Future Measures against Violations under the Act against
Unjustifiable Premiums and Misleading Representations (the“Act”) Including Introduction of a Surcharge System, Etc. in
Order to Ensure the Effectiveness of Regulations over
Misleading Representations under the Act(Replies to the Consultation)

June 10, 2014
Consumer Commission

Content
Page
1.

Introduction ...................................................................................................................................1

2.

Need for introduction of a surcharge system under the Act ..........................................................2(1)

Reality of consumer damage caused by misleading representations ....................................2(2)

Difficulty in damage recovery in the consumer damage caused by misleading
representations ......................................................................................................................2(3)

Need for introduction of a surcharge system ........................................................................33.

Purport and purpose of the surcharge system, if actually introduced ...........................................3

4.

Conditions for imposition of a surcharge ......................................................................................4(1)

Surchargeable cases ..............................................................................................................4(i) Surchargeable acts.................................................................................................................4(ii) Subjective factor ...................................................................................................................6(iii) Criteria based on size ............................................................................................................8(iv) Statutory exclusive period .....................................................................................................8(2)

Calculation of surcharge amounts .........................................................................................9(i) Basic concept ........................................................................................................................9(ii) Addition to the surcharge, subtraction from the surcharge or exemption of the surcharge ...9(iii) Applicable period ................................................................................................................ 10(3)Whether or not the administrative authorities should have discretionary power ................10

5.

Procedures for imposition of a surcharge.................................................................................... 11

6.

Future measures for damage recovery ........................................................................................ 11(1)

Damage recovery mechanism and its methodology............................................................ 11(2)

Deductible voluntary action system .................................................................................... 12(i) Reimbursement to consumers ............................................................................................. 12(ii) Donation.............................................................................................................................. 13
Appendix 1-3
List of Members and Summary of Deliberations

1.

Introduction

In the autumn of 2013, a series of inappropriate food labeling at hotels, department stores,
restaurants and other establishments were uncovered. In the wake of those incidents, the Japanese
government set up the “liaison meeting among relevant ministries, agencies, and other offices onfood labeling and other issues.” On December 9, 2013, the liaison meeting determined the “measuresfor ensuring appropriate food labeling practices” that were designed to restore consumer confidence,for reasons that those inappropriate incidents might erode Japanese and foreign consumer confidence
in “Japanese food.” One of these measures, the “proposal that new measures including theimposition of a surcharge or other punishment on violations be deliberated” under the Act against
Unjustifiable Premiums and Misleading Representations (No.134 Act of 1962; hereinafter referred toas the “Act.” All references to the article numbers hereinafter refer to those of the Act). On the sameday, the Consumer Commission was consulted by the Prime Minister with respect to the “future
measures against violations under the Act against Unjustifiable Premiums and Misleading
Representations including introduction of a surcharge system, etc. in order to ensure theeffectiveness of regulations over misleading representations under the Act.”In response to such consultation, the Consumer Commission recommended in its “Opinion as to‘Measures to Secure Appropriate Food Labeling Practices’” published on December 17, 2013 that anexpert panel be set up … to discuss new measures including introduction of a surcharge or otherpunishment against inappropriate food labeling incidents under the Act with the cooperation of theConsumer Affairs Agency.” On the same date, the Consumer Commission set up the Expert Panel for
Surcharge System, etc. against Misleading Representations under the Act against Unjustifiable
Premiums and Misleading Representations.
The expert panel held its first session on February 6, 2014, and the second and subsequent sessions
were held at the same time as plenary sessions twelve times until June 10. Thus, a total of thirteen
sessions were held for investigation and discussion. At a total of six sessions held in February andMarch, the members received briefings about the development of the revision bill of the Act which
was submitted to the Diet in 2008 and was repealed later, and the results of deliberations at the Study
Group for Administrative Methods for Consumer Property Damage (October 2011 to June 2013) atthe Consumer Affairs Agency, as well as about the subsequent development of discussions, andconducted investigations and discussion about the need for introduction of a surcharge system and its
purport and purpose, legal requisites, and other procedures, if introduced. Prior to entering into thefull-scale discussions about each of the relevant issues, the expert panel conducted hearings frombusiness operators twice and, at the same time, a hearing about the status of operations of the1existing surcharge systems1 and other issues. Then on April 2, 2014, the expert panel once organized
the progress of deliberations of each of the relevant issues and published it as the Interim Report.
After that, they conducted investigation and discussion about the “future measures for damage
recovery” and repeated discussions about the points of issue that would need continued discussion in
the text of the Interim Report, and conducted hearings from business operators twice.
Based on such investigation and discussion, we deal with the future measures against violations
including introduction of a surcharge system under the Act in the paragraphs that follow.
We expect the government to design the concrete system toward introduction of a surcharge system
under the Act as the consumer law based on the approaches presented below.
2.

