0. Introduction
Advertising and marketing activities in the Japan are subject to strict consumer protection rules. At the center of these rules is the Act against Unjustifiable Premiums and Misleading Representations (the “Premiums and Representations Act”). This article focuses particularly on the Act’s regulation of representations (“advertising claim”), outlining the its objectives, regulatory requirements, violation consequences and risks, as well as key considerations for foreign companies seeking to enter the Japanese Market.
1. Overview
The Premiums and Representations Act was enacted in 1962 and is administered by the Consumer Affairs Agency as part of Japan’s consumer protection framework. Its objective is to prohibit misleading advertising claims and protect consumers’ autonomous and rational choices of goods and services.
The Act regulates two areas within a single statute: (i) “premiums,” such as giveaways or discounts, and (ii) “representations,” meaning advertising claims about goods or services. This dual coverage in one statute distinguishes it from other jurisdictions. For example, in the United States these matters are generally addressed under separate rules, while in the European Union they are treated under broader consumer protection law but not divided into two categories as in Japan. The Act also adopts a strict liability approach, under which a violation can be found regardless of whether the business operator acted intentionally or negligently. This article focuses on the rules governing representations, while the regulation of premiums will be addressed in a following article.
2. Regulatory Details
(1) Scope of Regulation
The Act applies to advertising claims made by businesses in connection with the sale of goods or services. Among these, the law prohibits three categories of misleading representations, as outlined in items ①–③ below.
(2) Three Categories of Misleading Representations
The Act prohibits the following three categories of misleading representations:
① Misleading Representations regarding Quality, Standards or Content. (Article 5, Item 1)
Claims that mislead consumers into believing that a product’s quality, standards, or any other attributes are significantly better than in reality.
Example: Advertising a sweater containing 80% Cashmere wool as “100% Cashmere Sweater”.
② Misleading Representations regarding Price or Trade Terms (Article 5, Item 2)
Claims that mislead consumers into believing that the price or terms are significantly more favorable than they actually are.
For example, A typical case is “dual pricing” where an actual sale price is compared to a much higher reference price that was never actually used. This practice can mislead consumers into believing the product is cheaper than it really is, and therefore constituting a misleading representation.
③ Other Misleading Representations (Article 5, Item 3)
Claims likely to cause consumer misunderstanding, such as misstating the country of origin, labeling a beverage as “fruit juice” when it actually does not contain any fruit juice, or disguising advertisements as neutral information concealing the intent to advertise(stealth marketing).
Whether a representation falls into these categories is judged by whether there is a discrepancy between the claim and the actual product or service, based on the impression of the “ordinary consumer.” An “ordinary consumer” refers to an average consumer without specialized knowledge, and industry practices are not taken into account.
The threshold of “significantly” depends on whether the misrepresentation exceeds what is generally acceptable in society. Certain degrees of exaggeration are tolerated.
Since there are no bright-line criteria, obtaining advice from Japanese legal experts is recommended.
(3) Prohibition of stealth marketing
Since 2023, “Stealth Marketing”, which refers to the advertising where the statement used is disguised and intent that such a statement is an advertisement is concealed, has been designated as a misleading representation under the Act. A common example a is influencer posts that appear to be personal opinion but are in fact advertisement. The regulations on stealth marketing will be addressed in more detail in a separate article.
3. Penalties and Risks
(1) Corrective Order
If a violation is found, the Consumer Affairs Agency or a prefectural governor may issue a corrective order requiring remedial action and measures to prevent recurrence of the violation. Failure to comply may result in administrative fines of up to JPY 300 million (Article 49, Paragraph 1, Item 1).
(2) Administrative Surcharge System
An administrative surcharge system was introduced in the 2016 amendment of the Act. Companies that breach the regulations may be subject to an administrative surcharge of 3% of sales revenue generated by the misleading representation.
(3) Criminal Penalties
Since the 2023 amendment, intentional misleading representations, whether relating to product quality or advantageous trade terms, can result in criminal fines of up to JPY 1 million (Article 48).
(4) Reputational Risk
Violation cases are published on the Consumer Affairs Agency’s website,which may seriously damage brand trust. In the Japanese market, this reputational harm is particularly severe. With the rapid spread of information on social media, companies found in violation may suffer an immediate and significant loss of credibility.
4. Key Considerations for Foreign Companies
(1) Applicability to Foreign Businesses
The Act applies to any business that provides goods or services to consumers in Japan, regardless of whether the company is domestic or foreign, and regardless of whether they have a Japanese subsidiary. In practice, this means that even companies selling directly to Japanese consumers from overseas, such as through e-commerce platforms, fall within the scope of the Act.
(2) Trends in International Enforcement
Enforcement is not limited to domestic players. With the increase in cross-border transactions, Japan has strengthened cooperation with overseas enforcement authorities. The Cross-border Consumer Center Japan (CCJ) works with agencies in the United States, Europe, and other jurisdictions to address cases involving foreign businesses. As a result, companies marketing to Japanese consumers should not assume that a lack of local presence shields them from regulatory scrutiny.
5. Summary
The regulations on advertising claims under the Premiums and Representations Act have a significant impact on marketing activities in the Japanese market. Violations carry not only legal consequences such as corrective orders, administrative surcharges, and criminal fines, but also severe reputational risks that can undermine corporate trust.
For foreign companies, it is especially important to recognize that Japan permits only a narrow scope of exaggeration in advertising, and that the Act applies directly to businesses outside Japan as well. Therefore, startups and companies entering Japan should ensure coordination between their legal and marketing functions and conduct legal review in advance to ensure compliance.
At GVA Global LPC, we provide advice tailored to each client’s specific circumstances and objectives and can guide businesses on the most appropriate compliance strategies. Please feel free to contact us when considering entry into the Japanese market.
