Consumer protection in Japan: New law prohibits stealth marketing

From 1 October 2023, “stealth” or “undercover” marketing activities will become illegal under the Act against Unjustifiable Premiums and Misleading Representations of Japan (the AUPMR).

In its public notice on 28 March 2023 (the Public Notice), the Consumer Services Agency of Japan said that “representations that are difficult for general consumers to identify as being the Business Operator’s Representations” are prohibited. The law will become effective and enforceable on 1 October 2023.

The Consumer Services Agency also released guidelines for the interpretation of the Public Notice.

The Public Notice targets representations that are created, sponsored or backed by a business operator¹ (Business Operator’s Representation) that relate to their goods or services (collectively, Goods). It specifically targets representations that are difficult for general consumers to identify as being the Business Operator’s Representation and difficult to distinguish from representations made by genuine third parties.

Business Operator’s Representations

A Business Operator’s Representation is one that:

• appears to be a representation of a third party on the surface, but in reality, the business operator has been involved in determining or directing the content of the representation; and
• cannot be deemed as the voluntary intention of the third party based on an objective set of criteria and circumstances.

Business Operator’s Representations include representations made by employees of the business operator selling or promoting the Goods in question or employees of its subsidiaries with a relationship or responsibility relating to the sale or promotion of the Goods.

If representations made by third parties are influenced by the business operator selling or promoting the Goods (eg if the business operator is involved in determining the content of the representations), they’re considered Business Operator’s Representations.

Even if a business operator does not explicitly request or instruct a third party to make a representation, it can still be considered the Business Operator’s Representation if there’s a relationship between the business operator and the third party that means the third party can’t fully exercise free will and make independent decisions. For example, if a business operator provides its Goods, free of charge, to a third party in exchange for the third party to post a representation about the Goods and the third party makes a representation in line with the business operator’s intention, the representation will likely be the Business Operator’s Representation.

There’s a test to determine whether a representation is difficult for general consumers to identify as a Business Operator’s Representation and difficult to distinguish it from representations made by genuine third parties. The test will determine whether it’s clear, when viewed holistically, that it is the Business Operator’s Representation. The Public Notice provides the following examples of representations that are clear for general consumers to identify that they’re Business Operator’s Representations.

• a representation with an indication such as “advertisement (kokoku/senden)”, “promotion” or “PR”
• a representation with an indication such as “This post is made possible by the product sponsored by Company A.”

These indications must be clearly displayed to general consumers. Unclear indications are prohibited. Unclear indications include words and sentences that are vague in meaning, or are illegible because of the font size, low contrast or font colors indistinguishable from their surroundings, and other things that might mislead or confuse general consumers.

The Public Notice aims to protect general consumers from Business Operator’s Representations disguised as genuine representations from third parties. So it doesn’t prohibit representations that general consumers can usually understand to be a Business Operator’s Representations. For example, TV commercials in which it’s clear that the TV commercial (ie advertisement segment) run by a business operator is not part of the actual TV program, articles in newspapers and magazines with an indication of “advertisement”, or a business operator’s representations on its own website.

Punishment

Entities that violate the Public Notice will be subject to an order for corrective actions by the authority.

An individual, such as a representative, manager, agent and employee of a business operator (an entity) selling or promoting Goods, who directly fails to comply with the authority’s order for corrective actions will be subject to imprisonment of up to two years and/or a fine of up to JPY5 million.  A business operator (an entity) selling or promoting Goods to whom such individual belongs may also be subject to a fine of up to JPY300 million.

Third parties, such as YouTubers and influencers on social media who post a Business Operator’s Representations are not subject to the punishment.

---

 

^{1 The term “business operator” means a person or entity who runs a commercial, industrial, financial or any other business. In other words, manufacturers, wholesalers, retailers and other persons or entities selling or promoting Goods are considered “business operators” under the AUPMR.}