Need for introduction of a surcharge system under the Act(1)

Reality of consumer damage caused by misleading representations

With respect to consumer damage caused by misleading representations or advertisement, thenumber of consultations about consumer damage received only by the National Consumer AffairsCenter amounted to approximately 50,000 cases a year (according to the Annual Report on
Consumer Affairs 2010 and the Annual Report on Consumer Affairs 2013, the number ofconsultations focusing on “representations and advertising” has exceeded 40,000 cases each year
since FY2004, and amounted to 49,492 cases in 2012 2 . Thus, the consultations about“representations and advertising” as a percentage of the total number of consumer consultations havebeen on the increase year by year (Appendix 1).
(2)

Difficulty in damage recovery in the consumer damage caused by misleading
representations

In consumer damage cases caused by misleading representations, it is difficult to establish a causal
relationship between the subject representation and the resulting damage, or it is not necessarily
clear what should in nature be considered as damage. For these reasons, those cases are often unfit
1

Act on Prohibition of Private Monopolization and Maintenance of Fair Trade (Act No.54 of 1947), Financial
Instruments and Exchange Act (Act No.25 of 1948) and Certified Public Accountants Act (Act No.103 of 1948).
2
In addition, the real cases were pointed out where the representations or advertising merely trigger choices of
products and services by consumers and in actual consumer consultation, the subsequent method of distribution or
any contractual issues or other issues with termination are mainly complained about, although it is triggered by
misunderstanding caused by misleading representations or advertising and, as a result, such consultations will not be
categorized into “representations or advertisement” in some cases. Especially in the type of transaction wherein
consumers enter into a transaction after making decisions on products and services only based on advertising such as
mail-order trading services, including Internet shopping services, of which users have been increasingly growing inrecent years, the representations or advertising would quite substantially affect consumer choice. Given thesesituations, it is pointed out that there would be so many potential cases, among consumer consultations received by
the National Consumer Affairs Center, which have not been categorized into misleading representations.

2

for civil litigations by their nature for the reason that it is difficult to calculate the amount ofdamages suffered by individual consumers or the amount, even if it can be calculated, is too small.
The same is true in the cases under the Special Act on Consumer Court Proceeding3, and there are somany cases in which it is difficult for consumers to recover their damages once they have sufferedsuch damages. Thus it is highly necessary to deter consumer damage caused by misleading
representations in advance.
(3)

Need for introduction of a surcharge system

In contrast with these realities and characteristics of damages, the cease and desist orders under thecurrent Act that address such damages would not be sufficient as incentives to deter violations inadvance, as it is intended to stop violators from making misleading representations toward the future
and to prevent damage from spreading and recurring.
More specifically, the fact that it is difficult for consumers to recover damages means that business
operators that made misleading representations continues to retain unfair profits generated from sales
they earned through misleading representations. By contrast, the current cease and desist order does
not deprive violators of their unfair profits and would not effectively operate to deter the violations
from an economic standpoint. The introduction of a surcharge system wherein economic
disadvantages will be imposed on violators would deprive business operators that have gained
customers through misleading representations of their unfair profits. Such deterrent force would not
only work well to prevent consumer damage from occurring but also have the effect of constructing
a healthy and sound consumption market by ensuring the impartiality with business operators thatcomply with laws, regulations and ordinances.
Therefore, it is highly necessary, as measures to deter misleading representations in advance, tointroduce a surcharge system to impose economic disadvantages on violators and discourage their
incentives for the violations, in addition to the current cease and desist order.
3.

Purport and purpose of the surcharge system, if actually introduced

The purpose of a surcharge system is to deter misleading representations in advance in order toprotect consumer benefit.
With respect to the surcharge system covering misleading representations, the “Bill for the Act on
Partial Revision of the Act on Prohibition of Private Monopolization and Maintenance of Fair Trade
3“Act on Special Provisions to the Civil Court Proceedings for Collective Recovery of Consumer Property Damage”(Act No. 96 of 2013).

3

and the Act against Unjustifiable Premiums and Misleading Representations” (Appendix 2;
hereinafter referred to as the “revision bill of 2008”) was decided at the Cabinet meeting in 2008 andwas submitted to the Diet. This revision bill, however, was repealed later. As the jurisdiction over the
Act was transferred to the Consumer Affairs Agency, the legal system of the Act was changed fromthe competition law system intended to secure fair competition to the consumer law system intended
to secure general consumers’ voluntary and reasonable choice-making. As a result, in order tointroduce the surcharge system into the Act, it was found appropriate to consider measures toreinforce the deterrent power of potential violations when comprehensive discussions about thevictim relief system take place after the inauguration of the Consumer Affairs Agency.
The purpose of the current Act is to secure voluntary and reasonable choice-making by consumers,
and the purpose of the surcharge system to be introduced into the Act should be considered to be toeffectively deter misleading representations that would inhibit such voluntary and reasonablechoice-making by consumers in order to secure such purpose of the current Act.
Thus, the direct “purpose” of the surcharge system is not to recover consumer damage. However, inlight of the purpose of the Act as the consumer law, it is important to consider that this system willcontribute to consumer damage recovery, especially given that it is highly necessary to deter
misleading representations through introduction of a surcharge system because of the difficulty ofdamage recovery in the misleading representation cases and further that unfair profits of violators tobe deprived are generated from payment by consumers. To this end, attention was paid to theconsumer damage recovery when the conditions and other procedures of the surcharge system weredeliberated.
4.

Conditions for imposition of a surcharge(1)Surchargeable cases(i) Surchargeable acts4
A.

