Japanese Consumer Law

revised on 15th May 2010

General information

1       State of Consumer claim and disputes

Provably, the state of consumer disputes might be no different from other developed countries. Concerning regulations to protect consumer, our country has similar type and content as well to other instances.

On the other hand, some specific features can be found our law. Suitability rule is typical one. In fact, the rule is introduced in other countries; but it could apply to the investment regulation such as securities transaction, or it might target to consumer lending.

In our country, the notion is found some consumer protection regulation except investment law such as the Financial Product Trading Law and the Commodity Futures Trading Law, and the Insurance Policy Law.

For instance, the Specific Commercial Practices Act prohibits excessive trading beyond daily life necessity of customer, and a breach of conduct by business can be rescind. Same regulation can be found the Money Lending Business Act. The, act which revised and will be enforced in July 2010, prohibits excessive lending beyond on third of annual income. These regulation can be recognized in context of the Suitability rule which asks a business to conduct due to being suitable of customers aim , knowledge, experience and financial status.

However, it is on the way of development. The notion and the requirement of the rule is not clear. Court rulings concerning application of the rule is no stable.

Probably, the suitable rule approach in our country would be different from average consumer approach in unfair commercial practice prohibition.

In this essay, by introducing our consumer protection regulations and court rulings concerning consumer disputes, I would like to make it clear the state of consumer protection in our country and introduce our experience solving consumer disputes and lesson.

2       Consumer protection regulation

2.1      Fundamental Consumer Protection Law

Consumer rights and the general duties of business are stipulated in the Consumer Fundamental Act 2005. The Act, initially enacted in 1960 and revised in 2005, has no civil sanction clause. It only shows declaration of consumer rights.

Assurance of fair trading and prohibition of unfair commercial practices is due to the individual regulation such as the Consumer Contract Act, the Specific Commercial Practices Act and many administrative regulations , and civil sanction to breach of business conduct stipulating on these law is imposed by the Civil Code and the CCA principally. But gradually some administrative laws has been furnishing civil penalty clauses.

2.2      Consumer Contract Act

The Consumer Contract Act 2000 was enacted in 1999 and enforced on 12th March 2000. The law regulates not only unfair consumer contract, but also unfair commercial practices, misleading and aggressive conduct. Whilst unfair contract terms and conditions are regulated in the Specific Commercial Practices Act, the law applies only specific trading practices. On the other hand, unfair commercial practices is regulated on the SCPA which stipulates the civil sanction to the conduct against the law, but the requirements is a little bit different from the CCA.

2.3      Specific Commercial Practices Act

The Specific Commercial Practices Act 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.  

The doorstep selling is within the scope of the Specific Commercial Trading Act. The act does not contain the word of a consumer; the act describes only the “customer”. What is the difference between a consumer in the CCA and a customer in the SCTA?

The SPTA has an exemption clause concerning the scope of the trading applied;  therefore the wording of customer has almost same meaning of  the consumer:

Article 26(Exclusion from application)

 (1) The provisions of the preceding three sections shall not apply to the following sales or offer of services that fall under Door-to-Door Sales, Mail Order Sales, or Telemarketing Sales:(i) sales or offer of services pertaining to a sales contract or a Service Contract concluded by a person who made an application for it, the purchaser, or the service recipient for the purpose of business or as business;

The plaintiff, who was a car dealer, bought a fire extinguisher from the defendant company by doorstep selling. Thereafter, a plaintiff cancelled the contract based on the SCTA. The Kobe District Court, original court, rejected the argument of the plaintiff, because he was a business person and the contract was out of the scope of the application of the SCTA.

The Osaka Appeal Court overturned the original court decision and approved the claim of execution of cancellation right based on the SCTA by a business person who formed the contract of purchasing a fire extinguisher, on July 30, 2003.[[1]]: the plaintiff was a car sales and repairing company and did not dealt with the sales of extinguisher; therefore the inspection of the appliance was also not within his business or the purpose of his business; the circumstance was not different even if the plaintiff’s company was necessary to equip with the extinguisher in his business place; the claimant had to implement installing the outfit by the fire-fighting law.

2.4      Other regulations

Provably as same as other countries, many administrative regulations which chiefly regulate the business conduct of entrepreneurs also set a articles of consumer or customers protections. Most of these regulations have not civil sanction clauses, however, step by step, civil penalty articles is getting to be set on these administrative regulation. Before mentioned SCPA is principally belonging administrative regulation however, a business conducts against unfair commercial clause shall be rescinded. The Financial Instruments and Exchange Act which regulates the financial services sectors, set a compensation clause concerning a breach of explanation duty.

3       Consumer

3.1      Notion

3.1.1  CCA

The CCA 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.

The definition of a consumer, business and consumer contract is not different from afore mentioned definition of the UCPD and the UK law; sec. 2 of the Consumer Protection (Cancellation of Contracts Concluded away from Business Premises) Regulations 1987.

Article 2 (Definitions) of the CCA[[2]]

(1) The term “Consumer” as used in this Act shall mean individual(s) (however, the same shall not apply in cases where said individual becomes a party to a contract as a business or for the purpose of business).

(2) The term “Business Operator” as used in this Act shall mean juridical person(s), association(s) and individual(s) who become a party to a contract as a business or for the purpose of business.(3) The term “Consumer Contract” as used in this Act shall mean contract(s) concluded between consumers on the one hand and business operators on the other. If the contractual party is a corporate body, he cannot enjoy the protection of the act, even if the formed contract is outside his business. However, if the contracting party is a natural person, the act is applied to the contract as long as the contract is primarily formed outside his business.

3.1.2  SCPA

The Specific Commercial Practices Act is quite important regulation for consumer protection, which regulates doorstep selling, via-phone selling, distance selling, multi-level marketing, selling inducing to introduce work in home and durative service contract such as language school. However, the law has no definition of consumer and  business.

It only does not apply to the trading which aims to or for business activity (sec. 26 (1)), the law applies to both multi-level marketing and selling inducing to introduce work in home, even if these trading is to or for business activity.

3.2      Average consumer

3.2.1  in our law

Our law has no idea of average consumer, although it considered in enactment of Consumer Contract Act whether the notion should be introduced in the law.

In the process of enactment of the Consumer Contract Law 2000, however, the influential major business association, the Federation of Economic Business Associations, demanded to insert the notion of the average consumer instead of consumer wording in the law. According to the association, the notion of consumer should be clarified in consumer-business transaction to be able to perspective; therefore the notion of consumer should be limited to the entity that formed contract with the business. The average consumer should be defined as an average natural person who is attentive and can make his contract reasonably.[[3]] Eventually, the proposal was not reflected not only in the CCA, but also in the Specific Trade Practice Law.

3.2.2  EU directive

In EC unfair commercial practices directive, the unfairness is judged by average consumer. By the directive, the average consumer is defined as who is reasonably well-informed and reasonably observant and circumspect, taking into account social, cultural and linguistic factors.

The directive states that it is necessary to take into account the nature of consumer, preventing the exploitation of consumers whose characteristics make them particularly vulnerable to unfair commercial practices.

Therefore, it concludes as follows:“Where a commercial practice is specifically aimed at a particular group of consumers, such as children, it is desirable that the impact of the commercial practice be assessed from the perspective of the average member of that group…. Where certain characteristics such as age, physical or mental infirmity or credulity make consumers particularly susceptible to a commercial practice or to the underlying product and the economic behavior only of such consumers is likely to be distorted by the practice in a way that the trader can reasonably foresee, it is appropriate to ensure that they are adequately protected by assessing the practice from the perspective of the average member of that group.” 

3.2.3  usage of the notion

We cannot find any argument in current law reform discussion concerning a notion of the average consumers both the Consumer Contract Law and the Specific Trading Practices Law.

The general information requirement is based on the general consumers except the individual consumer. It is necessary to take account of notion of the general consumer in whether the advertisement or description is considered unfair or not.

Whilst we cannot find the wording of the “average consumer” precisely, the same wording of “general consumer” is used in the truth-in-advertising laws (sec.4) for instance. The meaning of the general consumer seems as same as the notion of the average consumer. The SCPA is control to the general information duty and advertisement. Probably, the act uses the consumer as the meaning of the average consumer concerning advertisement restriction, if the SCPA should be interpreted  coherent with the truth-in-advertising law.

However, in the face-to-face transaction phase, traders are able to take account to the consumer’s particularity in personal including vulnerability: knowledge, capability, intention, experience and the status of finance. Whether the particular practice is misleading or aggressive or not  is affected by the personal particularity, in addition to the nature of goods or services. In this situation, it is not efficient for a business to take account  of the average consumer. 

EC unfair commercial practices directive modifies the average consumer standard where a clearly identifiable group are particularly vulnerable by virtue of their mental or physical infirmity, age or credulity. But we have not the vulnerable consumer. Instead our several laws introduce the notion of the suitability rule. In EU countries, that concept only is introduced  in securities or investment law. In
Japan, the idea has been  growing in  consumer law: the  fundamental consumer law, doorstep selling regulation and some investment laws. It seems that the suitability rule plays a similar role as the notion of vulnerable consumer, but it is unclear.

4       Labeling

4.1      regulation

4.2      deceptive label

The number of deceptive labeling is revealed more and more recently. The National Police Agency reported 52 suspected violations of food safety-related laws, including deceptive labeling of a product’s origin, last year, up 27 from a year earlier and marking a record high since the agency started compiling statistics in 2002.

The majority of the cases involved people operating food service businesses without proper licenses.

In October, four former executives of Hokkaido meatpacker Meat Hope Co. were arrested on suspicion of violating the Unfair Competition Prevention Law for allegedly labeling minced meat mixed with pork as 100 percent beef.

Tanaka, the former president the defendant company, was formally accused of shipping about 138 tons of minced meat containing pork and chicken falsely labeled as “100 percent beef” to more than 10 companies from May 2006 to last June. He is also charged with defrauding three clients, including Hokkaido Katokichi Co., out of about ¥39 million by selling them about 100 tons of falsely labeled ground meat.

The Sapporo District Court on 19th March 2008 sentenced the former president to four years in prison for fraud and unfair competition over the false labeling of its meat products. The ruling said , “The defendant caused anxiety about food labeling among consumers, shaking the foundation of the public’s trust on food safety.” ; Tanaka’s practice of mixing other meat into beef “stands out in its maliciousness and should be distinguished from other recent false food labeling incidents, such as disguising a product’s origin,”

Prosecutors had sought a six-year prison term, claiming the false labeling was “unprecedentedly systematic and chronic for a food-related crime.”

5       Advertising

5.1      Misleading

Misleading advertisement is prohibit in the Truth-in-advertising Law. But to the breach of the law, only administrative sanction is imposed. There is no provision relating civil penalty.  On the other hand, the CCA stipulates the rescission against the false representation, but it is controversial whether in the interpretation of the CCA the misrepresentation advertising is including the scope of sec4 which prohibit the false representation and impose a civil sanction of rescission for the infringement.

The explanation of the Administrative body interprets that the provision does not suppose the advertising which is presented to general consumer. However, in progressing advertisement by internet, it is apparent that many consumers are strongly induced to purchase goods or services. In the discussion of the CCA reform, the theme is one of important issues of agenda and it was debated in recent advisory panel meeting (April 24, 2007). [[4]]

5.2      Aggressive advertisement

There is no provision relating aggressive advertisement not in the truth-in-advertising Law, but also the other consumer protection Laws. Of course, is in the CCA, too. We cannot find any agenda of the prohibition of aggressive advertisement. Why? It is difficult to understand for our government attitude. We usually see the aggressive advertisement in Japanese TV, taking advantage of health anxiety of consumers. It should be prohibit or restricted rapidly as aggressive advertisement.

5.3      Cross-out practice

From Asahi Shimbun on 7th June 2008, the sales practice of cross-out practice will be abolished:

Many major electric home appliance makers and some of the biggest retail chains in the business will scrap the common practice of showing crossed-out prices on price tags that promise “further discounts.”  The Home Electric Appliances Fair Trade Conference, which includes electric appliance makers and large electronics goods retailers, plans to revise its rules at a general meeting in July. The move comes after the government’s Fair Trade Commission pointed out the practice was “lacking transparency and undesirable.”

At a Tokyo shop in an area with a high concentration of electronics retailers, price tags on most televisions carried a printed price–the “original price.” Below, an attached tag listed a handwritten discounted sales price. On top of that was a sticker that read, “Further discounts available”–for those willing to haggle. At a rival store nearby, the situation was similar. Some prices were crossed out and the tag carried a sticker that said further discounts were available. The usual explanation from salespeople for the varied prices was that as prices sometimes change several times a day for popular items, reprinting price tags takes too much time.

However, it aims be done to avoid price wars, according to an industry insider. 

If a store clearly states its final discount price, other stores will follow suit, dropping their prices accordingly. That would intensify price competition and lead to lower profits all-around.

Act against Unjustifiable Premiums and Misleading Representations prohibit misleading representation on advertisement.

