Japanese Consumer Law

1. Introduction

We have no comprehensive consumer law.

The consumer rights and the general duties of business are declared in the Consumer Fundamental Act 2005. The Act, which was established in 1960 and revised in 2005, has no civil sanction clause. If consumers want to ask their civil redress, the claims should be based on the other laws including a civil code.

To accomplish with the fair consumer practices, several laws impose the general to trader and prohibit the unfair trading practices.

2. Consumer

The Consumer Contract Act 2000 defines the consumer as an individual who does not deal with business. The law only applies the consumer contract that the consumer forms with a business, whereas the Specific Commercial Practices Law may be applied to  the small or medium-sized enterprises who primarily does not trade as a business.  The act restricts the unfair trading practices as well as regulates the unfair contract term.

The Specific Commercial Practices Law regulates the specific marketing practices. The target of the act is door-to-door step selling, distance sales, telemarketing, multi-level marketing, specific continuous transaction and home-at-work trading. The act also restricts the unfair marketing practices and unfair contract term on the specific transaction as well as the Consumer Contract Act. The act does not define the consumer. But, the act says that the articles concerning doorstep selling, distance selling and telemarketing does not apply to the trading between business to business. In other word, these clauses only regulate consumer transaction.  

3. Duty to trade fairly

3-1. Information duty

As above mentioned, the Consumer Contract Act 2001 regulates both the unfair commercial practices and the unfair contract terms. In other word, the act has two nature of both the unfair commercial practice regulation and the unfair contract term regulation. 

The act states that there is a significant difference of information in quality and quantity as well bargaining power between a consumer and a business; therefore, the act also provides that: businesses drafting clauses of a consumer contract shall strive to make the rights and duties of consumers and such other things set forth in the consumer contract clear and plain to consumers and, in order to deepen consumer understanding when consumers are solicited to enter consumer contracts, to provide necessary information on consumer rights and duties and such other things set forth in the consumer contract.

3-2. Suitability rule

The Consumer Fundamental Act 2005 sates the suitability rule: the business has to do business taking account of the knowledge, experience and financial status of consumers. The principal has been developed in the financial services regulations such as the Financial Product Sales Law and the Commodity Futures Transaction Law. However, since the rule was stipulated in the Consumer Fundamental Act, many consumer protection regulations tend to adapt the principle in their article. For instance, on the doorstep selling regulation, a business is prohibited to exploit a consumer by taking advantage of the lack of his understanding; The basis of the article is a suitability rule of the Consumer Fundamental Act. 

4. Protection against unfair practices

4-1. Misleading commercial practices

The Consumer Contract Act prohibits the unfair commercial trade practices: misrepresentation, offer of an affirmation, omission of the substantial facts. The requirements is (1) the consumer is solicited by the seller to enter into a contract; (2) the seller performs one of the prohibited acts: (a) misrepresentation; (b) false evaluations in respect of future prices, of amounts of money that consumer should receive in the future; or  (b) intentional failure to state disadvantageous facts.

The similar prohibition is found in the Specific Commercial Practices Law; the law also provide the civil remedy against the breach of the law. But,  the has significant defect: the law only applies to the transaction concerning specific products and services so far.

4-2. Aggressive commercial practices

The law prohibits the practices that annoy the consumer for the purpose of making him a unreasonable decision.  The requirements of the practice are : (1) the consumer is solicited by the seller to enter into a contract; (2) the seller performs one of the prohibited acts: (a) failure of seller to leave a consumer’s place when requested by consumer to do so (door to door selling); (b) not allowing a consumer to leave a place where he is solicited to enter a consumer contract.

5. Unfair contract terms

5-1. Breach of good moral, the civil code

Unfair contract terms are prohibited by the civil code, sec.90: the immoral legal transaction which violates good moral is void. The details of good moral is not clear in the article.

In German law, sec. 138 (2) of the BGB indicates the instance of economical exploitation:

a legal transaction is void by which someone through exploitation of the predicament, inexperience, lack of judgment or significant weakness of will of another person causes to be promised or granted to himself or a third party in return for a performance economic advantages which are conspicuously disproportionate to the performance.

Our court ruling adapts the similar structure of above German law in judgment of the exploitation. Under the recognition, recent lower court decisions, concerning the excessive KImono sales cases,  approved claims of consumers who insisted that the distributors took advantage of lack of judgment or significant weakness of will of victims and therefore the contracts of excessive sales were void by the breach of good moral. 

5-2. Unfair contract, the CCA 

For consumers, identifying and proving the requirements of gouging should be quite difficult in usual. The Consumer Contract ACT 2001 aims to enlighten the burden of proof of gouging over the civil code.

Under the law, when the terms of consumer contract impose the consumer unreasonable disadvantage, the terms are void (art. 10): 

Clauses which restrict the rights of consumers or expand the duties of consumers beyond those under the provisions unrelated to the public order applicable pursuant to the Civil Code, the Commercial Code and such other laws and regulations and which, impair the interests of consumers unilaterally against the fundamental principle provided in the second paragraph of article 1 of the Civil Code, are void.

