.consumer.go.jp/english/cprj/index.html
- Cabinet Secretariat. Consumer Policy Council. Retrieved in August 2008 from, http://www.kantei.go.jp/foreign/policy/index/consumer/index_e.html
- Cabinet Office. The Consumer Contract Act. Retrieved in August 2008 from, http://www.consumer.go.jp/english/cca/index.html
- Fair Trade Commission. Act against Unjustifiable Premiums and Misleading Representations(unofficial translation up to the amendment of 2005). Retrieved in August 2008 from, http://www.jftc.go.jp/e-page/legislation/premiums/prerep_2005.pdf
- Fair Trade Commission. Retrieved in September 2008 from, http://www.jftc.go.jp/keihyo/keihin/keihingaiyo.html (in Japanese)
- Fair Trade Commission. Retrieved in September 2008. http://www.jftc.go.jp/shinketsu/keihyohaijo.html (in Japanese)
- Ministry of Economy, Trade and Industry(METI). Act on Specified Commercial Transactions (unofficial translation up to the amendment of 2004). Retrieved in August 2008 from, http://www.meti.go.jp/english/ASC.html
- Details of the amendments are listed in the homepage of the Ministry of Economy, Trade and Industry in Japanese. http://www.no-trouble.jp/#1232679167401
- The reporting requirements were created by an amendment of the law in 2006. A simple explanation on the proposal for the amendment is available in the website of METI. Retrieved in September 2008 from http://www.meti.go.jp/english/information/downloadfiles/PressRelease/
- Ministry of Economy, Trade and Industry. Retrieved in September 2008 from http://www.meti.go.jp/product_safety/index.html
- A simple explanation on the proposal for the amendment is available in the website of METI. Retrieved in September 2008 from http://www.meti.go.jp/english/newtopics/data/nBackIssue20071012_04.html
- Cabinet Office. Retrieved in September 2008 from, http://www.consumer.go.jp/english/index.html
- National Consumer Affairs Center of Japan (NCAC). Retrieved in September 2008 from, http://www.kokusen.go.jp/ncac_index_e.html
- NCAC. Retrieved in September 2008 from, http://www.kokusen.go.jp/book/data/gko.html (in Japanese)
- "Seihin Anzen Gaido" (meaning "Product Safety Guide" in Japanese). Retrieved in September 2008 from, http://www.meti.go.jp/product_safety/index.html
- "Shouhi Seikatsu Anshin Gaido" (meaning "Consumer Life Security Guide" in Japanese). Retrieved in September 2008 from, http://www.no-trouble.jp/
- National Institute of Technology and Evaluation (NITE). Retrieved in September 2008 from, http://www.nite.go.jp/index-e.html
- NITE. Retrieved in September 2008 from, http://www.jiko.nite.go.jp/php/jiko/search/index.php
- One of such publications is "Seikatsu Anzen Journal", NITE. Retrieved in September 2008 from, http://www.nite.go.jp/jiko/journal/ (in Japanese)
- "Tokyo kurashi web" in Japanese by Tokyo metropolitan government. Retrieved in September 2008 from, http://www.shouhiseikatu.metro.tokyo.jp/
- Cabinet Secretariat (2008). Fukuda Cabinet E-mail Magazine No.36 (June 19, 2008). Retrieved in September 2008 from, http://www.mmz.kantei.go.jp/foreign/m-magazine/backnumber/2008/0619.html
December 11, 2008
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