Article 4(Prohibition of misleading representations): (1) No entrepreneur shall make such representation as provided for in any one of the following items in connection with transactions of goods or services which he supplies: (i) Any representation by which the quality, standard or any other matter relating to the substance of goods or services are shown to general consumers to be much better than the actual one or much better than that of other entrepreneurs who are in a competitive relationship with the entrepreneur concerned contrary to the fact and thereby which tends to induce customers unjustly and to impede fair competition; (ii) Any representation by which price or any other trade terms of goods or services will be misunderstood by general consumers to be much more favorable to the general consumers than the actual one or than those of other entrepreneurs who are in a competitive relationship with the entrepreneur concerned, and thereby which tends to induce customers unjustly and to impede fair competition; or (iii) In addition to what are listed in the preceding two items, any representation by which any matter relating to transactions of goods or services is likely to be misunderstood by general consumers and which is designated by the Fair Trade Commission as such, finding it likely to induce customers unjustly and to impede fair competition. (2) The Fair Trade Commission may, where it finds it necessary in order to evaluate whether any representation falls under item (i) of the preceding paragraph, designate a period and require the entrepreneur concerned to submit data as reasonable grounds for the representation he has made. In such cases, if the entrepreneur fails to submit the data, the representation concerned shall be deemed to fall under the said item for the purpose of applying the provisions of Article 6 (1) and (2).

The cross-out advertising practices seems not be breach of the article whilst ambiguous price displays puzzle consumers. In other word, there may be nothing wrong with doing cross-out labeling. However, If such price tags (with crossed-out prices and a ‘further discount available’ message) become the rule, eventually the whole concept of having price tags on goods in stores will become meaningless, the article introduces the comment of FTC’s officer.

5.4      problematic issues

5.4.1  Loan advertising

The Financial Service Agency conducted a survey ads of consumer lending business; the result  was reported on 4th July 2008.

According to the result, 80% of ad was unlawful. Some of them does not show terms and condition that must be described on ad such as interest rate. Some lenders make misrepresentation on ad; many lenders stress significantly easiness for borrowers to be  loaned money.

You cannot avoid seeing the ads even in the case where the ads are provided via newspaper. When the ads is provided via TV, it should be regarded as nuisance: you cannot keep yourself away from these ads; many consumers might be induced to get loan without mental resistance. These practices, especially TV commercial of consumer credit, must be prohibited, because they shall invite consumer over indebtedness, therefore .

5.4.2  TV shopping

According to an article of the Yomiuri Shimbun on 14th June 2008, the Fair Trade Commission has cautioned TV Asahi Corp. for providing misleading information on a horse saddle-style exercise machine sold in its shopping programs. This is the first time the FTC has admonished a broadcaster over a shopping program.

The broadcaster had claimed people could lose up to 6.6 kilograms by exercising on the machine for one hour per day for three weeks. However, the FTC obtained data from the manufacturer stating that a person could only lose up to 0.4 kilogram with this amount of exercise. According to the FTC, about 53,000 of the fitness machines, Rodeo Boy II, were sold during a yearlong period via the shopping programs, with sales totaling about 1.5 billion yen. TV Asahi featured the product in its shopping program Selection X, and other information programs between June 2006 and July 2007, claiming the machine could help reduce body weight. To prove the product’s effectiveness, the programs introduced several individuals who allegedly had lost between 1.4 kilograms to 6.6 kilograms after using the machine for an hour a day over three weeks. In response to the FTC’s inquiry, TV Asahi also disclosed it had carried out its own experiment with 14 people, but that six of the 14 trial subjects were dieting during the three-week experiment.

The FTC concluded that the TV programs might have led viewers to believe a considerable amount of weight could be lost in a short period of time merely by using the machine. The administrative order is based on the Act against Unjustifiable Premiums and Misleading Representations, which prohibits a misleading commercial practice (art. 4(1)):  No entrepreneur shall make such representation as provided for in any one of the following items in connection with transactions of goods or services which he supplies: (i) Any representation by which the quality, standard or any other matter relating to the substance of goods or services are shown to general consumers to be much better than the actual one or much better than that of other entrepreneurs who are in a competitive relationship with the entrepreneur concerned contrary to the fact and thereby which tends to induce customers unjustly and to impede fair competition. Then, the Fair Trade Commission may order the entrepreneur concerned to cease the said act, or to take the measures necessary to prevent the reoccurrence of the said violation, or to take any other necessary measures including public notice of the matters relating to the implementation of such measures. Such an order may be issued even when the said violation has already ceased to exist (art.6(1)).

An article of weekly magazine brought about the order. The Yomiuri stated: Last summer, Weekly Gendai magazine published stories claiming the broadcaster had falsified data on the product. In response, TV Asahi filed a libel suit in August with the Tokyo District Court against the magazine’s publisher, Kodansha Ltd. and others, demanding they pay compensation and publish an apology. Did customers claim to TV Asahi? Why did the TV Asahi claim to Kodansha?  In all likelihood, the TV company must have considered that he could win this litigation. According to the disclosure of the TV Asahi to the FTC, the effectiveness of the machine was limited; in other word, not all customers could enjoy the result of diet. Before the TV Asahi filed a lawsuit to Kodansha, some of customers might have claimed to TV Asahi or the maker. Then TV Asahi might have succeeded to reject these claims. If it is true, TV Asahi’s conduct would be extremely irresponsible and must be said to seriously betray a reliance of consumers.

5.4.3  advertising on website

The Tokyo District Court ruling on August 3rd, 2007 was in terms of the website advertising case..

The plaintiff was the sales company of the satellite navigation system. Although the sales prices of the products on the company’s website were 131,000 yen, the company indicated 13,100 yen by mistake. As a result, in 3 days, about 3,000 people put their orders purchasing the products as price following the advertising via internet. As soon as noticing the misrepresentation, the company communicated to the applicants via e-mail, stated that the company could not accept the applicant’s orders due to the mistake of pricing. However, 44 purchasers amongst the applicants asked performing the contracts at the price presented on web-site; so the sales company filed a petition to confirm the invalid of the contracts in questioned.

The court concluded that these contracts are void due to the mistake (art.90 of civil code):Comment the plaintiff, on the website, never committed special offer reducing price whereas other similar products of the plaintiff were sold as the price over 100,000 yen; under the circumstances, the applicants had noticed or were likely to notice the mistake on the advertising.

As long as the article in the newspaper,[[5]] the court seems to approve the invalid of the contract. However, to be invalid of the contract by virtue of mistake is premises that the contract was formed legally. To approve the conclusion, it is necessary that the advertising of goods on website is deemed to be the offer to the contracts. But this idea is not in accordance with theories in academia; the advertising of products on web-site are only invitation to the contract; in this case, there may not exist the effective declaration of acceptances with the plaintiff corresponding to the offer by the defendants. I would like to comment this ruling after viewing the original decision.

6       Disclosure, information and explanation

6.1      Regulation

The Specific Commercial Practices Act, which regulates doorstep selling, telephone sales, multi-level marketing scheme, work-in-home scheme and certain continuous contract, require for traders to deliver consumers e written documents of disclosure. A trader must hand a document that explains the details of the contract to the consumer before the consumer give his contractual declaration. This kind of requirement is asked in other consumer practices acts: Estate Agent Law, Securities Transaction Law, Commodity Futures Transaction Law, Money lending business act and so on. Whilst the extension of information is varied by laws and depending on the nature and feature of goods, rights and services, the benchmark might be benchmark of average consumers.

The Consumer Contract Law stipulates information duty. A trader, inducing a consumer to start trading, makes his effort to provide necessary information by that a consumer can recognize the details of the contract, his rights and duties in depth. For instance, the Futures Commodity Transaction Law says that a broker-dealer has to provide statutory information to the customer clearly and comprehensively in time before he gives his contractual declaration and during trade if necessary: lump sum amount of trading is extremely huge rather than amount of deposit of margin; there is possible for a customer to sustain huge amount of damages beyond deposit of margin by market fluctuation. Traders have to explain the material information that affect or is likely to affect the customer’s decision. In money lending case, the Tokyo Summery Court, on February 3rd 2005, said that a money borrower included a notion of consumer broadly speaking and therefore a money lender bore information duty to the borrower. The extension of material elements is decided in general by considering the nature of the trading, trading goods or services. And also it is necessary to take an account of the individual particularity of the customer: knowledge, information, experience and so on.

For instance, according to the Financial Instruments and Exchange Act, broker-dealer must explain a customer material terms and conditions; market risk, credit risk, deadline of execution of right and so on. The law also refers the degree of information duty; it should be executed by the way and degree efficient to make a customer recognize the material elements, taking account of his knowledge, experience and financial status. Concerning a commodity futures trading case, The Sapporo District Court on April 12th 2007 strengthened the information duty to be done substantially; the explanation of the details of the transaction including trading risk had to be given by illustrating specific case; it was not efficient only to be explained it as abstractly. The court also affirmed that a trader, if he completed his explanation duty, needed to investigate the customer’s status quo: ability, trading objectives, recognition of trading, affordability of finance and so on. However, the duty of investigation might be overlapped by the obligation in the suitability requirement.

For failure of information duty, the CCL does not cause any administrative sanction against the duty, as well as civil penalty (sec. 3). However, it can be found several laws that stipulate the civil sanction. The Commodity Futures Practices act imposes to pay damages caused by their omission of the duties, if traders are against the information requirement..

Certainly, such statutory provision is not condition for a customer to claim damage compensation in other trading. Customers can get damage based on good faith as general clause .in civil law.

6.2      Disclosure

6.2.1  Internet service provider

According to the article of Yomiuri Shimbun, the Tokyo District Court has ordered an Internet service provider to reveal the name and address of a person who used file-swapping software to spread leaked private information on the Internet of about 110,000 Kanagawa prefectural high school students in fiscal 2006. 

IBM Japan Ltd., which had filed for a provisional injunction against the prefectural board of education and the Internet service provider seeking the offender’s name and address, announced the decision Friday. The decision was dated Feb. 26.

According to the Internal Affairs and Communications Ministry, it was the first instance in which a court granted a request to disclose a name and address via a provisional injunction, though there had been a previous case in which a court order was issued during a trial, which involves more complicated legal procedures than a provisional injunction.

The information had been spread by a personal computer infected with a virus that uploaded the information to the Internet via file-swapping software. The computer had been used by an IBM Japan subcontractor’s employee involved in developing an account-transfer system.

In December, IBM Japan had asked the Internet service provider to disclose the name and other information of an individual who had taken data of students’ private information, including names, address and bank account numbers for paying school fees, and made the information freely accessible to other file-swapping software users.

After the Internet service provider rejected its request, IBM Japan on Feb. 9 sought the provisional injunction, saying it needed to protect confidential information it learned while conducting business. IBM Japan also had filed for a separate provisional injunction against the individual in question after information on the person was disclosed, to prevent the recurrence of information leakage. The district court on March 6 reportedly decided to grant the second injunction.

According to the prefectural board of education, the information leaked on the Internet had already been disseminated, but the court’s decision cannot halt the further spread of the data by other Web users.

6.2.2  Internet access provider’ ruling on 13th April 2010

The Supreme Court made rejected a claim of plaintiff who asked to disclose information of internet bulletin board sender,  on the ruling on 13th April 2010.

The Act of Compensation Limitation of Provider stipulates that the refuse of disclosure is lawful to the extent that the refuse is not done by intention or gross negligence. In the ruling, the court said that the plaintiff failed to prove gross negligence on the defendant who did not respond the requirement of disclosure by the reason why it was not apparently for the plaintiff to be injured  his personal rights. ruling on 9th April 2010

The Supreme court approved the claim of a victim who suffered defamation via internet bulletin boards. The victim asked a defendant internet access provider to disclose information of senders. The court ordered the defendant to disclose it, on 9th April 2010. Relevant regulation concerning this issue is Act on the Limitation of Liability for Damages of Specified Telecommunications Service Providers and the Right to Demand Disclosure of Identification Information of the Senders; however, the Act does not make it clear who is responsible to disclose sender’s information.

The Tokyo District Court dismissed the claim of the plaintiff by the reason why an internet access provider only intermediated a customer to an internet service provider. However, the Tokyo Appeal Court overturned the original court decision.

The Supreme Court reversed the decision of the appeal court. It ruled that posting via internet usually used an internet access provider, therefore the other entrepreneur had no information regarding posting entity; if a victim of  defamation could not get any information in terms of sender from an internet access provider, he could not get relief at all.

6.3      Explanatory duty, information duty

6.3.1  regulation

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.

6.3.2  Case house lent

A tenant claimed that his landlord and a broker of the renting contract had a duty to pay damage compensation of his negligence: a landlord failed his duty to explain that the lent house was haunted by phantoms. The lawsuit was filed to the Utsunomiya District Court on 8th May 2008.

The plaintiff was a businessperson managing a restaurant; he rented the restaurant from the defendant. According his argument, he heard, from his client, that the house was haunted by phantoms; and he encountered the ghost at the rented house; a former tenant had gone away from the rent, bothered by the haunted phantoms.

 The defendants rebut the plaintiff’s contention: the landlord provided a religious ritual to comfort the spirits of the ghost and he explained the rumor of the ghost to the plaintiff.

Therefore, the point of dispute on the court battle might be put down concerning it. However, is it the legal duty that the defendants provide such information to the plaintiff?  Provably, nobody can prove the existence of a ghost: in other word, the claim of the plaintiff can only prove that there would be a rumor. What rumor disturbs for tenant to live in the concerned house? What is there any significant difficulty for the tenant to continue to rent the house?