Representation of the better quality (Article 4, paragraph (1), item (i) and representationof the more advantageous quality (item (ii), ditto)

Misleading representation of the “much better quality” and misleading representation of the4

If it is determined that there is more than one entity making misleading representations, you should consider that
more than one entity will be subject to imposition of the surcharge. The current misleading representation regulations
apply only to entities who have participated in the decision-making of details of the misleading representations,regardless of whether such decision is made by a single entity or more than one entity. When a surcharge is imposed,
the need for deterrence of misleading representations will never differ depending on whether such misleading
representations were made by a single entity or more than one entity. If by more than one entity, each of them would
separately enjoy unfair profits caused by the misleading representations and imposition of a surcharge on each ofthem would not constitute double imposition.

4

“advantageous quality” are the basis of the misleading representation regulations under the Act, andmake up most of the past cases to which the cease and desist orders were issued (Appendix 3). These
representations substantially need to be deterred and should be subject to imposition of a surcharge.
B.

Representation designated by public notice (Article 4, paragraph (1), item (iii))

Representation designated by public notice is the one designated by the Prime Minister as the“representation which is likely to be misunderstood by consumers” and would have been subject tothe cease and desist order as part of the policy-making process from a preventive standpoint.
However, it is unnecessary to consider it to be surchargeable under the present circumstances, as
there has been a relatively small number of cases dealt with in the past cases in which the cease anddesist orders were issued (Appendix 3).
C.

Representation regulated as unproved advertisement (Article 4, paragraph (2))

It is highly necessary to consider the representation regulated as unproved advertisement5 to besurchargeable. The act of a business operator that enters into transactions by inducing customers
with any representation that is highly likely to constitute the representation of the better quality
without any reasonable supporting materials is malicious per se and it is strongly requested todeprive the business operator of unfair profits earned by it from such transaction by way of asurcharge. On the other hand, it is not appropriate to impose excessive burden of proof on theadministrative agency from a standpoint of securing flexible and effective law enforcement
especially with respect to the representation of effectiveness and efficacy.
However, the cease and desist order is intended to remove the current dangerous condition in
response to the urgent need, and also is a tentative action in the sense that it is permissible to reshow
the representation at issue by preparing reasonable supporting materials ex post facto. By contrast,
the surcharge imposes economic disadvantage on the past act, and is different in nature from thecease and desist order in that the former has no implication referring to an interim action.
Therefore, attention should be paid to this difference in adopting the method for the representation
regulated as unproved advertisement in the punishment in the form of a surcharge, and a surcharge
should be imposed separately from the provision regarding the cease and desist order in Article 4,paragraph (2) unless the business operator submits reasonable supporting materials concerning the5

In order to enable the cease and desist order to be issued promptly from a standpoint of preventing consumer
damage from spreading, representation of effectiveness or efficacy will be considered to be the representation of thebetter quality and be subject to the cease and desist order if the relevant business operator fails to submit materials
that support any reasonable grounds supporting the representation within a certain period of time.

5representation about the effectiveness and efficacy within a certain period of time. Given the above,it is advisable to establish the procedural provisions setting forth, from a standpoint of protecting
justifiable interest of the entity on which the surcharge is imposed, that the entity can challenge theimposition of the surcharge by producing reasonable supporting materials in the subsequent
litigation to establish that the representation at issue is not misleading6.
As a matter of practice, in light of the cases involving the representations regulated as unproved
advertisements to which the cease and desist order has ever been issued, it is difficult to consider that
there would not be so many cases where the violators could have supplement reasonable supporting
materials in the repeal litigations, and the enforceability of the surcharge system would be
sufficiently secured by the above-mentioned provisional structure.
Even if it is permissible for violators to choose to challenge the imposition of the surcharge by
supplementing reasonable supporting materials ex post facto, such reasonable supporting materials
should have primarily been retained from the beginning of the representation7, and there is no needto award any special time grace to violators to supplement them when the surcharge is imposed.
D.

OthersWhether or not it falls within any of the surchargeable acts should be considered so that business
operators will not be unnecessarily intimidated, as necessary, by taking steps including clarificationof the judgment criteria for the applicability of the requirements8.
(ii) Subjective factor
A.

Whether or not subjective factors are necessary

Consumers may suffer damages through misleading representations, regardless of whether or not it
is caused by the willful misconduct or negligence of the violator, and the inappropriate misleading
should be corrected regardless of whether or not it is caused by willful misconduct or negligence.
6

Should the provision having the similar effect to that in Article 4, paragraph (2) be set forth with respect to thesurcharge, it would be impossible for the violators, even if they could prepare reasonable endorsing materials after theissuance of the order for payment of a surcharge, to insist on the repeal of such order depending on those materials in
the relevant litigation. In this regard, a surcharge would be imposed simply by treating the representation madewithout any reasonable endorsing materials that would support the representation as misleading representation. In thatcase, however, it is necessary to add a new category of misleading representation and it would be difficult to directly
organize how the nature of a surcharge and the procedure for imposing it under the Act should be thought of.
7
In the judicial precedent, it is held that the “business operator should make the representation after retaining in
advance reasonable endorsing materials that would support such representation, and must not sell the products withthe presentation without such materials” (November 26, 2010 judgment of the Tokyo High Court).
8
In this regard, many emphasized the need for securing the clarity in hearings from business operators, offering
opinions calling for the formulation and communication of administrative guidelines, and the establishment of aconsultation desk for business operators.

