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Japan: Act on Specified Commercial Transactions Amended

(Aug. 29, 2016) An amendment to Japan’s Act on Specified Commercial Transactions (No. 57 of June 4, 1976, Japanese Law Translation) was promulgated on June 3, 2016.  (Act No. 60 of 2016, KANPO (June 3, 2016) (in Japanese).)  Most of the amended provisions will become effective within 18 months of the promulgation date.  (Id., Supp. Provisions, art. 1.)

The Act aims to protect the interests of consumers and facilitate appropriate and smooth distribution of goods and provision of services in specified commercial transactions.  The specified commercial transactions include transactions arising from door-to-door sales, mail order sales, telemarketing sales, and multilevel marketing transactions, among other transactions defined in the Act.  (Act on Specified Commercial Transactions, art. 1.)  The major points of the amendment are as follows.

  1. Prohibiting directors of suspended businesses as defined under the Act from operating the same type of business by establishing new entities:

There are persons who reestablish illegal businesses, after their original businesses have been sanctioned, by the creation of a new business entity. The persons can carry on the same illegal practices until the new entity itself is sanctioned.  (Bill to Amend the Act on Specified Commercial Transactions (Bill Summary), Consumer Affairs Agency (last visited Aug. 26, 2016) (in Japanese).)  The amendment prohibits directors of sanctioned entities from operating the same business by establishing new entities or other entities.  (Act on Specified Commercial Transactions, as amended by Law No. 60 of 2016, arts. 8-2, 15-2, 23-2, & 58-13-2.)  To find such violations, the government’s authority to investigate businesses is also enhanced.  (Law No. 60 of 2016, art. 66.)

  1. Enabling punishment of businesses that do not have known addresses:

To effectuate a punishment under the Act, the government must send a written decision to the business. However, some online businesses do not disclose their physical addresses.  (Bill Summary, supra.)  The amendment establishes that public posting by the government has an effect equivalent to sending a decision to the business.  (Act on Specified Commercial Transactions, as amended by Law No. 60 of 2016, art. 66-5.)

  1. Ordering a business to take remedial action for consumers:

The amendment enables the government to order businesses that violate the Act to take action to protect consumers’ interests.  (Id. art. 7, ¶ 1, art. 14, ¶ 1, & art. 22.)  For example, should a business claim a false benefit from a product, the business would be required to notify the customers of government findings about the product and of any sanctions the business had received because of the false claim and to establish a plan for refunds to customers.  (Bill Summary, supra.)

  1. Regulating telemarketing sales of unusual quantities of goods and services:

For door-to-door sales, sales of an unusual quantity of goods that would not be necessary for a normal household are already regulated.  (Act on Specified Commercial Transactions, as amended by Act No. 74 of 2008, arts. 9-2 & 9-3.)  The amendment expands the application of this regulation to telemarketing sales.  The government can issue a warning to a business that sells an unusual amount of goods and services, and the consumer can cancel the sales within one year.  (Act on Specified Commercial Transactions, as amended by Law No. 60 of 2016, art. 22, ¶ 1, item 4, & art. 24-2.)