If the defendants explained previously that the former tenant cancelled the tenancy contract by virtue of the ghost, the plaintiff would have never formed the tenancy contract with the landlord. Whilst the defendant argued that he explained the phenomenon. the plaintiff would have to insist and prove the fact that if he heard, he would never make the contact. payment via internet

The Sasebo branch of the Nagasaki district court stated that the credit card company had the obligation to explain the problem of online use of credit card; the user can use the credit card only to type the card holder’s number, his name and expiration  date. The court, on 24th April 2008, rejected the claim for payment by the credit card company by virtue of his negligence of information duty.

The claimant was a  credit card company and the defendant was the holder of the credit card issued by the claimant.  According to the ruling, the 58-year-old company employee of Sasebo, Nagasaki Prefecture, was asked by Tokyo-based Credit Saison Co. to pay about 3 million yen for the use in February 2005 of Web sites that the man said he did not access. It was later learned the man’s eldest son copied information from his credit card–such as the card number and expiry date–while the man was sleeping. The son, who was 19 at the time, then used the card information to pay for Web site services.

The plaintiff claimed its rules stipulate that credit card holders are personally responsible for payments associated with the unauthorized use of a card–including usage by family members. In response, the defendant made a counterclaim: he had not been informed of payment systems that did not require identity verification data, such as a personal identification number, making it difficult to properly control the credit card.

The court rejected the claim by the defendant: the credit-card company didn’t necessarily establish to the best of its ability an online payment system capable of preventing the unauthorized use of credit cards. The defendant therefore didn’t commit a serious offense.

The credit card industry says that card holders are responsible for keeping and controlling their credit card. But, the plaintiff’s payment systems does not require identity verification data, such as a personal identification number, making it difficult to properly control the credit card. In other word, there is limitation for the usual consumer to prevent unauthorized use of the credit card.

On the other hand, the credit card company can adapt more strict measure to minimize unauthorized use of the credit card: the Japan Consumer Credit Industry Association, based in Shinjuku Ward, Tokyo, said, “We’d like to encourage member firms to take measures as early as possible vis-a-vis identity verification for online payments, such as for systems that require holders to enter information known only to them–perhaps a favorite color or a password–without requiring them to enter identity numbers.” 

While credit companies continue to provide the current online credit card payment system, if they can offer more safety system to prevent unauthorized use of credit card, the present service should be defective. In that case, the credit companies should take liability as long as they provide the defective services.

It is not bad that the court approved the negligence of the information duty of the credit company. However, It shall be temporarily measure of solution for consumer’s injury; such rationale which relieves customer’s compensation would vanish if the system of online payment of the credit card become known widely. It does not take long time.   In that situation, the customer cannot blame the negligence of the information duty. I think that the liability of the credit company should be based on the provision of the defective system rather than the negligence of the information duty. 

Credit companies make profit or can reduce their cost by maintaining such system, at the same time the customer’s risk might be increasing; it shall be justifiable reason for the credit company to take responsibility for the damage caused by the system.  

6.4      Advice

6.5      Warning

Tokyo District Court approved damages claim of a customer who traded securities via a defendant securities trading company. An article of the Yomiuri Shimbun reported it on February 23, 2009.

The defendant company made the plaintiff continue to hold securities after their price dropped intensely. The court said that the defendant had a duty to prevent the trading loss to expand, therefore he should pay damages equivalent to the dropped value.

7       Suitability

7.1      definition

The fundamental Law of Consumer stipulates several duties of a trader (sec. 5): to confirm security of consumer and fairness in trading with consumer; to consider the knowledge, experience and the stats of finance in the trading with consumer; to prepare the setup to respond a claim of consumer appropriately and promptly, dealing with a consumer complaint suitably; to corporate with the consumer policy decided by consumer the administrative body .

The notion of the suitability rule has been developed especially in the field of the financial services trading; commodity futures trading and securities transaction. First, the idea was introduced it the code of fair practices in the securities trading. Thereafter, A large amount of court ruling admitted to the rule as a instrument of admitting damages to consumers. As a result, the notion was inserted in many laws concerning financial services. Above mentioned provision of the Fundamental Law of Consumer was a conclusion of these court rulings.

Recent Supreme Court decision[[6]] related to securities transaction dispute said that the breach of the rule was not only restriction to the trader, but also it gave a consumer damages in civil code. The notion expands to other consumer law such as the doorstep selling law as a instrument of protection for vulnerable consumers.

In European countries law, it is difficult to find out the idea except financial services. Is this recognition correct or not?

7.2      Development

Like overseas countries, the principal of the Suitability rule has been progressing in the financial transaction fields. Initially, the concept was found in the fair commercial practices notice issued by the Ministry of Finance on December 2nd 1974. It asked the securities company to strengthen their compliance due diligence for customer’s interest. The notice demanded that the securities companies were necessary to consider the customer’s intention and the status quo; as particular elements, knowledge, experience and the status of finance were indicated there. Afterwards, the concept was introduced in the Commodity Futures Transaction Law. Recently, the revised Fundamental Consumer Protection in 2006 stipulated the notion in the article (sec. 5(1)(iii)).[[7]]

The laws that adapt this notion are growing except above mentioned laws: the administrative regulation of the Specific Trading Practice Law (sec. 7(3)), the Financial Products Practices act (sec.40(1)), the Commodity Futures Transaction Law (sec. 215), the Financial Instruments and Exchange Act (sec. 8(2)), and so on.

In the process of Insurance Business Law reform, the advisory panel recommends to introduce the notion coming reform law.[[8]]

Moreover, the noticeable point is that many local governments introduce this notion as a unfair commercial practices in their ordinances. We can find a lot of administrative enforcements based on the breach of this provision: Tokyo[[9]], Hokkaido[[10]], Shizuoka[[11]], Gifu[[12]] and so on.

However, it also said the definition of the notion is varied and ambiguous. Most administrative punishment, therefore, are imposed with using other unfair practices prohibition, in addition to the suitability rule offence. However, since the Supreme Court decision, on July 14th 2005 that indicated the possibility of damage compensation in tort by the breach this offence,[[13]] the atmosphere seems to be changing. The notion is getting easier to use as a material element of administrative punishment and damage compensation.

7.3      Regulation

7.3.1  Consumer Fundamental Act

The Consumer Fundamental Act 2005 states 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. 

7.3.2  Specific Trade Practice Act Act

Art.9-2 stats the suitability rule on excessive selling and admits the cancelation right to a customer under the following condition: 1) the purchasing contract of product or specific right which is beyond significantly to his necessity in daily life, or service contract which is beyond the necessity of times, term or quantity in his daily life, 2) a business is intentional or negligence to the fact. A customer can conduct his right within one year from making the contract. Oder

Act on Specified Commercial Transactions (Act No. 57 of June 4, 1976), Article 7(Order)
Where a seller or a Service Provider violates any of the provisions of Articles 3 to 6 or conducts any of the following acts, if the competent minister finds the act to involve the risk of impairing the fairness of the transaction pertaining to Door-to-Door Sales or harming the interests of the purchaser or the service recipient, he/she may order the seller or the Service Provider to take necessary measures:

….(iii) in addition to the acts listed in the preceding two items, acts concerning Door-to-Door Sales, which are specified by an Ordinance of the Ministry of Economy, Trade and Industry as acts that involve the risk of impairing the fairness of the transaction pertaining to Door-to-Door Sales and harming the
interests of the purchaser or the service recipient. Regulation

Regulations for Enforcement of the Act on Specified Commercial Transactions (Ordinance of the Ministry of International Trade and Industry, No. 89 of November 24, 1976), Article 7 (Prohibited acts in Door-to-Door Sales)

Acts specified by an Ordinance of the Ministry of Economy, Trade and Industry referred to in Article 7(iii) of the Act shall be the acts listed in the following items:

….(iii) an act of conducting solicitation that is found to be inappropriate in light of the state of the customer’s knowledge, experience, and assets;

As above regulation does not lay down the civil sanction, the court probably ruled based on default or tort on the basis of the violation of good faith stipulated in the Civil Code (sec.1 (2)). The suitability rule on the Specific Commercial Practices Act Regulation consists of material element of a good faith on civil code.

In UK law, the sales practices in this case might have been corresponding to the undue influence to the vulnerable consumer and the consumer could rescind the contract. And it also is against the Consumer Protection from Unfair Trading Regulations (CPRs) implementing The Unfair Commercial Practices Directive (UCPD).

7.3.3  Investment regulation securities

The Financial Products Practices act states the suitability rule, but it has not any clause concerning civil penalty against the rule. Therefore, a customer who suffered damages by illegal conduct of a securities business need to file damage compensation action based on Civil Code.

The Supreme Court Decision on July 14th 2005[14], in the case of the option trading disputes, does not indicate concerning what principle in civil law is infringed by the breach of the suitability rule. The ruling said that if the securities broker solicited positively particular securities transaction that is materially dangerous against the investment objective and the status of customer and therefore is not accordance with the requirement of the suitability rule apparently, such practices become illegal in tort law. Above word of “status” of a customer is not defined in detail. Provably, it might mean the financial status and/or risk tolerance of the customer. Concerning the considering whether the practices is against the requirement or not, it is necessary not only to take account of the abstract danger of financial products, but also  consider the actual risk of particular security in relation to the elements of the suitability rule: experience of investment, recognition and information of securities, investment objective and financial status. 

The ruling of the Sapporo District Court on April 12th 2007, in the case of the commodity futures trading case, stated apparently that the breach of the suitability rule was against a good faith in civil law (sec.1).Moreover, the ruling stated the justification of the duty should be based on the existence of the qualitative difference on information, experience and capability between a customer and trader in the particular trading, in addition to the reliance for the trader by consumer and the privilege of a trader that is able to trade with a license. 

7.3.4  Commodity futures

Many usual consumers are lured to the commodity futures transaction by cold calling. For the respondent for the increase of disputes in nationwide, our government decided to stipulate the Opt-out rule in the provision (sec.215(1)(v)). In spite of the law reform, a number of disputed was reported even now. Only concerning the licensed future commodity brokers, The number of consultation to the consumer centre reached 2,427 in 2005 fiscal year. [[15]

The recent number of complaints can be found the NCAC’s website.[[16]]  The increasing is remarkable. 

The importance as a criterion of judgment of unfair practices  

Suitability rule as the criterion of illegality judgment. In a decade, the number of court rulings that adapted the suitability rule as a criterion of fairness of the trading practices has been increasing significantly.  

For instance, the Sapporo District Court, April 12th 2007, interpreted the requirements and circumstance stated  of the rule  in details.

The defendant was the licensed and registered commodity futures broker. The plaintiff, 58 years old at the trading started, was reemployed salaried worker who graduates a university and retired a financial institution. The claimant suffered a trading loss as JPY 17,076,200 for a half of year trading with the defendant. The invested and loss money was his retirement allowance and death benefit of his wife.

The goods of futures trading were petroleum and kerosene. The plaintiff claimed the defendant to pay damage compensation, because the trader’s solicitation and business activity was against a good faith and fair trading practices (sec.213).

In conclusion, the court approved the plaintiff claim in full and rejected the counterclaim of the defendant that the damage should be reduced in virtue of contribution negligence of the plaintiff. 

7.3.5  Financial services

Nikko Asset Management published a finding about the status of consumer recognition and perception concerning mutual fund products sales.

The White Paper about Sales of Mutual Funds pointed out that more than half of  customers who purchased mutual funds is under insufficient status of understanding of products. About 30% of customers consider that it cannot be understood the reason why banks sell mutual funds .

7.4      Requirements

The Osaka District Court, on 4th March 2009, issued an interesting decision regarding the adaption of suitability rule in securities transaction not recommended. The transaction was in terms of the NTT stock and a plaintiff customer had claimed that he was recommended to concentrate his investment to the stock by a securities broker, “Shinko Securities”.   

The court approved that the plaintiff was recommended to purchase the NTT shares; but the concentration of the NTT stock was not recommended by the defendant, but asked by the plaintiff, the court said.

Initially, the court approved the concentration of a certain stock was too danger  for the plaintiff to be not suitable in his investment intention, knowledge, experience and financial status; and the court said that the defendant owed a duty to investigate a suitability of the plaintiff concerning the dangerous transaction; the court also pointed out that , as long as the defendant knew or was possible to know the status  of the plaintiff, the defendant should advice to stop his decision; the court indicated a good faith on civil code (art. 1(2)) as a basis of the duty.

The court, on the other hand, asserted that the negligence of the duty should be deemed as a recommendation of the trading by omission; therefore it also should be against suitably rule by omission. 

7.5      Excessive selling

The Tokushima District Court approved the plaintiff damage claim concerning excessive kimono sales case on February 28, 2007. The plaintiff was 64 years old house wife and pensioner. While she purchased various goods of lump sum of 59,787,728 yen during 1.5 years, the purchasing of 27,470,823 yen was kimono transaction from the defendant shop. She used loan from co-defendant credit company in her some transaction from the shop

She was suffered from manic depression for a long time. During this trading period, she was with mental disturbance caused hepatic encephalopathy and her some strange behaviors were watched by families and neighbors. The claimant sued damage to the defendants: the defendant shop noticed or was likely to notice her vulnerability suffered from mental infirmity: notwithstanding the defendant shop sold excessive amount of kimono taking advantage of her vulnerable condition: the practice against the public moral.