6However, in cases where it objectively constitutes the misleading representation even though thebusiness operator has exercised sufficient care, the deterrent of a surcharge would not work andwould not lead to the achievement of the goal of the system.
On the other hand, merely because the misrepresentation of the better quality (Article 4, paragraph(1), item (i)) or the misrepresentation of the more advantageous quality (item (ii), ditto) should berecognized based on the requirement that it is “much” better or “much” more advantageous, many of
the relevant cases would have been caused by the willful misconduct or a remarkable lack ofobjectively reasonable care. If any subjective factors should be added to the requirements in addition
to the objective violation, it is necessary to consider that there will be the burden of enforcement forsuch recognition.
Therefore, with respect to whether or not any subjective factor is necessary as the requirement for
imposition of a surcharge, a surcharge will be imposed, in principle, on any misleading
representation, based on the basic recognition that a subjective factor is necessary by which asurcharge should be imposed on the violator in light of the purpose of the system that is to deter
misleading representations. Only if the violator who did not intentionally make the misleading
representation presents any reasonable counterevidence that it had exercised the certain duty of care,
it would be sufficient to exceptionally refrain from imposing a surcharge.
B.

Details of the duty of care

Details of the duty of care that a business operator should exercise would differ depending on its sizeand category of business. The manners of misleading representations vary from case to case, andthere are a wide variety of forms in the duty of care it should exercise in making the representation.
So it is difficult to set up a uniform standard to judge that the business operator has exercised the
duty of care depending on how much investigations it conducted.
Therefore, details of the duty of care that a business operator should exercise so that a surcharge may
not be imposed on it should be considered based on the circumstances in individual cases (such as
the magnitude of an impact that the manners of misleading representation would have on consumers,
and the size of the inspection and verification duties of a business operator), as well as on whether it
has exercised the duty of care as required when it makes the representation (such as a certain actionin which it is found reasonable for it to believe in information obtained from other entities)9.
9
In this regard, the revision bill of 2008 (Appendix 2) requires the existence of willful misconduct or negligence(“provided that such business operator does not know throughout the whole period from the day on which it did suchact until the day on which such act ceased to exist that the representation resulting from such act fell under any one of
the following, and it is believed that such failure to know was not due to the substantial lack of reasonable care”), andthe business operators presented their opinion in their hearings that the requirements in the revision bill of 2008

7

(iii) Criteria based on size
There is an issue of whether or not the surcharge of which amount is less than a certain amountshould be excluded by so-called “cutback.” Based on the purpose of the system that is to protect
consumer interest by deterring misleading representation in advance, if a business operator hascaused consumer damage by misleading representation, such business operator would normally besubject to imposition of a surcharge, regardless of the size of such damage. Misleading
representations are often made by small-sized business operators. In order to trap such violations, it
can be considered that a surcharge should be broadly imposed without any criteria based on size.
However, if law enforcement is not enough despite the increase in the number of surchargeable cases,
no deterrent effect of misleading representations can be secured.
For this reason, a certain cutback is necessary in order to make the surcharge system effective, given
the burden of enforcement.
With respect to the base amount of cutback, it is necessary to consider establishing appropriate
requirements by taking, among other issues, the possible effects of the violation on consumers andthe possible effect of the imposition of a surcharge on the relevant business operator10 into accountafter examining the past cases to which the cease and desist orders were issued, from a standpoint of
securing the deterrent effect of the surcharge system.
(iv) Statutory exclusive period
In order to decide whether the applicable period should be restricted if a reasonable period of time
elapses after the violation occurs, it is necessary to consider the burden of law enforcement authority
resulting from dissipation of materials necessary for the calculation of the amount of a surcharge, as
well as the burden of the relevant business operator. Accordingly, there should be a certain
reasonable period of time based on the statutory exclusive periods under the existing surcharge

should be followed, alleging that the surcharge system should be applied only to highly malicious cases.
However, there are many cases in which it is difficult to identify the negligence as minor or gross even in the civil
litigation practice. If the entity that identifies it is the administrative agency and gross negligence is a requirement in
the imposition procedure that needs to be dealt with promptly, it would be difficult to impose a surcharge. Moreover,what will become a problem when the violator could not identify any error in the information provided by its supplieris whether or not there was the negligence, not gross negligence. If the violator was misled even though it checkedwith the supplier as necessary in light of common sense, there would have been no minor negligence. Thus, drawing
a line by gross negligence would substantially be nonsense.
10
As described below, the amount of surcharge was calculated based on the amount of sales from the products andservices in question under the revision bill of 2008 (Appendix 2). Following this, the cutback would be based on thesize of sales from the products and services in question, not the size of the relevant company.