Sec.8 notes that the instance of the clauses which restrict the rights of consumers beyond those under the provisions unrelated to the public order applicable pursuant to the Civil Code. It says the nullity of clauses which exempt a business operator from liability for damages:

(1) The following clauses of a consumer contract are void.
(i) Clauses which totally exclude a business operator from liability to compensate damages to a consumer arising from the business operator’s default.
(ii) Clauses which partially exclude a business operator from liability to compensate damages to a consumer arising from the business operator ‘s default (such default shall be limited to cases where same arises due to the intentional act or gross negligence on the part of the business operator, the business operator’s representative or employee).
(iii) Clauses which totally exclude a business operator from liability to compensate damages to a consumer arising by a tort pursuant to the provisions of the Civil Code committed on occasion of the business operator’s performance of a consumer contract.
(iv) Clauses which partially exclude a business operator from liability to compensate damages to a consumer arising by a tort (such torts shall be limited to cases where the same arises by intentional act or gross negligence on the part of the business operator, the business operator’s representative or employee) pursuant to the provisions of the Civil Code committed on occasion of the business operator’s performance of a consumer contract.
(v) When a consumer contract is a contract for value, and there exists a latent defect in the material subject of a consumer contract (when a consumer contract is a contract for work, and there exists a defect in the material subject of a consumer contract for work The same shall apply in the following paragraph), Clauses which totally exclude a business operator from liability to compensate damages to a consumer caused by such defect

(2) The provision of the preceding paragraph shall not apply to the clause provided in item (v) of the preceding paragraph which fall under the cases enumerated in the following items.
(i) In the case where a consumer contract provides that the business operator is responsible to deliver substitute goods without defects or repair the subject when there exists a latent defect in the material subject of the consumer contract
(ii) In the case where a contract between the consumer and another business operator entrusted by the business operator or a contract between the business operator and another business operator for the benefit of the consumer, which is concluded before or simultaneously with the consumer contract, provides that the other business operator is responsible to compensate the whole or a part of the damage caused by the defect, deliver substitute goods without defects or repair the subject defect when there exists a latent defect in the material subject of the consumer contract

Sec. 9 stipulates indicates the instance of the clauses which restrict the rights of consumers and expand the duties of consumers beyond those under the provisions unrelated to the public order applicable pursuant to the Civil Code:

(i) As to a clause which stipulates the amount of liquidated damages in case of a cancellation or fixes the penalty, when the total amount of liquidated damages and the penalty exceeds the normal amount of damages to be caused by the cancellation of a contract of the same kind to the business operator in accordance with the reason, the time of the cancellation and such other things The part that exceeds the normal amount.

(ii) As to the clauses in a consumer contract which stipulate the amount of damages or fix the penalty in the case of a total or partial default (if the number of payments is more than one, every failure of payment is a default in this item) of a consumer who is over due, when the total amount of liquidated damages and the penalty exceeds the amount calculated by deducting the amount of money actually paid from the amount of money which should have been paid on the due date and multiplying by 14.6% a year in accordance with the number of days from the due date to the day on which the money is actually paid The part that so exceeds.

6. Product liability

7. Lender liability

The concept of the connected lender liability has been established through many court decisions year after year.

In the Installment Sales Law, art. 30-4 stipulates the counterclaim for purchaser to refuse reinbursement of  outstanding installments in the tripartite credit agreement: if the debtor has effectively revoked his declaration of will to conclude a contract regarding the specified transaction regarding delivery good or the provision of another services by supplier, then he is no loger bound by his declaration of wil to conclude a consumer credit contract connected with this contract; but the debtor has no right to ask  repayment of his paid installment from the creditor.

In that case, if the consumer gets repayment of paid installment from the creditor, he has to revoke the credit contract by unfair commercial practices such a misrepresentation or ommission, or prove that the contract is invalid by the breach of good moral or mistake. Otherwise, he can seek a damage compensation from a creditor if he proves the negligence of the creditor.  

8. Cancellation

9. Remedy

9-1. Legal actions by consumer associations

There are procedures available allowing collective action lawsuits to be filed by groups of private individuals who have suffered similar harm as a result of the wrongful actions of the defendant. The regime was introduced by revised Specific Commercial Practices Law in 2006. The remedies available in actions by consumer associations are limited to injunction, as opposed to monetary recovery.

9-2. The collective action lawsuits procedures 

The lawsuits are filed by groups of private individuals who have suffered similar harm as a result of the wrongful actions of the defendant. So far, the collective action lawsuits procedure is not introduced.

9-3. Small claim court

Summery cout make a role of small claims court, and the procedures can offer consumers access to the court system at a cost and burden not disproportionate to the amount of their claim.  This court procedures is available for claims under a certain monetary threshold, up to 1,400,000 yen.

9-4. ADR

The Alternative Dispute Resolution (ADR) Law was enacted in 2006. The methodologies include various types of arbitration, mediation and neutral evaluation.

Mediation is a process whereby the parties involved utilize an out-side party to help them reach a mutually agreeable settlement. As out-side parities,  summary courts provide a civil procedure.

Arbitration is the procedure by which parties agree to submit their disputes to an independent neutral third party, known as an arbitrator, who considers arguments and evidence from both sides, then hands down a final and binding decision. this resolution is provided by several Bar Associations, Tokyo, Osaka and so on.  

In neutral evaluations, a neutral individual with a background in ADR listens to each party give its version of events. After their perspectives have been considered, the neutral evaluator offers his/her opinion on the disagreement. This opinion is not binding in any way.

In state-run orgnizations, consumer affairs centres play a important role as neutral party between businesses and consumers. In debt work-out resolution, the Credit Counseling Association that is managed by member companies of credit industry association accept lawyers recommended by Bar Associations as neutral evaluators. In disputes of deffective products, each industrial product sectors establish private ADR.