The court said that whilst the claimant purchasing from the defendant shop was abnormal objectively, there was not efficient proof for the defendants to perceive the abnormality in her behavior. However the court concluded that the sales by the defendant shop was regarded as the excessive sales against public moral and the shop had to pay damages equivalent to the amount of her purchasing beyond 20,000,000 yen: In generally, the traders have a duty not to sell excessive sales as well as a credit company connected with the trader has an obligation not to loan excessively. whether the sales or loan was excessive would be considered in a view point of the customer’s character such as occupation, financial status and age; in this alleged case, the transaction beyond lump sum of 20,000,000 yen should be against public moral and therefore the sales   by the sales practice of the defendant shop was illegal as well as the loan solicitation of the connected defendant credit company; thus the defendants have to pay damage compensation the claimant.

Although this ruling ordered the defendants to pay compensation, the damage was limited by the portion equivalent to sum beyond 20,000,000 yen and the court could not reveal the rationale and justification of the decision; therefore, the ruling is not persuasive. The ruling indicated that the basis of the prohibition of excessive sales was on the consumer protection regulation of Tokusima prefecture. The prefectural rule states the principle of the suitability rule. While the court said that the element judging overindulgence of transaction is the consumer’s age, job and the financial status, it is not sufficient. It is necessary to take account of the purpose or intention of the transaction in case that the suitability should be considered. Kimono is usually expensive and is not purchased frequently in usual consumers. Therefore, except the person who need to purchase frequently for his work, the shop has to confirm a purchaser’s purpose or intention of getting it if the purchasing repeat in short period; if she cannot show the certain purpose in those transaction, the seller must doubt the purchasing might be caused by mental infirmity and examine it as his duty that is required by the suitability principle. If the seller neglect his confirmation duty and continues his sales promotion, he should pay damage compensation against the suitability rule.

7.5.1  Osaka District court decision on 30th January 2008

Osaka District Court decision, on 30th January 2008, regarding excessive kimono sales might be of a case of illegality based on undue influence. But it is possible to acknowledge the case against suitability rule.

7.5.2  Tsu District court decision on 28th February 2008

The Tsu District Court in Mie prefecture approved a plaintiff’s compensation claim damaged by kimono purchasing. It may be evaluated as the precedent of suitability rule in the field of general consumer transaction. The ruling, on 28th February 2008, ordered the defendant to pay compensation of 1,680,000 yen whereas the claimant suffered her loss of about 15,000,000 yen.

The claimant, who was a 58 years old woman and under a condition of maniac depression, purchased Kimono consecutively from the defendant, The defendant was aware that the claimant was difficult to make a suitable economic decision by virtue of her mania condition since 25th April 2004; therefore the defendant could be conscious that if the claimant continued her purchasing of expensive products, she might have been facing financial difficulty. In the situation, the defendant needed rein his sales to prevent the claimant’s loss unforeseen, the court said. The defendant, however, failed to complete his duty of care and had to pay compensation incurred by his negligence.

It is not clear whether the ruling admitted the breach of the suitability underneath the decision, because I do not get written verdict of the case so far. The ruling indicated that the defendant was under obligation to prevent excessive sales to consumer. The suitability obligation is stipulated in the Specific Commercial Practices Act Regulation.

7.6      excessive lending

Consumer complaints for excessive lone does not decrease in Japan,[[17]]Our government published the multiple-debt improvement action program on April 20th, 2007,[[18]][[19]] and completed the multiple-debt counseling handbook.[[20]] The handbook is for the consultant of administrative body, and it aims for multiple-debtors to be able to get effective consultation from administrative consulting officers. But it is only for the multiple-debtors. It is necessary to establish a suitable scheme to prevent to be fell into the multiple-debt. Excessive lending marketing practice is necessary to be tacked with as most significant issues. At the time, the instrument of suitable obligations is useful to curve excessive lending by money lenders.

Are suitability obligations adapted to the money lending practice? The Money lending business act[[21]] impose ask money lenders to investigate financial situation (income, other loan), repayment plan, and if lenders consider for borrowers not to be afford to repay his debt, lenders must not to form money lending contracts (art. 13(1).

The guidance[[22]] of the law compiled by the FSA, asks money lending businesses discretion to excessive lending to consumers: money lenders is prohibit soliciting loan to consumers who is no necessity to have loan. It includes the practice that money lenders refuse to receive repayment from borrowers, persuading to maintain their loan.

The money lenders are prohibited to offer pulling up a credit line, although consumers do not ask it (guidance 3-1-2(2)).[[23]]The Installment Sales Law has a similar provision. Creditors make effort not to finance to consumers who is considered to be difficult to make repayment in their financial status thorough suitable investigation borrower’s debt information that is registered in financial data information centre established by financial institution collectively (art. 38).

Each laws aim to protect consumers, in addition to make money lending management maintain with sound condition. In the view point of consumer protection, the rationale of these laws can be sought in suitability obligations. It can be explained that when money lenders loan to consumers, they must have a reasonable basis for believing that loan is suitable for consumer’s financial status. In making this assessment, lenders must consider borrower’s repayment tolerance, other loan, financial situation (income and net worth), financial needs, and loan objectives.

However, it should be ineffective for prevention of excessive lending in a viewpoint of enforcement, because there is no sanction both administrative sanction and criminal penalty against these restrictions.

Consumer group insist to regulate the excessive lending under the administrative sanction, but the money lending business oppose it strongly referring some bad and side effect:

  1.  Money lending business points out that it is difficult to establish certain criterion that is used the judgment whether the loan is excessive or not, because the financial status of borrower extremely vary due to individual and is variable depend on consumer’s circumstance constantly. This information is uneven distribution in consumer side, therefore it is quite difficult for the business to take such personal financial information and consider the affordability of repayment precisely;
  2. If it is possible to make certain criterion, the restriction might be against borrower’s request in loan;
  3. The restriction for lump sum lending has adverse impact upon the national economy such as incurring consumption decline.

In excessive lending case, some lower court rulings reduced money lender’s repayment claim to borrowers in virtue of good faith: Kushiro Summery Court decision on March 16th 1994, Sapporo Summary Court decision on March 17th 1995, Oita Summery Court decision on July 18th 1995. Yokote Summary Court ruling reduced 20% of loan principal and rejected default interest performance claim by a lending business in virtue of good faith.

7.7      Suitability and fiduciary duty

There seems some confusion in Japanese courts concerning the notion of fiduciary duty and suitability rule so far. Both instruments have been popular gradually in court rulings. Especially, the suitability rule is used explicitly as the tool of criteria of the unfairness of business practices whereas the word of fiduciary rule is used implicitly.

However, the requirements of these notions are still uncertain; while the suitability rule is found in several laws and these law defined the notion, several courts might ask additional requirements for applying the notion; one of the requirement is that customers rely on their economic decision to the broker-dealers, depending on the advices provided by the broker-dealers.

The decision of Osaka Appeal Court on March 9th, 2007 was concerning securities transaction between defendant broker-dealer and plaintiff customer. The court stated as follows:

“The securities companies and their employees have duty not to infringe the self-determination of their customers; the obligation contains the duty not to take advantage of their customers by soliciting transaction, if their trading continue in significant period, and therefore their customers rely on the broker-dealer and tend to obey their recommendations and solicitations by their achievement of result until then; Thus, the securities companies also have the duty not to undertake the tracings unsuitable for their customers in investment policy and objectives that are indicated in explicitly or implicitly, even if the customers entrust the transactions to the securities companies; if the customers do not leave their tracings in the hands of the securities companies, the companies  have to take a consideration for the customers’ self-determination; therefore they have to explain the difference concretely, clearly and understandably to customers , if they solicit the trading different from customers’ investment policy or objectives; these explanation duties still remain even if the securities company get reliance from the customers.”

Probably, the court is confused. If the customers rely upon their trading decision or their advices utterly, the securities companies dealing with the trading have fiduciary duty to the customers, although there might be existing the argument  that the fiduciary duty does not exist in the securities transactions between broker-dealer and customers. On the other hand, if the trading is not suitable to the customers’ knowledge, objects, experience and financial status, the tracings have not suitable to the customers; the securities companies have to investigate the customers’ suitability to particular transactions. After all, the notion of suitability rule is not always necessary of the reliance or dependence of the customers to the broker-dealers.

However, whilst this court decision concluded the breach of suitability rule, it did not appraise the offence of investigate duty and it, on the other hand, stated for the defendant to take advantage of the plaintiff’s reliance. Such indication is  harmful rather than unnecessary, because it  makes the requirement of application of suitability rule enlarge.

8       Unfair commercial practices

8.1      Misleading

8.1.1  regulation

Consumers may revoke their declaration of will to offer or accept a consumer contract if consumers make any of the specified mistakes set forth below as a result of any of the acts listed in the following items by a business operator at the time of being solicited to enter into such consumer contract by such business operator and thereby making said manifestation of intention:

(i) to represent that which is not true as to an important matter. Mistake that the content of said representation is true;

(ii) to provide conclusive evaluations of future prices, of amounts of money that a consumer should receive in the future and of such other uncertain items that change in the future with respect to goods, rights, services and such other things that are to be the subject of a consumer contract. Mistake that the content of said conclusive evaluation so provided is certain (sec. 4(1) of the CCA).

8.1.2  Assertion

The later prohibition , “presenting assertion”, has been developing in the fields of financial services laws such as the Commodity Futures Practices act (sec. 214(1)(i)) and the Financial Instruments Exchange Act (sec. 38(1)(iii)).  

However, the aspect of the presentation is different from the Consumer Contract Law. For instance, in the Financial Products Practices act says that the trader is prohibited to solicit the customer to assert the element in future as certainty in spite of uncertainty in truth, or to make the customer misbelieve to be certainty in spite of uncertainty in coming events or element such as a value of securities.

In the followed case of the Osaka Appeal Court , the meaning of assertion was argued. The plaintiff was enrolled in the defendant school of study of divination, paid the matriculation fee and purchased supplemental goods such as a stamp. The plaintiff claimed to rescind this contract, because defendant school asserted the plaintiff in the fluctuated matter in his future. In June 30, 2004, The Osaka Appeal Court ruled that the solicitation was not coming under the assertion, because it meant the difficulty to predict the future event related affection to the profit on property. And it said that the solicitation of the defendant only said the uncertainty fate of him in future, and it was not evaluated as assertion.

However the court accepted the claim of the plaintiff in different reason. It was because the amount of matriculation fee and price of supplemental goods was so extraordinary high that the contract was void; the solicitation was unfair for the purpose of getting excessive profit and the practice was offensive to public order and morals (civil code: sec. 90). 

8.1.3  Breach of the prohibition

Consumers can rescind their manifestations of intention to offer or accept a consumer contract if a business operator represents to said consumers the advantages as to important matters or things related to said important matters but intentionally fails to represent disadvantageous facts (limited to those facts that consumers would normally consider to be non-existent by such representation) at the time of solicitation by a business operator to enter into such consumer contract, as to important matters, and said consumers thereby mistakenly believe the non-existence of such facts.

Provided, however, that this shall not apply where the business operator has attempted to make representations of such facts to said consumers and said consumers refuse to hear such attempted representations (sec. 4(2) of the CCA).

The similar prohibition is found in the Specific Commercial Practices Act; 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.

8.2      Omission

If a trader omits to present a material fact affecting to the decision whether a consumer decide to make the contract and is stipulated in Art.4 (4), the consumer is entitled to rescind the contract (Art. 4 (2)).

8.2.1  material fact

Does the fact of omission include a assertion concerning fluctuating matter which a trader prohibit to offer a consumer?  The Supreme court showed significant translation concerning this issue In a commodity futures transaction case.

In the case, a defendant trading company who solicited a plaintiff to have futures trading, being stressed that the gold price will be up certainly. The plaintiff believed the solicitation and bought gold, but the gold price suddenly went down rapidly after the plaintiff offered his order to the defendant. The price down was so rapidly that the plaintiff could not sell the purchase by offsetting order due to variable price limit. As a result, the plaintiff suffered his trade loss as 16 million yen whilst he already invested about 15 million yen. The plaintiff claimed to rescind the commodity futures contract by virtue of omission of material fact, based on Art. 4 (2) of the Consumer Contract Act, and sought reimbursement of paid investment money as well as declaration of inexistence of hid debt of trading loss concerned.

Whilst the Sapporo District court rejected the plaintiff claim, the Sapporo Appeal court denied the original court decision, and approved the plaintiff’s claim. The ruling stated that the fluctuation of commodity futures price is regarded as quality of trading object (Art. 4 (4) (i), and it was deserved the matter which would affect trading decision (Art. 4 (2)). The ruling also indicated that the recommendation of purchase showing trader’s view of an increase in price was worthy of offering for the plaintiff to be able to get interest. The law ask for a defendant not to say disadvantageous matter to a plaintiff; whilst the possibility of decrease in price could be worthy of the disadvantageous matter, it is presumed for the plaintiff to believe it by indication of the defendant’s view before mentioned.

However, the Supreme Court ruling on 30th March 2010, eventually overturned the appeal court decision and the plaintiff’s claim was thrown away again. The ruling said that the material matter stipulated in Art. 4(2) did not included the matter of fluctuation such as price or interest in future, stipulated in Art. 4 (1)(ii); as a result, the gold price in futures was not regarded as a material matter of this law; therefore, if the defendant did not explain the possibility of a decreasing in price to the plaintiff, the plaintiff could not rescind the contract with the defendant.

8.3      Aggressive commercial practices

8.3.1  Civil Law

The Civil Code prohibits duress; the contract concluded with the practice is voidable. The Consumer Contract Law prohibits a marketing activity which let a customer confused to make a contract; in addition, the confusing of customers should be occurred due to either trespass or captivity.