8systems.
(2)

Calculation of surcharge amounts(i) Basic concept
It is considered that the amount of a surcharge necessary to secure the deterrent effect of violations
through a surcharge should be larger than the unfair profits earned by the violator in case of theviolation due to willful misconduct. However, given that it is difficult to establish whether or not theviolation was due to the violator’s willful misconduct, the amount of a surcharge should be
calculated based on the amount equal to the unfair profits earned by the relevant business operator,
regardless of the violator’s subjective view.
The “amount equal to unfair profits” as used herein should be calculated, without exception, using acertain formula, not using a separate method of calculation on a case-by-case basis. The manners of
misleading representations vary from case to case, and unfair profits earned by violators would differ
depending on the transaction covered by the relevant case, profitability ratio and other factors. In
addition, it is remarkably difficult to strictly calculate “unfair profits” in individual cases. As a result,if the amount of a surcharge is to be calculated in each case, it would take time to conduct
investigations necessary for enforcement, which would make it impossible for the law enforcement
authority to impose a punishment promptly.
The revision bill of 2008 defined the calculation rate based on the operating profit ratio of eachbusiness operator and provided that the amount of a surcharge should be calculated by multiplying
the amount of sales from products and services subject to the violation by such profit ratio(Appendix 2). However, the calculation rate should be adequately defined after examining the pastcases to which the cease and desist orders were issued, in order to give incentives necessary andsufficient to deter misleading representations in advance, so that violators no longer retain unfair
profits at hand.
(ii) Addition to the surcharge, subtraction from the surcharge or exemption of the surcharge
Additions to the amount calculated pursuant to item (ii) above deserve proactive consideration, as itraises the deterrent effect of violations. Additions would include, for example, those for repeatedviolators. In designing the system in the future, this should be considered in parallel with verificationof whether it is necessary, also in light of the fact that there has been so many repeated violators in
the past cases in which the cease and desist orders had been issued11.
11
Additions would include those by reason of cover-ups of violations (including cover-ups of whistleblowing).
However, in these cases, the amount of a surcharge would be added based on how the violation occurred and the9Moreover, subtraction from the surcharge or exemption of the surcharge also deserve consideration
as measures to prevent damage from spreading by urging violators to voluntarily declare violations
to detect misleading representations early, as well as to encourage business operators to build up
their voluntary compliance systems, through which the deterrent effect of violations in advance will
be increased12.
(iii) Applicable period
The applicable period for which the amount of surcharge is to be calculated should be restricted to acertain reasonable period of time, in light of the burden of enforcement for which the amount ofsurcharge is calculated.
Such period should be adequately defined as the period that would be reasonable to attain the
purpose of the system of deterring violations, after examining the past cases to which the cease anddesist orders were issued13.
(3) Whether or not the administrative authorities should have discretionary power
Which system should be chosen―the system in which the competent administrative authorities havethe discretion as to the application of law or the non-discretionary and standardized system―should
be considered based on characteristics of a surcharge that is to impose economic disadvantage andthe general principle of administrative disposition that fairness and transparency should be secured.
The situation in which the burden of law enforcement will be increased as a result of the introductionof the surcharge system, which will, in turn, adversely affect the current enforcement by issuingcease and desist orders, should be avoided. For example, it is often inappropriate to impose asurcharge in some specific cases, such as immaterial cases. If the administrative authorities have thediscretionary power, it is possible to exclude such cases from the imposition of a surcharge. Suchcases can also be dealt with by restricting the surchargeable cases to a certain extent by setting up the
cutback or other requirements.
Therefore, in introducing the surcharge system into the Act at this point of time, the system should
circumstances after the violation occurred, not the relevant misleading representation per se and the situations varyfrom case to case. Therefore, it is necessary to consider whether or not the system can be designed in which additions
due to such cover-ups are to be made.
12
However, with respect to subtraction from the surcharge or exemption of surcharge, it is necessary to consider the
relationship with the purpose of the surcharge system that is to deter violations by depriving violators of their unfair
profits.
13
The revision bill of 2008 stipulated that the applicable period was three (3) years (Appendix 2).

10not be designed in such a way that the administrative authorities may have the discretion.
5.

Procedures for imposition of a surcharge

With respect to the procedure for imposition of a surcharge against a violation, the business
operators presented their opinions in their hearings, asking for procedural security such as giving ofan opportunity to give explanations in advance. The revision bill of 2008 provided that the advanceprocedures are the same as those for the cease and desist orders, and gave the opportunity to give
explanations in advance. Based on this, business operators should consider any similar procedural
security as that under the cease and desist order.
The collection procedure should be designated in accordance with the existing surcharge systems, as
it is to be the procedures necessary and appropriate for the execution of a disciplinary action to
impose economic disadvantage.
With respect to enforcement, it is pointed out that it is necessary to further discuss the role-sharing
and collaboration between the national government and prefectural governments14, based on themeasures for strengthening of administrative monitoring and guidance under the Act for Partial
Revision of the Act against Unjustifiable Premiums and Misleading Representations which was
submitted to the 186th session of the Diet and was enacted on June 6, 2014.
6.

Future measures for damage recovery(1)Damage recovery mechanism and its methodology

Given the background to the repeal of the revision bill of 2008 because it was difficult to recoverdamage in the misleading representation cases, and it is appropriate to discuss the introduction of thesurcharge system into the Act when the victim relief system is comprehensively discussed, themechanism for promoting consumer damage recovery should be introduced in designing thesurcharge system.
To this end, in issuing a surcharge payment order, a system should be adopted in such a way that acertain amount will be deducted from the surcharge amount, taking voluntary actions taken by theviolator, such as reimbursement to consumers. Unfair profits of the violator that should essentiallybe deprived through a surcharge should be refunded to the victims. If the violator voluntarily refunds
unfair profits earned by it to consumers, it should be reflected in the imposition of a surcharge. By
14This would include, if it is assumed that the national government will issue a surcharge payment order in a case inwhich the prefectural government has already issued the cease and desist order, consideration of the procedure forsuch issuance.

