Why METI endorsed the NOVA’s illegal business?

Law 

The contract that is disadvantage for consumer is invalid against the Specified Commercial Transaction Act[1] and the Consumer Contract Act (art.10).[2] 

Article 10 of CCA

Any provision which, in comparison with the case applied by the provision of the Civil Code, Commercial Code and other laws which do not relate to the public order, restricts the right of the consumer, or aggravate the duties of the consumer, and harms the interest of the consumers one-sidedly in contravention of the basic principle provided in the second paragraph of article 1 of the Civil Code shall bevoid.In continuation contract (Specified Continuous Service Offers) such as a language school, a student can terminate his contract in midterm

Art.49 of SCTA

(1) Where a Service Provider concludes a Specified Continuous Service Contract, the recipient of the Specified Continuous Services may terminate said contract when eight days have passed from the date on which he/she received the document referred to in Article 42(2) (if the recipient of the Specified Continuous Services had not rescinded the Specified Continuous Service Contract pursuant to the provision of Article 48(1) by said time limit due to being misled by the Service Provider’s act of misrepresenting, in violation of the provision of Article 44(1), information concerning the rescission of the Specified Continuous Service Contract pursuant to the provision of this paragraph, or due to being disturbed by the Service Provider’s act of intimidating the recipient of the Specified Continuous Services in violation of the provision of Article 44(3), it shall be when eight days have passed from the date on which the recipient of the Specified Continuous Services received a document, which has been issued by the Service Provider pursuant to an Ordinance of the Ministry of Economy, Trade and Industry under the same paragraph and contains a notice to the effect that the recipient of theSpecified Continuous Services may rescind said Specified Continuous Service Contract pursuant to the provision of the same paragraph). 

In such case, the school has to reimburse the student’s tuition indicated and calculated in subject to the SCTA. Aforementioned, if the school only repays smaller amount of tuition calculated by own way, such calculation is invalid.

Art.49(2) of SCTA

Where a Specified Continuous Service Contract has been rescinded pursuant to the preceding paragraph, the Service Provider may not demand that the recipient of the Specified Continuous Services pays an amount of money that exceeds the total of the amount specified in the following items according to the respective cases listed therein and the amount of the relevant delay damages based on the statutory interest rate, even when there is an agreement for liquidated damages or a provision on a penalty: (i) if said Specified Continuous Service Contract was rescinded after the start of the offering of the Specified Continuous Services the total of the following amounts: (a) the amount equivalent to the consideration for the Specified Continuous Services offered; and (b) the amount specified by the Cabinet Order referred to in Article 41(2) according to the respective services specified therein as an amount of damages that are normally caused by rescission of said Specified Continuous Service Contract; and (ii) if said Specified Continuous Service Contract was rescinded prior to the start of the offering of the Specified Continuous Services the amount specified by the Cabinet Order referred to in Article 41(2) according to the respective services specified therein as an amount of costs normally required for concluding and performing a contract.

These articles are so complicated that it is quite difficult to read those even usual practicing lawyers.

NOVA’s scandal

NOVA was against the laws and therefore METI imposed a business suspension as administrative sanction last month. It already reported in this blog.However, it was revealed that METI admitted NOVA’s illegal business in June 2002.[3] Although the details are unclear, the METI issued instructions to local governments that endorsed the NOVA’s illegal midterm repayment terms was reasonable. Probably, it was result that NOVA lobbied and encourages the ministry to issue such instruction.

Interruption to the Tokyo’s governmental sanction

As a matter of fact, Tokyo Metropolitan Government ordered the business improvement instruction to the NOVA before METI’s paper published. But, METI’s interpretation made the Tokyo’s administrative sanction interrupt.Thereafter, as a result, NOVA’s illegal business continued and the number of victims has increased until Supreme Court decision in March 2007.Certainly, there were several lower court decisions. But the NOVA neglected such rulings and continued his own calculation that was disadvantageous to students. Administrative bodies also did not take suitable administrative measures for consumer protection. It was caused by the METI’s incomprehensible measure as previously mentioned

METI’s tyranny

METI seems that his interpretation to the law the ministry has jurisdiction. But it is not correct. The law is result and reflection of past consumer’s injuries. METI have to be modesty to the past consumer damage and ten of thousand court decisions.  The responsibility of METI is serious and maleficent.

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[1] http://www.cas.go.jp/jp/seisaku/hourei/data/ASC.pdf

[2] http://www.cas.go.jp/jp/seisaku/hourei/data/CCA.pdf

[3] http://www.yomiuri.co.jp/national/news/20070701it02.htm