8.3.2  Consumer Contract Law

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.

8.3.3  Comparative Law

In the EU unfair commercial practices directive, harassment and undue influence is prohibited as unfair practices, in addition to duress; as long as the proposed draft, the discussing panel does not take an account of these marketing practices as voidable. Whilst this practice may be prohibited in door-step selling by the Specific Commercial Practices Act, the activity is only constituted of an administrative punishment, except to tort.

8.4      Claims

8.4.1  Loan collection

Takamatsu District Court approved a compensation claim of a debtor for mental distress damages on 21th September 2007.

According to the debtor’s argument, he was required to repayment frequently over rings by the defendant money lender; the defendant demanded to pay reimbursement by borrowing money from others for about a month; such manner of debt collection by the defendant was against the Money Lenders Business Act and caused the plaintiff to mental distress. The plaintiff filed lawsuits to the plaintiff to pay 3,300,000 yen as mental distress damages. The court accepted the plaintiff’s plea and ordered  to pay 330,000 yen to the plaintiff.

Whilst a suicide death toll also keeps high level in 2008 fiscal year; material part of the  suicide might be caused by financial difficulty. About 32,000 people killed themselves in Japan in 2008, keeping suicides above the 30,000 line for an 11th straight year, a tally showed on 7th March 2009. The article of Kyodo reports it. The figure is slightly less than the 33,093 suicides in 2007 announced by the NPA last June. The article said that  the latest data do not necessarily reflect the fallout from the global financial crisis; but it also warned suicides could rise as people who lose their jobs in the economic slowdown begin to despair several months later.

In addition, aggressive debt collection of a usury might accelerate to lead a debtor committing suicide, the Osaka District Court ruled on 30th January 2009.

8.4.2  Lent collection

Collection of unpaid lent in midnight was illegal; the Fukuoka Summery Court ruled and ordered to pay damage compensation in mental distress to Surety Company of landlord. Whilst the tenant claimed 1 million yen, the court only approved 50,000 yen as damages. Debt collection is regulated strictly by the Money Lender Law; but lent collection is only restricted by general clause of the civil code.

8.4.3  Condominium sales

The National Consumer Affairs Centre reported the increasing of complaints in condominium sales. Recent report of NCAC on 6th October 2008 described the state of illegal sales practices.

The number of consumer inquiries and complaints concerning this issue is nevertheless ever increasing, the NACS said. Local consumer centers located throughout the country have been receiving a significant number of consumer inquiries and complaints regarding malicious telemarketing designed to sell condominiums and the number of these cases has been increasing every year.

According to the data registered with PIO-NET (Practical living Information Online-NETwork), among the overall consumer inquiries and complaints relating to condominium sales telemarketing that have been raised since 2003, 12,642 cases were associated with problematic sales methods including forceful and threatening calls. Furthermore, 10,661 cases, accounting for 84%, solely detailed ‘forceful and obsessive sales methods.’

As a regulation on a real property, we have the Estate Agency Law, named the Building Lots and Buildings Transaction Business Law.  The Specific Commercial Trading Act, which is applied to a doorstep selling and telemarketing sales, does not deal with a real estate transaction; the Estate Agency Law stipulate similar clauses in customer protection.

In 1996, a notice was issued concerning the Law to prohibit any threatening acts and/or malicious business practices aiming to confuse customers by carrying out telemarketing that lasts over a long period of time; this notice has later become an enforcement regulation of the relevant law.

8.5      talisman ploy

Complaints over talisman ploy have been double in 5 years, the National Consumer Affairs Center reported on Jun 16th 2007[24].

As the report, complaints concerning the purchase of expensive personal good such as good luck seals have been expanding to 1,179 cases in fiscal 2006. The figure was doubled, comparing that of fiscal 2001.

Most transactions are conducted by doorstep selling, induced consumer to purchase the expensive seals by the appearance of their homes threatening some disturbance or problems. This kind of sales has been done by some cult parties. Recent unashamed sales promotion seems influenced by the “spiritual boom” created by some popular TV programs.

For instance, a 79-year-old woman purchased 10 seals at a cost of 2.5 million yen from a salesperson and a well-dressed man who carried what she described as a large, official-looking book and claimed to be an “appraiser.” After the “appraiser” expressed concern about the woman’s home, and the pair asked her detailed questions about her situation, she explained she did not get along with her son. They then recommended she purchase various seals, saying, “If you want a peaceful family, press the main seal with all your heart at the first of each month for 10 years.”

A 69-year-old woman of the prefecture claimed to have tried to cancel her purchase within the legal cooling-off period, but withdrew her cancellation when an employee of the firm said he did not know what would happen to her if she did not take steps to improve her luck because the number of strokes in her name’s kanji characters implied misfortune.

On above mentioned case, the practice that made a consumer withdraw her cancellation is regarded as duress or undue influence. These practices constitute unfair practices and are against good faith. The consumer can claim damage compensation based or tort or breach to perform contract. As another remedy, the consumer can execute her cancellation right again: when a consumer executes the cancellation right, the examination is regarded as other application of new contract. The trader is necessary to deliver the application or contract document stipulating cancellation right again, therefore the consumer can execute her right anytime until the trader hand it to the consumer. The Kobe Summery Court on February 16th 2005 ruled it principle.

The problem is initial solicitation to the consumer. The trader said no unpleasant fact or her misfortune in the case where she did not respond it. The recommendation distorts the consumer’s decision and inducing her to form a contract, which would not be formed otherwise. However, the recommendation is still vague whether it is estimated as false representation/misrepresentation or not.

The Consumer Contract Law also prohibits providing assertion in variableness fact in future (sec.4 (1) (ii)). However, the scope of “assertion regarding variableness fact” is interpreted as the economical facts by both the guidance of METI and lower court decision. The fact indicated in question case was not economic fact in such as investment solicitation.

The Specific Commercial Practices Act prohibits misrepresentation and it contains the fact of inducement that make a consumer form contract (sec.6 (1) (VI)). The contract forming against the provision is voidable (sec.9-2(1)). The existence of “appraiser” and his recommendation is considered as deceit; therefore the solicitation is regarded as fraud in all circumstances.

As other redress, it is possible to use the notion of “breach of good morals” (civil code, sec.90). In precedent of lower ruling, the Osaka Appeal Court on July 30th, 2004, the definition of “facts variable in future” means the facts: it is consumer profit related property; it does not include the vague fate or destiny. But the court concluded the sales products price was extremely high, thus the contract was void as predatory transaction. 

8.6      psychological sales practices

8.6.1  fortune-teller

Taking consultations from fortune-tellers gets hotter; many television programs provide them. Simultaneously, bogus scammers who take advantage of consumers’ uneasiness of future tend to increase. The number of consultations to nationwide consumer affairs centers in 2007 is 2,928 whereas the number was 1,890 in 2003, the Yomiuri reported.

According to the report of National Consumer Affairs Center,  the number of disputes regarding to the television shopping in 2007 fiscal year climbed to the highest level in our history; 2,251 consultation cases were reported. Among the diversified contents of consultations in consumer centers,  the trouble of withdrawing or cancellation held a majority; 77.7 % of claims is concerning cancellation; it is pointed out that the provision of information concerning cancellation of the contracts may not enough. 66.9% of  complaints are by elderly, and the goods targeted is cosmetics and  health food products ranked in the top 2 of all. In our law, the  withdrawing right is not admitted in any consumer regulations. it depends on the traders’ policy whether customers can cancel their contracts or not. In this point, our law is quite inferior to other developed countries.

8.6.2  court ruling

There is no regulation to sales practices using psychological manner. However, some court rulings imply such sales practices being unfair and compensated in the case which distort the love emotion for selling products; in the case, sales person approached a plaintiff woman for the purpose of an invitation to purchase, hiding his true aim. After the defendant invited the plaintiff out several times, eventually he sold her necklaces and gems taking advantage of her favor. These products were estimated about 4 times high rather than ordinary market price. Kyoto District court decision on 20th November 2007

Kyoto District Court on 20th November 2007 ordered the defendant to pay 1,980,000 yen as compensation. The court said that the commercial practice of the defendant was illegal by virtue of abusing tactics against social tolerance. Since communicated with the plaintiff by an unsolicited call, the defendant invited her to a restaurant and gave her suggestive word. The court said that these selling practices should be treated as unfair practices, because these practices made the plaintiff purchase expensive products.

These sales practices should be considered as the undue influence. However, our law does not prohibit a undue influence generally like as UK law. Undue influence is defined in as meaning “exploiting a position of power in relation to the consumer so as to apply pressure, even without using or threatening to use physical force, in a way which significantly limits the consumer’s ability to make an informed decision”. Our law only prohibits the pressuring practice of limited a manner: creating the impression that the consumer cannot leave the premises until a contract is formed; conducting personal visits to the consumer’s home ignoring the consumer’s request to leave or not to return, except in circumstances and to the extent justified to enforce a contractual obligation. Both practices are prohibited as commercial practices which are in all circumstances considered unfair in UK Consumer Protection from Unfair Trading Regulations 2007.

According to the National Consumer Affairs Centre, the number of similar troubles queried to the centre is 1,281 cases in 2006 fiscal year. Shizuoka District court ruling on 21th December 2007

Shizuoka district court approved a damage compensation of a customer purchasing products from distributors who brought the customer emotion of a sweetheart prior to the selling, the Shizuoka Shimbun reported on 20th June 2008. The case seems similar as a similar one posted on 21th December 2007. 

The decision said that the female employee of the defendant company made the plaintiff man bring about the love emotion before she solicited purchasing to the plaintiff.  It might not say apparently the sales misused a psychological practice; but the court probably stated that such sales should be regarded as illegal commercial practice, because the plaintiff could not refuse the solicitation under the love emotion to the employee.

Using psychological sales practice is not regarded as illegal usually. However, it should become illegitimate when distributors misuse such practice as a means of exploiting customers: strictly speaking, the practice may not evaluate unfair aggressive commercial practices immediately; but customers who are conducted by psychological sales practice is not in the situation who shall make reasonable economic decision; in other word, they have not suitability in transaction; on the other hand, sellers can have recognition that while customers tend to make purchasing decision via their psychological sales practice, they can accomplish their purpose under abusing the situation of customers who could not refuse the sales invitation of sellers. 

This sales practice should be regarded abusing vulnerable situation of customers and prohibited as illegal conduct as unfair aggressive commercial practice, whilst  both civil law and consumer contract law do not stipulate it as illegal practice. The ruling might approve this . Nagoya Appeal court ruling on 23th February 2009

The Nagoya Appeal Court approved a restitution claim of a woman to a sales company and a linked creditor. It was reported on February 23, 2009. The original court, the Mie District Court,  rejected the plaintiff claim. Whilst the woman purchased some expensive rings and necklaces valued at over 2 million yen, she claimed that the defendant seller misled her to have marriage with him. The appeal court ruled that the contract was void by unethical conduct term of the Civil Code (art. 90). The court also said that the linked credit contract was also void; therefore the credit company had to repay the installment that the plaintiff already perfumed.

9       Unsolicited call

9.1      State of Claims

9.1.1  unsolicited visiting

The National Consumer Affairs Centre, an independent administrative body, has finalized a report of consultations regarding to complaints of unsolicited call.

These consultations is deal with local consumer centers nationwide: the entire number of local consumer affairs centers is 532 up until 19th January 2007; the number of prefectural consumer centre is 151 whereas the number of municipal consumer centers is 381. One of important role of the NCAC is to analyzed gathered consultations and to publish the result to local consumer centers: the result also provides to consumer via website of the agency.

Unsolicited doorstep selling is significant cause of consumer detriment. The situation is similar in UK. The number of consultations regarding to doorstep selling is over 100,000 in every year. It is only actual number: the estimated complaints would be more and more. Unsolicited phone call for commercial sales is also not small. Whilst the number of consultations to consumer centers is about 5,000 in every year, it is only the iceberg.

The most effective measure to prevent consumer detriment is to ban those sales practice except to prior agreement of consumers. However, the METI that has supervise a doorstep industry is reluctant to introduce such measure: the ministry would fear that the adoption of opt-in rule would reduce the growth of doorstep sales industry.

9.1.2  unsolicited lending

According to the research by local government in UK, [[25]] 41.7% of debtor who borrows money from home loan trader decided to take out his fist loan, because the agent called at his door.

However, we must not tide over the use of psychological money lending or irresponsible lending. Most money lender of unsecured loan and credit company ask the question whether the borrowing is secrecy for other family or not. These lender and creditors tend to more money to the borrower who is secrecy for loan to other family member. It is explained that such debtor does his best effort to pay in order not to be revealed it by delinquency.

Such kind of lending manner aims to manipulate borrower’s anxiety[[26]].In addition, there are a lot of debtors who were proposed of loan over their possible repayment. 61.7% of over-indebted debtor is canvassed of money borrowing passing over his lending limit and 38.6% of debtors are lured over their necessity. The lending amount is suitable for the borrower’s capability of repayment.8.5% of over indebted debtor borrowed money for the payment on doorstep selling contract. The purchasing goods are varied: studying materials, futon, health food, accessories and so on.