11

doing so, it would be possible to promote damage recovery, while maintaining the deterrent effect of
the surcharge system.
(2)

Deductible voluntary action system(i) Reimbursement to consumers
Deductible “voluntary action” should basically take the form of a reimbursement to consumers who
have purchased the subject products and services and have lost unfair profits that the violator retains
at hand. Voluntary reimbursement to consumers is what damage recovery should essentially be, andis an action that will help the violator to restore its brand value and reputation. Promotion of such
reimbursement would benefit both consumers and business operators.
The scope of the amounts of deductible reimbursement should not be limited to those relating to thesurchargeable act of representation, given the fact that reimbursement by business operators to
consumers is often made without restricting the model numbers and sale period of the relevant
products to the scope of the act of representation subject to the surcharge, and should extend toreimbursements that would be considered to form an integral part of them from common sense.
The amount to be deducted should be the entire amount to be refunded (up to the amount of prices),and should not be restricted to the amount equal to the price multiplied by the surcharge calculation
ratio, from a standpoint of promoting voluntary reimbursement by business operators.
As the deduction system is a mechanism to urge violators to help consumers to recover their damage,the deductible reimbursement needs to be voluntary. Therefore, if the violator has been passively
compensated for damage under the judgment or other decree of a civil litigation, such amount should
be excluded, in principle, from the deduction15.
Moreover, the amount of reimbursement made properly and equally should be deducted. The systemshould be designed in such a way that the amount of reimbursement not made properly and equally
may not be deducted. For example, as it is inappropriate to deduct the amount of the surcharge basedon the reimbursement made only to any particular consumers, it should be one of the conditions forbeing accepted as the reimbursement made properly and equally for business operators toappropriately communicate the reimbursement to consumers.

15

If, however, the violator making voluntary reimbursement has made payments under the judgment or other decree
in a litigation brought by some of victims, it should exceptionally be permitted to deduct it from the amount ofvoluntary reimbursement.

12

(ii) Donation
In addition to the reimbursement to consumers as the deductible “voluntary action,” it would often
be practically difficult to make reimbursement to consumers due to the factors other than theexistence of misleading representation (such as the characteristics and manner of sale of the relevant
products and services, and amount of damage), and a donation mechanism should be permitted as aform of refinement of unfair profits earned by the violator to consumers, from a standpoint of theequality between business operators.
However, a donation should consistently be positioned to supplement reimbursement to consumers.
In order to prevent the violator from easily choosing to make a donation to evade cost of
reimbursement to consumers, a mechanism should be adopted in the cases where reimbursement ispermissible to consider measures to restrict the period during which a donation of which amount isdeductible is permissible to the final phase of the period during which the violator can makereimbursement, and to enable the administrative government to individually and concretely judge
whether the donation has been properly made.
Receivers of donation or the purpose of use of donation should be defined in a limited extent, in part
because the surcharge is imposed due to the violation and does not offer broad options to evade
payment of surcharge to violators and in part because the deduction system is structured to promote
consumer damage recovery. In order to make any donation deductible, those who will receive the
donation will be limited neutral organizations or groups that will not engage in any activity forwhich the donation is to be used (except for the administration and management of the amount of
donation), and discussions should be made to design a system under the purpose of use and methodof administration of the amounts of donations made will be properly utilized for activities, etc. thatwill contribute to consumer damage recovery.
- End -

13

Appendix 1
Excerpt from Handout No.6 provided at the 1st session of the Expert Panelfor Surcharge System, etc. against Misleading Representations under the
Act against Unjustifiable Premiums and Misleading Presentations○Number of consumption life consultations by category/year

Year

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Contracts andcancellations

375,716

461,341

640,834

1,244,569

1,646,361

1,086,432

918,997855,872

761,630

705,962

675,299

616,790

601,443

Sales methods

217,680

270,273361,562

650,923

872,671583,342

480,369

426,138

369,053

344,088369,986

401,553

403,279

Prices and fees

80,763

100,561

130,810

159,208

131,508

144,760

155,049

163,332

151,326

150,259

173,799

162,707

146,440

Quality, functions andservice quality

88,78887,21795,02983,617

79,261

89,12890,531

104,472

102,765

111,313

116,839

124,610

118,882

Politeness tocustomers

54,29656,40466,557

65,15264,17681,80486,876

101,125

99,876

115,088

121,222

126,507

128,246

Representation andadvertising

15,94821,356

28,68932,00647,09045,22941,49245,36041,82041,50346,08350,91649,492

As a percentage ofthe total number ofconsumer life
consultations (%)

2.9

3.3

3.3

2.1

2.5

3.5

3.7

4.3

4.4

4.6

5.2

5.9

5.9

Laws, regulations andstandards

17,324

20,78930,07437,01937,52043,43041,31239,82336,12032,37837,62534,73232,373

Safety and sanitation

18,02916,70920,318

16,958

16,641

24,701

24,571

31,25930,23733,21430,20333,99829,139Category

Source: National Consumer Affairs Center, “Annual Report on Consumer Affairs 2010” and “Annual Report on Consumer Affairs 2013”*Multiple answers for category of consultations

Appendix 2
Excerpt from Handout No.6 provided at the 1st session of the Expert Panelfor Surcharge System, etc. against Misleading Representations under the Act
against Unjustifiable Premiums and Misleading Presentations

Bill for Partial Revision of the Act on Prohibition of Private Monopolization and Maintenance of Fair
Trade and the Act against Unjustifiable Premiums and Misleading Representations(169th session of the Diet, No.73 Bill Submitted by the Cabinet) (Excerpt)
Article 6-2.

