Marketing laws in Japan that you didn’t know about

Making the leap into the overseas market involves more than just identifying a new market and breaking into it. You might fall into legal pitfalls without prior research.

Some regions around the world have stricter rules about marketing than others. Japan is one such place.

In this article, I am going to introduce you to some key points about laws related to marketing and advertising.

The Antimonopoly [Antitrust] Act

The Antimonopoly [Antitrust] Act is a collection of articles and guidelines which have been issued by the Fair Trade Commission in Japan. The purpose of the Antimonopoly Act in Japan is to protect consumers from the unfair sales tactics of  monopolies or oligopolies. Below are examples of business activities that violate the Antimonopoly Act.

Prohibition of Dumping

Dumping is one kind of predatory pricing. It occurs when a company sells its product/service at a price that is either below the market price or the cost of production. Dumping is prohibited if it causes — or threatens to cause — material injury to other companies. This practice is often carried out by large enterprises in order to drive small companies into bankruptcy.

Prohibition of Cartel

A cartel is a formal, explicit agreement between competing firms. It is a rather precise organization of producers and manufacturers who agree to hold prices, marketing, and production at a fixed rate.

A cartel is only illegal when companies agree on a certain price. It is legal for other companies in the industry to imitate price increases initiated by the leading companies.

Prohibition of Bid Rigging

Bid rigging is a form of fraud in which a commercial contract is promised to one party, even though several other parties also present a bid. This form of collusion is typically illegal in Japan.

Prohibition of Concerted Refusal to Deal

A concerted refusal to deal is an agreement made by competing firms, and its purpose is to avoid dealing with particular firms.  For instance, an agreement not to sell products or services to discount stores, in order to keep their price high, is considered illegal in Japan.

Prohibition of Resale Price Maintenance

Resale price maintenance is the practice whereby a manufacturer and its distributors agree that the latter will sell the manufacturer’s product at certain prices.

Prohibition of Abuse of Dominant or Superior Bargaining Position

Abuse of dominant or superior bargaining position and causing harm to other companies are illegal. More details on this subject can be found in the “Act against Delay in Payment of Subcontract Proceeds, Etc. to Subcontractors”.  For example, unreasonable requests for funds, refunds of goods and dispatching of staff are illegal.

Prohibition of Merging to Decrease Competition

Merging companies in order to dominate the market is illegal in Japan.

The primary law to regulate advertising in Japan is the Act Against Unjustifiable Premiums and Misleading Representations .  The core principle of this law is to prohibit non-factual expressions in advertisements.  Below are some examples of this practice:

  1. “The Best”
    When describing products as “being the best”, it has to be an objective fact, not a mere opinion.  For instance, if your product is the most popular product on the market, a well-integrated survey must be carried out in a statistically accurate method.
  2. Double Pricing Advertisement
    Double pricing is misleading and causes customers to believe that a discount is really a discount, when it is actually the regular price. Having discount campaigns too often could be considered double pricing.
    Another example of a double pricing advertisement is when you list a manufacturer’s recommended price or regular price along with the actual retail price. There must be a either the manufacturer’s recommended price or a regular one.  They cannot be invented during advertising.
  3. Undercover Marketing (Stealth Marketing)
    Undercover marketing, also referred to as “stealth marketing” or “buzz marketing”, is when people are advertised a product without them knowing they are being marketed to. It can be carried out by product placement in a movie or TV show or celebrity endorsement.  The main goal of stealth marketing is to raise awareness for a product.
  4. Native ads without warning the reader
    Native advertising is when an advertisement is disguised as an article or a video, generally in the form of clickbait.  The word “native” is used because the content of the ad is related to the content on the platform on which it is posted.  There must be an indication, such as “This is a PR article”, to let readers know they are being advertised to.

Markets around the world vary in their laws.  It is important to know these differences when getting started in a new market.  Keeping the stipulations of the Antimonopoly Act and Act Against Unjustifiable Premiums and Misleading Representations, it will be easy to carry out legal business practices in Japan.

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