Loan on excessive selling is serious problem. 80 years old woman on depression purchased 96 kimonos during 8 years solicited by a major dealer, and paid total amount of £128,000. Payment of a part of contract was done by credit contract by major three credit companies. By these purchase, the victim lost all of her husband heritage and bank deposit and have debt from the kimono sales company.[[27]]

9.2      Regulation

9.2.1  unsolicited e-mail

Sending unsolicited advertising e-mail is prohibited by 2 laws; the Specific Commercial Practices Act and the Law on the Regulation of Transmission of Specified Electronic Mail. Under these regulations, spam e-mails shall be basically prohibited unless the recipients agreed to receive them in advance.

the Law on the Regulation of Transmission of Specified Electronic Mail also imposes fines on offenders to 30 million yen from the previous 1 million yen. It had been unclear whether spam e-mail from abroad can be recognized as illegal, but it will be subject to regulations under the revised law. However, the revised law does not prohibit sending an unsolicited fax as well as an unsolicited phone call.

9.2.2  Commodity Futures Practices act

The Commodity Futures Practices act has been revised on 3rd July 2009; the law makes progress significantly with a customer protection. The bill was submitted on the diet on  3rd March 2009.  The Japanese Federation of Bar Associations upheld the cabinet decision, commented it 12th March 2009. 

The law will become comprehensive regulation; it regulates so called Loco-London trading and commodity futures trading dealt in overseas markets; these trading sectors will be prohibited to conduct a cold calling entirely.

It also demands business traders to take suitable measures to prevent customers detriment beyond the principal in market trading; if they fail them, they will be prohibited unsolicited calls, whereas it prohibits a cold calling to the over-the-counter trading to a retail customer.

Consumers lawyers, most of whom are participating a study group “Sakimono-zenkoku-ken” ,  celebrate this law reform, because  they have demanded the prohibition of cold calling regarding commodity futures trading for about two decades. They have been revealing most of the customers detriments were caused by cold calling via a lot of court cases and customers claims via hotline. This law reform is a fruitful victory of successive activity by the lawyers group.

9.2.3  Ordinance

Although failed eventually, Akita prefecture planned to revise an ordinance regarding door step selling, prohibiting the cold calling. But the government  faced a stiff resistance by business sectors, therefore it decided to pass over the revision of the ordinance. However, some members of lawmaker in the prefecture do not let go of the law reform. Jiji Press reported it  on 4th July 2009.

9.3      Necessity of opt-in rule

The door-step selling is regulated by the Specific Commercial Practices Act . The government is going to revise the law. One of the significant reason of the law reform is the increasing of injuries of vulnerable consumers who have not enough ability of discernment.  

Finally, the government adapted the OPT-OUT scheme in doorstep selling practice, although the Japan Federation of Bar Association demands to stipulate the OPT-IN rule. According to the compendium by the METI, a seller cannot make solicitation to the consumer who shows the intention of refusing door-step selling.

9.4      “no door-step selling sticker”

Ikoma City in Nara prefecture decided to prohibit a cold calling and distribute stickers to citizens, revised the City Ordinance of Consumer Protection on 21th December 2007.  So far, we have neither a legislation of opt-in nor do-not-call list concerning unsolicited visiting,  except to some financial products sales.  It might be effective to prevent consumer detriments  by cold call sales practices.

Previously, Nara Bar Association recommended to revise the Consumer Protection Ordinance, arguing the ordinance reform of unfair commercial practices on 18th April 2007. 

The mayor of the Ikoma City, Mr. Yamashita who is lawyer of Osaka bar association, is the activist of the consumer protection. After taking recommendation of Nara Bar Association, he launched the work of the ordinance reform promptly.

In other area, many inhabitants of Neyagawa city and a part of Hirakata city in Osaka prefecture are placing the same sticker already on their house entrance, distributed them by city offices. However, these distribution is not based on the Consumer Protection Ordinance.  

9.5      effectiveness of the sticker

The problem is whether his refusal by “no door-step selling sticker” is regarded as lawful measure or not. According to the compendium, the refusal by the document indicates the material that is for specific person; it means that “the no cold calling sticker” is not regarded as valid notification. According to the interim report on 10th December 2007 in relation to the law reform. the METI’s argument is not consistent with the interpretation over a guidance about revised Commodity Futures Law.

Certainly, it might be not written in the law itself; but the intention of the METI would be explained in the guidance; as a result, it might be the substantial standard of the interpretation of the law. Consumers must face difficulty to change the meaning of the METI’s opinion; it might be necessary for consumers to experience many court battles. The METI’s attitude shall injure the consumer interest. Therefore, the Japan Federation of Bar Associations would strongly oppose the opinion of METI.

The law prohibits second solicitation in case a customer rejected solicitation by commodity trader (art. 214-5). The METI seems to consider that the expressing rejection of solicitation includes posting the sticker, therefore traders cannot solicit to consumers who post the sticker in their house.

However, such governmental view might change after ruling party changed to the Democratic Party from the Liberal Democratic Party last year and establishing the Consumer Affairs Agency. The Consumer Affairs Agency showed his interpretation of the meaning of  exhibiting a no cold calling sticker. It was mentioned in an announcement on December 10, 2009.

9.6      Overseas instance

The doorstep selling for home repair services is popular in UK, thus the OFT recommends to ban the doorstep selling if a consumer gives a prior consent. However, the DTI does not accept this recommendation.

Several local governments introduce the “No Cold Calling Zones” in a bid to protect mainly elderly residents from bogus workmen and high-pressure sales teams.[[28]]

It is a sheltered housing schemes, where signs will be erected warning sales people they are unwelcome and no goods will be bought. In Japan, a similar system is introduced in several local governments. For instance,
Osaka city council started to deliver stickers to the residents, written as “I refuse to doorstep selling” since August 12, 2005.[[29]] Actually, the sticker would make a doorstep sellers hesitate to visit consumers. However, there is no sanction including an administrative order or criminal punishment to visit a consumer, ignoring the sticker. Therefore, there is little that can be done to stop salesmen ignoring the ban. It is also said in the UK. The necessity of ban of cold calling to the doorstep selling is not changed even if the system is introduced.

10    Unfair contract terms

10.1    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. 

10.2    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 overdue, 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.

10.3    Rulings

10.3.1     general

The NCAC, on 16th October 2008, reported the status quo and transition of  disputes and ruling concerning consumer contract. It shows the details of meaningful cases.

10.3.2     NOVA case

Over 300,000 students could not have restitution of their advanced tuition from NOVA:  the school was well-known language school and went bankrupt on 11 August 2008; the amount of outstanding is estimated as 56 billion yen. 24 ex-students filed a lawsuits against the former executives of the school and his accounting company; the court procedure was began on 18th December 2008 in Osaka District Court. The Asahi  Shimbun reported it.

In terms of the contract between Nova and students, there are many court ruling showed the conclusion that the contents of the contracts included some unilateral disadvantage clauses for the students, therefore these contracts were invalid against the Specific Commercial Practices Act or the Consumer Contract Act.

10.3.3     house lent contract

The landlord have been asking high amount of a deposition from the borrower, especially in Kansai region. The deposition is for guaranteeing default by a customer’s obligation: a rent and other loss occurred in a letting. When the borrower finishes the contract and leaves the house, the landlord can deduct the damage from the deposition.

It would be no problem, if the amount of deduction is proportionate the actual damage. But it has been not for a long time. The ratio of deduction is usually decided in the contract even if the actual damage is not worth the deduction. In May 12, 2000, the Consumer Contract Law was enacted and the contract terms and condition, which are disadvantage for the consumer, are void. After the law reform, the number of litigation claiming repayment of it except any deduction if there is no default of rent and special substantial damage in letting house which could not occur in usual residence. In December 16, 2005, the Supreme Court ruled that the agreement regarding estimated compensation did not exist, and the court ordered the landlord to pay the deposition.[[30]] The court said that the usual damage was included in the monthly rent; therefore the deduction of it from the deposition was equivalent to make a borrower pay double unexpectedly. According to the ruling, if the landlord wants to ask the borrower to pay usual loss, it is necessary to decide the extent of loss clearly and concretely at the contract, or the landlord needs to explain it in oral and gets recognition by a borrower. The ruling is not referring the void of the agreement of deduction. However, recent lower decisions in lower court tend to accept the claim of borrower, admitted to be void of the deduction agreement based on the Consumer Contract Law (sec. 10).  See Kyoto District Court ruling: April 20, 2007.[[31]]

11    Performance

11.1    regulation

11.2    case

The plaintiff was a student whose class was shut down by merger of Nova’s several branch. The plaintiff claimed the damage compensation because he/she become inconvenient to go to school. As noted previously, the Nagoya District Court, the original court, rejected the plaintiff’s petition. But the Nagoya Appeal Court, on the contrary, approved the claimant claim and ordered the defendant to pay damage compensation to the claimant, on 15th January 2008.

The ruling recognized said that the place of the class was significant fact for the student because he/she decided by virtue of his/ her convenience; therefore, the defendant was indebted to operate his lesson on the promising place located in Fushimi where was 772 meter distance from coming class in Sakae. The court asserted that next class was not called as “Fushimi class”, therefore the defendant practice was regarded as a breach of the contract.. 

12    Product safety

12.1    Regulation

The Consumer Appliances Safety Law compels manufactures of consumer products to report serious incidents caused by their producing goods to METI. METI publishes the details of the accidents on the website. 

A recent finding shows them on 15th March 2009.  METI issued a report which compiled the findings of accidents due to using consumer appliances in 2008 fiscal year.

An article of Asahi Shimbun showed it on 22th March 2009. According to the report, about 20% of accidents were caused by responsibility of consumers; it showed the instances such as an improper usage or not confirming an instructions.

However, we can find usually that consumers do not examine instructions of consumer goods; manufactures have to take account of existence of misuse by consumers, when they design their products.  In other words, it is suitable that significant number of accidents that are identified as responsibility of consumers is classified as producer’s liability rather than consumer’s liability. The instruction of METI above mentioned is useful for consumer; but misuse of  consumer goods does not always mean a consumer liability; if METI considers so, it should be said as old-fashioned criterion concerning consumer safety standard.  

12.2    Defective product information

The Central government will start to provide consumers accidental information occurred by defective products from 2008 fiscal year. Consumers can access and use the information to prevent to face similar accident and get damages. It reported on May 27, 2007[[32]].

The information that is consisted in the data base will be collected by internet from consumers, businesses and administrative bodies including the police department, fire department and medical institutions in central and rural area. Currently, the administrative bodies that collect and analyze such information vary in several ministries or authorities who have jurisdiction to the products or services.

Actually the corporation having together of accidental information amongst administrative bodies is insufficient. It might also become significant causation of the delay of prompt and suitable response by the administrative bodies to the prevention of same accident by defective products.

12.3    Safety standard of electric wheelchairs

According to the National Institute of Technology and Evaluation, 96 accidents involving electric wheelchairs have taken place in Japan since 1986, when it began keeping such records.  Of them, 41 were fatal, the institute said, adding that they included a case of an elderly person falling into a roadside ditch. Since last May, four accidents involving electric nursing beds have proved fatal, the institute said.

The wheelchairs in question are those with armrest control sticks and cart-type wheelchairs with steering wheels. The chairs have a maximum speed of only 6 k/ph. As their users are treated as pedestrians under the Road Traffic Law, they are not required to have a driving license to operate them. But certain technical skills are needed to operate the chairs, such as leaning to one side when going round bends, and taking appropriate action when in danger of losing control of the steering wheel. The slow speed of the wheelchairs also means it takes a long time to cross wide roads, another cause of accidents.

The Kyoto district court rejected the damage claim related with a nursing bed accident, on 13th February 2007. The plaintiffs were inheritors of the victim who used a nursing bed manufactured by the defendant company. 

According to the plaintiffs, the bed made by the defendant had a problematic structure that gave more pressure to breast and stomach of a user rather than similar products, when a back side and knee side lifted, in addition to remaining the back side lifted; it caused bad influence to both a respiratory organ and  circulatory organ of user; the bed was in lack of safety that the product should have in general, therefore the bed had a design defect.

However, the court did not approve the argument of the plaintiffs: the court concluded that the bed of the defendant manufacture was not significant difference compared with other similar products made by other makers.

Our government plans to improve the safety standards for electric wheelchairs and nursing beds following a series of accidents involving elderly people. As mentioned above, the maker of nursing bed did not fail the lawsuits. However the frequent accidents concerning these products prove the safety standard is inadequate straightforwardly.

The Ministry of Economy, Trade and Industry will add the updated measures to a list of products covered by the Japanese Industrial Standards system by the end of the year after making arrangements with the welfare ministry and manufacturers. 

After the planned reform, manufacturers can sell their electric wheelchairs and nursing beds with the JIS mark if they pass safety tests conducted by institutions designated by the government.

12.4    Incidents

The Firefighting Agency, on 27th December 2007, reported the result of the survey concerning the causation of fire incidents in 2006.

According to the finding, 174 fire incidents were apparently caused by defective products whereas the number of fire was about 53,000 in 2006 fiscal year. The kind of defective products that caused ignition were varied; 105 fire incidents was caused by home electric appliances; whereas 49 cases by defective combustion appliances and 20 cases by defective cars.

On the other hand, although the causation was not clear, 719 fire cases were assumed by the defective products: 344 cased by defective electronic appliances; 336 cases by defective card; and 39 cases by combustion appliances.

12.5    Court Cases

12.5.1     conjac jelly

In terms of hazardousness of conjac jelly, victims claimed damages lawsuits based on the Product Liability law to Nagoya District court on June 15, 2007.