(Surcharge Payment Order)(1) In the case that any business operator effects any act that constitutes a breach of the provisions ofArticle 4, paragraph (1) (limited to those which fall under item (i) or (ii) of the said paragraph), theFair Trade Commission shall order the said business operator to pay to the national treasury asurcharge of an amount equivalent to an amount calculated by multiplying the sales amount of therelevant goods or services calculated pursuant to the method provided by a Cabinet Order for theperiod from the date on which the business operator effected the said act to the date on which it is nolonger considered that the representations relating to the said act would be likely to induce customers
unjustly or impede fair competition (in the case that the said period exceeds three years, it shall be thethree years preceding the date on which it is no longer considered that the representation relating to
the said act would be likely to induce customers unjustly or impede fair competition) by three percent;provided, however, that in the case that the said business operator does not know during the whole
period from the date on which the said business operator effected the said act to the date on which therepresentations relating to the said act were discontinued that the representation relating to the said act
falls under either of the following items and such failure to know is considered to result from the factthat the said business operator had substantially failed to exercise due care, or the amount so
calculated is less than three million yen, the Commission may not order the payment of such asurcharge.
(i)

Any representation by which the quality, standard or any other matter relating to the substance ofgoods or services is shown to be much better than the actual one, or to be, contrary to fact, muchbetter than those of other business operators who compete with the said business operator; and(ii) Any representation by which price or any other trade terms of goods or services is shown to bemuch more advantageous to the counterparties than the actual one, or to be, contrary to fact,
much more favorable to the counterparties than those of other business operators who competewith the said business operator.
(2) and (3) (Omitted)(Reference) Act against Unjustifiable Premiums and Misleading Representations (No.134 Act of May 15,1962) (Excerpt)
Article 4. (Prohibition of Misleading Representations)(1) No business operator shall make such representation as provided for in any one of the following items
in connection with transactions of goods or services which it supplies:(i)

Any representation by which the quality, standard or any other matter relating to the substance ofgoods or services is shown to general consumers to be much better than the actual one, or to be,contrary to fact, much better than those of other business operators who supply the same kind ofor similar goods or services as those supplied by the business operator concerned, and thereby
which tends to induce customers unjustly and to interfere with general consumers’ voluntary andrational choice-making; and(ii) Any representation by which price or any other trade terms of goods or services will bemisunderstood by general consumers to be much more advantageous to the general consumers
than the actual one or than those of other business operators who supply the same kind of or
similar goods or services as those supplied by the business operator concerned, and thereby
which tends to induce customers unjustly and to interfere with general consumers’ voluntary andrational choice-making.

Appendix 3
Excerpt from Handout No.4 provided at the joint meeting of the 156th plenary
session and the 10th session of the Expert Panel for Surcharge System, etc.
against Misleading Representations under the Act against Unjustifiable
Premiums and Misleading Representations○Status of application of each item of Article 4 of the Act against Unjustifiable Premiums and Misleading Representations in thecases to which cease and desist orders were issued on account of misleading representations
FY2009(from Sep.
2009)

FY2010FY2011FY2012FY2013

Total

5

16

19

29

41

110

0

0

3

5

22

Item (ii) (representation ofadvantageous quality)

0

6

11

9

4

30

Item (iii) (representation
designated by public notice)

1

2

0

2

3

8

Total

6

24

30

40

48

148

Item (i) (representations ofbetter quality)
Article 4, paragraph (2)applied (representation
regulated as unproved
advertisement)

30

Note: The total of this table does not meet the total of the cases to which the cease and desist orders were actually issued (136 cases),as some of those cases related to more than one item of Article 4.

List of Members
The members, etc. who participated in the deliberations of the Replies to the Consultation are as follows:○ Members of the Consumer Commission
Chairperson

Shoji KAWAKAMI

Professor at the Graduate Schools for Law and Politics,
University of Tokyo

Actingchairperson

Yutaka ISHITOYA

Lawyer

Ryozo AKUZAWA

Dean of the Faculty of Applied Life Science, Nippon
Veterinary and Life Science University

Kimie IWATA

President of Japan Institute of Workers’ Evolution

Norimichi SAITO

Professor at the Faculty of Law, Doshisha University

Nobuko
TAKAHASHI

Freelance Journalist

Satoko NATSUME

Director-General of the National Federation of Regional
Women’s Organizations

TomokoHASHIMOTO

Head of the Hokkaido Consumers Association

Ryuji YAMAMOTO

Professor at the Graduate Schools for Law and Politics,
University of Tokyo

Taeko YUINE

Director of the Nippon Association of Consumer
Specialists○ Consumer Commission
Members of the Expert Panel for Surcharge System, etc. against Misleading Representations under the
Act against Unjustifiable Premiums and Misleading Representations
Chairperson