A consumer filed a petition to conjac jelly food company and Ise Municipal authority in Mie Prefecture. A plaintiff is parent of child who died by sticking conjac jelly food in his throat in March 2007. He was, 7 years old at the accident happened, 1 grade in municipal elementary school. While he was in nursery after school administrated by Ise City, he had snack conjac jelly food in nursery. A defendant company is a manufacture of the conjac jelly food.

According to the petition of the plaintiff, the conjac jelly food has design defect in its figure and elasticity that is danger of being caught in throat. The plaintiff also points out the design defect of plastic nutshell of conjac jelly food. The nutshell is made in the design that a consumer eats conjac jelly food by inhaling from it.

Although the defendant company stated the caution out of packet that indicated not to inhale to eat it and recommend scooping chewing enough to eat, the plaintiff blamed that it was not enough and the recommendation was necessary to describe that a infant, kid and elderly was prohibited eating it. The plaintiff also said that current caution sought a consumer difficulty to accept it, because the nutshell of the food was too  small to comply it.

The husk is made in the design that the consumer is inhaled food there and eats. The plaintiff claimed the defendants to pay JPY 75,000,000 as damages based on the Product Liability Law 1992.

The National Consumer Affairs Center reported 13 fatal accident cases since July 1995 in Japan. The centre recommended that infants and elderly peoples had not to eat it on June 15, 2007 on website.

In US, the Food and Drug Administration warned that mini conjac jelly candy posed a serious choking risk, particularly to infants, children and the elderly; the FDA also announced a recall by Thomas Diaz, Inc., of Toa Baja, Puerto Rico of 1,500 cartons of Fruzel assorted Natural Fruit Jelly Candy because these products present a choking hazard, on 10th July 2002.

The mini jelly candies come in assorted flavors. Each mini jelly cup is about the size of single-serve coffee creamer. The candies are packaged in 16.5 gram jars with 88 units per jar. These candies contain the ingredient “conjac” (also known as conjac, konnyaku, yam flour, or glucomannan). The Food and Drug Administration and the Consumer Product Safety Commission staff consider this type of candy to pose a serious choking risk, particularly to infants, children and the elderly. There have been six children’s deaths from choking associated with this type of jelly candy throughout the United States in recent years. There have also been reports of deaths in other countries.
“FDA continues to warn consumers about this product, which poses a risk that must not be tolerated,” said Dr. Lester M. Crawford, FDA Deputy Commissioner. Consumers are urged to return this product to the place of purchase

After the Canadian Food Inspection Agency (CFIA) has received information from the Consumer Council in Hong Kong that mini-cup jelly products may pose a choking hazard on mid-2000, the agency passed along this information to Canadian people immediately. In addition, the agency issued a mandatory recall order.

The Canadian Food Inspection Agency (CFIA) has been warning consumers not to consume mini-cup jelly products with conjac listed as an ingredient as they pose a choking hazard. A mandatory recall order has been issued that requires all persons selling, marketing or distributing the product to recall it immediately. Failure to comply with this order can result in fines of up to $50,000 or a jail term. The CFIA is continuing to work toward having all affected product removed from the marketplace.

According to the New York Times on 14th May 2003, a Santa Clara County jury awarded $16.7 million to a couple whose daughter died after choking on a jelly candy.

The couple, Yvonne and Gil Enrile, sued the Sheng Hsiang Jen Foods Company of Taiwan after their 11-year-old daughter, Michelle, choked in April 1999. The girl remained in a coma until her death in July 2001. Lawyers for the family told the court that the candy contained a substance derived from yams called conjac gel, which does not dissolve in the mouth and must be chewed. The Food and Drug Administration banned the gel in 2001.

The National Consumer Affairs Centre has tested the safety of a risk of mini conjac jelly in several times and found the fatal risk of the products; however the centre only could take procedure of warning  its risk to consumers since 1995. Why could not the government ban the gel or take some measure to prevent the fatal damages so far?

What ministry supervise these kind of accidents? So far, there is no administrative body which oversee them. Conjac is food and the plaintiff injured by the food. In generally, Food is administrated by the Ministry of Agriculture, Forestry and Fishers. On the other hand, the problem related fatal safety is governed by the Ministry of Health, Labour and Welfare.

However, the extent of the jurisdiction of the MAFF is limited within the issue of food labeling; the ministry does not have jurisdiction of the safety. The MHLW has a jurisdiction of personal injuries or fatal damages. But the jurisdiction of the MAFF is limited over accidents which are caused by sanitary problem such as poisoning food. Current regulations related do not include the food safety concerning shape,  design or hardness. Whilst the METI that governs the shape and hardness on industrial products, it has no jurisdiction over food safety concerned.

It is the reason why the Consumer Agency which has comprehensive jurisdiction of food products including “conjac jelly”.

12.5.2     “Gacha-pon”

The Namuco Bandai Games is known as a “Gacha-pon” maker in Japan. “Gacha-pon” is transparent plastic sphere capsules in which small toys are enclosed. Whilst purchasers can get one of capsules in vending machines, they cannot know which capsules appear from the machine. The figure of capsules is 40 mm in diameter.

A child, 2 years old and 10 months, swallowed it by mistake; whilst the capsules was removed from his throat after 30 minutes, he suffered low-oxygen injury; therefore residual disability by that he could not move himself remained. His parents claimed that the capsules had design defect and Bandai should pay their son 180,000,000 yen as damage compensation based on product liability.

Kagoshima District Court, on 20th May 2008, approved the product liability of Bandai and ordered Bandai to pay about 26,260,000; the court stated that whilst the damage of plaintiffs was 79,540,000 yen, they had comparative negligence and the amount of compensation should be reduced by 70 percent.

Bandai insisted that the capsules met the safety standard regulated by the Japan Toy Maker Association. According to the standard, the size of the capsules should be more than 31.8 mm in diameter, when the intended users were under 3 year old of age.

However, the ruling rejected such claim of the defendant: the width of mouth of infants who were under 3 years of age might be possibly more than 4 cm in diameter and therefore the standard was not enough to prevent accidents; the capsules should be cubic figure to be able to remove from throat or  should have porosity to establish an airway.

In some common law jurisdictions, declaratory judgment is a form of equitable relief.  But, unfortunately, we have no declaratory judgment system. Any court including the supreme court cannot make a decision generally and abstractly beyond the concerned case. 

However, I think that this court case might result more than a transfer of money. The Namuko Bandai would appeal this case to the appeal court, Fukuoka Court of Appeal. Simultaneously,  the METI would be supposed to seek reviewing the safety standard regarding  a self regulation in the defendant as well as industry associations of this kind of toys to  prevent such a tragedy from ever happening again. The direction or guidance of concerning regulatory authority, the METI, might work significantly to the related maker and industry than the statutory regulations or court decisions whereas It is true that the Namco Bandai is not forced to comply with any requests to change their safety standards.

At present, the government considers establishing a comprehensive administrative body concerning consumer affairs. The coming reform means that the METI would lose his authorities about the consumer protections in his jurisdiction. The METI resists the transferring his jurisdiction to the new consumer affairs department by arguing that the ministry perform his role enough. This ruling might verify such argument of the METI.

12.6    Battery

According to the National Consumer Affairs Centre, the incidents of scald by a battery in a mobile phone tends to be increasing recently. 34 injuries cases were reported from 2007 to until 29th November 2007. 126 complaints concerning ignition or fuming of mobile phone were claimed to the nationwide consumer centers whereas 186 consumer felt danger in using mobile phone.

On 28th March 2008, KDDI and Kyosera recalled the battery packs because the battery was possible to be ignited or exploded by defect; the number recalled was about 210000. The 13 incidents were reported from October 2007. In Aomori, Hokkaido and Miyagi, 3 people were injured by burn.

The incident on 18th March 2008 happened 4 days later after the KDDI and Kyosera could specify the defect. It seems that they preferred business’s interest rather than consumer’s interest; they might have been busy to acquire new batteries to be replaced.

The plaintiff was ex-user of a  mobile phone made by the defendant, Panasonic, and he had injuries of burn by the mobile phone heated.  The plaintiff filed a lawsuits to the Sendai District Court on 2nd June 2005. Although the court refused the plaintiff compensation claim, the Sendai Appeal court dismissed it and approved this claim.

The alliance that promotes the voluntary recall of the problematic lithium-ion battery was formed on 18th October 2007.

13    Cancellation

13.1    Cooling-off

13.1.1     the condition of execution

 In a doorstep selling, the Specific Commercial Trading Practices Law requires supplying a copy of unexecuted agreement to the purchaser prior to contract. It is the condition to start a cooling off period (sec. 9(1)(i)). And after making a contract, the seller have to deliver the contract document.

Information to be disclosed to a purchaser is stipulated in the law. The notice indicating the right of a consumer to cancel the agreement, how and when that right is exercisable is included among information.

If the trader neglects his obligation, a consumer can exercise the cancellation right anytime, even if the cooling off period passed. When the trader delivers the document lack of information other than a cancellation right, is a consumer able to execute the right after passing the cooling off period?

The Specific Commercial Trading Practices Law does not limit the kind of necessity information delivered to the consumer, as a condition of starting a cancellation period. Therefore, if information other than the cancellation right is lack or false in an unexecuted or contract document, a consumer would be able to execute the cancellation right anytime as long as the right the statute of limitation pass.

In UK doorstep selling law, it stipulated that if a trader does not deliver the cancellation document to the customer, the contract is not enforceable. The law has no provision of the cooling off period at the time. In the case, It is supposed to be interpreted as the cooling off period is not end.

13.1.2     Condition of starting period

The regulations stipulating cooling off period regime ask the necessity of delivery of both disclosure and contractual document. If such documents are not delivered at all or there is any defect, the cooling off period does not start, though the regulations do not state it.  As a result, under the Japanese law, the customer is able to make cancellation of the contract at any time whereas some academics says the period should be limited within 5 years.  

The regulations concerning cooling off period ask the business to ensure the literature size 8 pts and over both in disclosure and contractual document. If the literature size is under 8 pts in the document, does the cooling off period not start because the document is not enough to be delivered to the consumer?

Kobe District court, on 19th December 2005, answered to above question. The court stated that the size of literature written in the contractual document was lack of 0.8 mm per edge and it showed the document was not perfect and it did not meet the requirement of cooling off period and the period did not begin; whilst the cancellation period should end after 14 days since the document was handed to the customer, the customer could cancel the contract with distributor, even if 8 months already passed after the contract was formed.

13.1.3     effectiveness of interruption of execution

According to the Specific Commercial Transaciton Act, if the trader interrupt the cancellation right, the consumer can execute the cancellation right whenever until the trader explains for the consumer to hold the right and the specific period elapse. Such article cannot be found in other country’s law.

The consumer can withdraw the execution of cancellation after he formed a contract. In this case, does the contract reactivate automatically?  The Kobe Summary court judgment on February 16th, 2005 ruled that the revocation of previous cancellation is regarded as a new proposal of the contract; therefore, the trader is demanded delivering the written document that describes the details of the cancellation right again; as a result, the consumer can execute his cancellation right until the trader deliver above mentioned document to the consumer.

13.2    Damage compensation by mid-term cancellation in duration

In April 3, 2007, the Supreme Court ruled concerning the effectiveness of compensation clause in the mid-term cancellation.[[33]]

The Specific Commercial Trading Practices Law regulates the long-term contract. The language studying contract is adapted in this type. The law, sec. 49(1), gives a consumer a cancellation right in the middle of contractual term. On the other hand, the school usually stipulates the compensation clause. It is limited to amount in which the interest is added to little amount of either JPY 50,000 or 20/100 of payment deducted the responding money as finished lessen. In long term contract, a consumer cannot confirm the quality of services in initial; and the effect of the services is not unforeseeable or unsecured for a consumer. It is the rationale the law admits the cancellation right and limits the amount of compensation to be paid by consumer. In other word, the cancellation right makes a consumer to exercise his cancellation right easily.

The defendant school has terms that if a student exercise a cancellation right, the amount equivalent to finished services are deducted from the tuition paid by a student initially. The problem is that the deducted repayment rate per hour is higher than the initial tuition.

The court judged it as an excessive penalty that makes a student to exercise the cancellation right, and the repayment clause was void against sec. 49(2)(i) of the Specific Commercial Trading Practices Law, and the repayment rate had to be calculated by the initial rate.

14    Remedy

14.1    Role of Small claim court

Summery court 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.

14.2    Compensation scheme

14.2.1     Civil compensation order

Our government introduced the Civil Compensation Order System via criminal procedure. Since introducing the system, it has been took or going to be took in several court: indecent assault case held in the Hiroshima District Court and a injury case in the Tokyo District Court. The regime was established along with the scheme that permits to the criminal victim to question to the accused directly in a criminal court procedure. When the criminal court return a verdict of guilty to the accused, the same court can approve a damage compensation on the consecutive trial within 4 times; as a result, the victim who makes the application need not file a damage complaint to a different civil court. However, the extent of filing is limited certain criminal cases; murder, injury, sex crime. it excludes offences against property such as burglary and offense committed through negligence.

14.3    National Consumer Affairs Centre

We, in Japan, have no private consumer group dealing with consultation to a consumer like as the CAB in UK. Instead, the role is carried on by the National Consumer Affairs Centre[[34]], the independent administrative corporate body.