MitsuoKOBAYAKAWA

Professor at the Seikei University Law School

Actingchairperson

Tadashi SHIRAISHI

Professor at the Graduate Schools for Law and Politics,
University of Tokyo

Naoko KANO

Professor at the Keio University Law School

Toshihiro KAWAIDE

Professor at the Graduate Schools for Law and Politics,
University of Tokyo

Miki NAGATA

Deputy Director-General of the National Federation ofRegional Women’s Organizations

Etsuko MASUDA

Executive Director of the Japan Association of Consumer
Affairs Specialists

Akira MIYAGILawyerMieko TANNO

Executive Vice President of the National Consumer Affairs○ ObserverCenter of Japan

Summary of Deliberations
Description of the Meetings
Date of the meeting held

AgendaJoint meeting of the first session of the Expert Panel for Surcharge System, etc. against Misleading
Representations under the Act against Unjustifiable Premiums and Misleading Representations (the1.

“Act”)
Thursday, February 6, 2014

● Status of deliberations made so far at the Consumer Affairs
Agency● Future plans for investigation and discussion

Joint meeting of the 142nd plenary session and the second session of the Expert Panel for Surcharge
System, etc. against Misleading Representations under the Act
2.

Thursday, February 13, 2014

● Need for introduction of the system● Purport and purpose of the system to be introduced (such as
viewpoint of damage recovery)● Organization of the points of issue to be deliberated

Joint meeting of the 144th plenary session and the third session of the Expert Panel for Surcharge
System, etc. against Misleading Representations under the Act
Tuesday, February 25, 20143.

● Hearings from the economic associations
・ KEIDANREN (Japan Business Federation)
・ Central Federation of Societies of Commerce andIndustry・ Japan Association of Corporate Executives

Joint meeting of the 146th plenary session and the fourth session of the Expert Panel for Surcharge
System, etc. against Misleading Representations under the Act
Tuesday, March 11, 2014

● Hearings about the existing surcharge systems
・ Antimonopoly Act (Japan Fair Trade Commission)・ Financial Instruments and Exchange Act, Certified Public

4.

Accountants Act (Financial Services Agency)● Hearings from the trade associations
・ Japan Food Service Association
・ Japan Ryokan & Hotel Association● Revision bill for the Act
Joint meeting of the 148th plenary session and the fifth session of the Expert Panel for Surcharge

5.

System, etc. against Misleading Representations under the Act
Tuesday, March 18, 2014

● Deliberations about the legal requisites and other procedures(1)Description of the Meetings
Date of the meeting held

Agenda・ Surchargeable cases (surchargeable acts, subjective
factors, criteria based on size, statutory exclusive period)

Joint meeting of the 149th plenary session and the sixth session of the Expert Panel for Surcharge
System, etc. against Misleading Representations under the Act
Thursday, March 20, 2014

● Deliberations about the legal requisites and other procedures(2)・ Surchargeable cases (statutory exclusive period)

6.

・ Calculation of surchargeable amount (basic concept;
addition to the surcharge, subtraction from the surcharge
or exemption of the surcharge; applicable period)
・ Discretionary power
・ Investigation power, procedural security, collection
procedure
Joint meeting of the 151st plenary session and the seventh session of the Expert Panel for Surcharge

7.

System, etc. against Misleading Representations under the Act
Tuesday, April 1, 2014

● Interim report

Joint meeting of the 153rd plenary session and the eighth session of the Expert Panel for Surcharge
8.

System, etc. against Misleading Representations under the Act
Wednesday, April 16, 2014

● Future schedule of investigation and discussion● Future measures for damage recovery

Joint meeting of the 154th plenary session and the ninth session of the Expert Panel for Surcharge
9.

System, etc. against Misleading Representations under the Act
Tuesday, April 22, 2014

● Deliberations about the legal requisites and other procedures(3)

Joint meeting of the 156th plenary session and the tenth session of the Expert Panel for Surcharge
System, etc. against Misleading Representations under the Act
Thursday, May 1, 2014

● Hearings from the economic associations
・ KEIDANREN (Japan Business Federation)

10.

・ Central Federation of Societies of Commerce andIndustry・ The Japan Chamber of Commerce and Industry● Deliberations about the legal requisites and other procedures
(4)

11.

Joint meeting of the 157th plenary session and the eleventh session of the Expert Panel for Surcharge
System, etc. against Misleading Representations under the Act

Description of the Meetings
Date of the meeting held

AgendaWednesday, May 7, 2014

● Hearings from trade associations
・ Japan Chain Stores Association
・ The Japan Direct Marketing Association● Free discussions (exchange of opinions for discussions for
finalization of the Replies to the Consultation)

Joint meeting of the 161st plenary session and the twelfth session of the Expert Panel for Surcharge
12.

System, etc. against Misleading Representations under the Act
Wednesday, May 28, 2014

● Future measures for damage recovery (2)● Discussion for finalization of the Replies to the Consultation

Joint meeting of the 162nd plenary session and the thirteenth session of the Expert Panel for
13.

Surcharge System, etc. against Misleading Representations under the Act
Tuesday, June 10, 2014

● Discussion about the draft Replies to the Consultation