The centre was found in 1960 based on the National Consumer Centre Act. The aim of the centre is providing information regarding consumer issues, studying and analyzing the information. Current aim is as follows: providing consumer information, consultation to the consumer regarding consumer claims or disputes, distribution of information through mass-media, exercising the test for product safety, educating to officers carrying on a consultant to consumers, researching and studying the status quo of consumer issues.

The activities can be viewed in the annual report[[35]].

One of the important activities of the centre is gathering information regarding consumer consultation carried on nationwide consumer centers. The information is collected and made as a huge data base through named “Pio-Net”. The officers dealing with consumer consultant can access to the data base and refer the contents. In 2004, the number of data was over 1,600,000.

The centre sometimes reports the findings of research and study based on the data on the website, monthly magazine, “Kokumin Seikatus” and “Seikatsu Gyohsei Zyouho”.

These magazines are quite useful for us to recognize the status quo of consumer disputes in Japan. But except for above channels, we cannot know the particularity in each consultation issues. Moreover, “Kokumin Seikatus” is going to be stopped at the end of 2007[[36]].It was reported on May 15, 2007.

If we want to use the data in the litigation, it is necessary to ask through Bar Association based on the Attorney Law, art. 23. Notwithstanding, there are some to be rejected these proposals in virtue of privacy protection.

14.4    Private sector

14.4.1     ombudsman

We have not ombudsman scheme like European countries so far. By the way, , there are some private bodies that examine the activities of administrative body and major businesses. Shimin (Civil) Ombudsman[[37]] network is organized by lawyers and accountants and has 80 branches in nationwide. It targets the inappropriate activities and enforcement by rural governments. The group depends on volunteers and donation that is gained as rewards by the litigations in addition to membership fee.

On the other hand, Kabunushi (shareholders) Ombudsman[[38]] aims to supervise the business activities. The group is also organized by layers and accountant voluntary. The group has been filing many lawsuits to the major companies so far as representation of share holders.

 Recently, our government may adapt an ombudsman system from this autumn. According to the Cabinet Office, the organization would be set under the advisory panel to the Prime Minister, “Kokumin Seikatsu Shingikai”. It was revealed on May 17, 2007[[39]], thereafter reported May 17, 2007 again[[40]]. The role of the body seems to target the products accidents.  

Inducement of introducing the system is recent consecutive serious accidents: gas water heaters, lifts, jet coaster and so on. It is pointed out that the inappropriate supervision and/or enforcement by administrative bodies are in background of these incidents. The predicted body will be organized by specialists of law and technology. The onus of it is collecting information, investigation and making proposal to the central government after the incident incurred.

14.4.2     JFBA

In Japan, Bar Associations wok a significant role in consumer dispute solution on both prevention and relief.

15    injunction

15.1    Regulation

Entity who is possible to suffer damages by illegal conduct by others can file a complaint to have injunction order to court by Civil Code: it is based on personal right or right of possession.

The Consumer Contract Law has injunction procedure clauses by collective action whereas the procedure of individual injunction is not stipulated in both the law and other consumer protection regulation.

15.2    collective action

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.

Collective action scheme entitles certificated consumer group to file a injection lawsuits for the purpose of protection of whole consumer’s interest. The procedure of admission and supervising is stipulated in a guideline, formed in December 2008[41].

The regime was introduced by revised Specific Commercial Practices Act in 2006. The remedies available in actions by consumer associations are limited to injunction, as opposed to monetary recovery.

The scheme was established in the Consumer Contract Act in June 2007. After that, the scheme was introduced in the Specific Commercial Practices Act and other law.

15.3    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.

15.4    Certified consumer group

Whilst it passed three years since the scheme established, the number of the certified consumer group still remain as only 9; there is no certified consume group in Tohoku, Shikoku and Kyushu district.

In the regime, the consumer group certified by the prime minister can file a injunction lawsuits representing individual consumer. It may empower consumer groups to prevent future consumer damages. The regime may already be introduced in developed countries. It is not new one.

 The regime targets to the unfair practices and unfair contract terms regulated by the Consumer Contract Law. The consumer groups’ right is stipulated in the law. It, however, the unfair advertisement is not object in existing law. Our government decided to enlarge the collective lawsuits regime to the extent of advertising practices, the METI reported on 4th March 2008.  

15.5    case

The Kansai Consumers Support Association (“KC’s“) is a nonprofit legal entity, which was established under the revised Consumer Contract Law, to protect consumer interest in Osaka. It made statement that it settled with an English conversation school regarding an initial collective lawsuit on 4th March 2009 in the Osaka District Court, showing the details of the settlement.

KC’s filed collective lawsuits in Osaka District Court: a defendant was an English conversation school; it has been conduced unfair commercial practices, such as aggressive solicitation via phone and a misrepresentation, against the Consumer Contract Law. According to the claim, the school disturbed a student to return, who visited the school to have an instruction.  

In the settlement agreement in the court, the school admitted to exist indicative unfair aggressive practices; and the school promised that it would not do conduct such practices so far and that, if the school would be against the pledge, the school would promise a repayment of received tuition to students who would claim to the school in future.  

The Osaka District court, in September 2009, ordered a real property agency to stop a contract term imposing mending cost of lent property to the tenant. The Osaka Appeal court upheld the decision on April 2010. The injunction lawsuits was filed by the Kyoto Consumer Contract Group.

15.6    problem of the scheme

The number of action is also few, 7 cases up to May 2010. Why is it so few?  Most significant problem is a burden of litigation cost such as investigation and court charge. Total cost of taking action might be estimated as about 2 million yen. However, if the consumer group win the case, the group cannot get compensation because the scheme only approve taking action of injunction, not damage compensation. Therefore, income of the group is limited by contribution or member’s fee.

Kyoto Consumer Contract Network, one of certificated consumer groups under the  collective action scheme, took 4 court actions so far; but legal fee of these lawsuits is undertaken by lawyers who participate the group or corporate the activity of the group.

In November 2004, the Consumer Supporting Fund was established. But the fund was only 30 million yen donated initially. If the fund will be consumed, activity of the fund shall be forced to be shut down.

In September 2009, the Establishing Law of Consumer Affairs Agency pledged to review supporting scheme to consumer groups and take suitable action within 3 years.  

16    Compensation

16.1    mental distress damage

Principally, it is difficult to find Japanese court rulings that admitted the moral damages on the breach of contract, if the physical damages was not along with it. it seems to be thought  that the  moral damages is compensated by payment of the material damages.  

Certainly, the injury party can get moral damages if he can prove specific emotional distress that is not covered by the compensation of the material loss. Court rulings that admitted the moral damages without physical distress are found in several investment cases: securities, commodity futures, variable life insurance and so on. In addition, there are many court decisions admitted moral damages in the case that the money lending business rejected to disclose the lending history to borrowers without reasonable excuse. 

Fukuoka Appeal Court, on March 9th 2006, admitted the claims of plaintiffs in the case of a defective apartment.[[42]] The plaintiffs are sectional ownership of the apartment. According to the plaintiffs petition, there were serious defects in the part of joint ownership space in the apartment, therefore the value of the apartment got lower after these defects were repaired. The plaintiffs claim damages: difference of declined value of the apartment, attorney’s fee and moral damages.  

The court ordered the defendant to pay compensation to the plaintiff within their claim. Regarding the moral damages, the court ruled that the plaintiffs were in the situation equivalent to be rewarded the emotional distress suffered damages of loudness and dusts by repairing the defects. However, the amount of moral damages in this case was only JPY 200,000 to 300,000.  

Does the compensation correspond to the moral damage ? Certainly, the plaintiffs were not suffered any physical injuries. But they were threatened their peaceful life, therefore it seems equivalent to the physical damages. 

16.1.1     unfair sales practice

The inducement of purchasing an apartment varies. Some people do it to enjoy fireworks. If their enjoyment is disturbed by other apartment build after their purchasing, is it possible to claim payment of damage compensation to the selling company of his flat?

If the later flat was built by the property agent who also sold the claimant’s flat, there is possibility to claim somehow damage. The Tokyo District Court ruling on December 8th 2006 was such case. Sumida river fireworks festival is operated in August. That is one of the most famous fireworks in Japan. Defendant, who was real estate agent, advertised that purchasers could enjoy the fireworks from the flat. The plaintiffs, who believed the defendant’s advertisement, purchased their flats on construction from defendant. Their purposes of were enjoying those fireworks. The contract was formed in May 2003 and the defendant was performed them in October the same year. However, the defendant started to build another apartment in the location between plaintiff’s apartment and the Sumida River since May 2004. Therefore, the plaintiffs were to be impossible enjoying the Sumida fireworks. The claimants stated that the defendant knew or was likely to know the purpose of plaintiffs purchasing and that the construction of the other apartment disturbing plaintiffs’ vista of fireworks was against good faith. The amount of damage the plaintiffs claimed was JPY 3,500,000 each as their mental distress.

Tokyo District Court approved the plaintiff’s claim, stated as follows: the defendant knew or was likely to know above mentioned plaintiffs’ purchasing intention; the defendant had a duty not disturbing the plaintiffs’ possible vista to the Sumida River in good faith; notwithstanding, the defendant constructed the other apartment interfering the plaintiff’s vista only 1 year after his selling to the plaintiffs. The ruling said that the defendant did not seem to take suitable care to the plaintiffs’ interest of vista until starting construction of the other apartment; even after starting construction, the defendant also failed the honest attitude to the plaintiffs. In conclusion, the ruling ordered the defendant to pay JPY 660000 as mental distress damage to the plaintiff. Prior the above mentioned decision, the Sapporo District Court on March 31st 2004 did similar decision.

These ruling admitted the duty based on good faith even after the defendant performance finished. However the requirements of the duty are still ambiguous and it is vague how long does that kind of the defendant’s duty continue.

16.1.2     scam

If a business cannot sell a flat in certain price, he might usually consider the price reduction. The practice would be permitted by the private company, unless he promised to the previous purchaser not to sell it by reducing price or the reduced price was so massive. If the seller is public body and the sales price is significant lower than the previous one, is it possible for the preceding purchaser to claim somewhat damage to the seller? The Osaka Appeal court decision on April 13th 2007, was concerning such case.

The defendant was Hyogo Prefectural Housing Corporation; the plaintiffs of 82 peoples were the purchasers of the flats from the defendant. After Hanshin earthquake disaster in 1995, the local government had built and provided many apartments to the victims.  This apartment impugned was one of them, which had 12 stories with 203 flats. The government, however, had the unsold stock of 70 flats in the apartment, he decided to reduce the price by 46% and sold remaining flats completely, four years later; the reduced price was also lower than the market price by 10%; as a result, the value of previous purchased flats plunged down suddenly and significantly. Accordingly, the plaintiffs claimed damages of 8,000,000 yen each to the defendant on this litigation; the claimed damage consisted of both the loss equivalent with decreased value and mental distress.

The Kobe District Court rejected the plaintiffs’ claim completely. The Osaka Appeal court on April 13th, 2007 also rejected the argument of property damage of claimant; the court indicated that the possible loss affected with price reduction sales might not be consecutively hereafter. Mental distress damage However, the appeal court admitted the mental distress damage of the claimants of 1,100,000 yen each, overturned the Kobe District court decision. The appeal court blamed the defendant’s sales practice was against good faith: the local government, as the public entity, owed the obligation to sell their properties in proper price not to harm the reasonable interest of previous purchaser; however, the defendant reduced the sales price materially compared with the previous selling price and it injured the interest of previous purchasers of flats; the conclusion was not different, even if the government was necessary to sell these flats.

16.2    extent of damages

Defrauded victims can ask a return of their expense to defrauders: if victims rescind contracts based on civil code (art.96) , they can seek restitutions as unjust enrichment (civil code, art.704);  victims also seek repayment as damage compensation by tort (civil code, art.709).

In any events, when the scammer expensed any money to as means of defrauding a victim, the scammer principally can ask deducting his payment from damage; It is because the money that a victim got shall be regarded as unjust enrichment, even if the money was spent as a means of cheating (civil code, art.703), precedent court ruling had stated (Supreme Court ruling on 24th March 1993, Showa 63nenn (o) 1749). The civil code stipulates that a person who made an expenditure based on unlawful inducement cannot claim return of it. But the civil code does not make it clear whether a person who already paid back the money can seek restitution of money paid by unlawful inducement or not.

On 24th June 2008, the Supreme Court altered a precedent in nominal terms of purchasing transactions of U.S treasury bond;  it follows to the Supreme Court ruling on 10th June 2008 related to illegal money lending case. The defendant sold a U.S treasury bond to the claimants, promising to be able to get profitable dividend by the purchasing. Although the defendant did not purchased any bonds, he paid the dividend several times as promised, but soon later he failed to perform his obligation. In litigation procedure, the defendant claimed that the dividend should be deducted from his unjust profit.

The court of appeal approved the claim of the defendant. However, the Supreme Court, on the contrary, rejected the claim of the defendant: the scammer cannot ask a return of his expense, if the expense was consumed by immoral purpose like as fraud; the scammer also cannot ask deducting his expense from damages compensation; as a result, a victim can claim returning all of his payment including an expenditure of the defrauder.

One of the Justices, Justice Tahara, objects to this ruling: he states that if the payment of dividends for the purpose of concealing illegal activity by defrauder, the ruling might be justified; but in this case, the payment of dividends by defrauder is already established at the contracts formed; the payment of dividends is embodied in fraudulent scheme and it should not be regarded as the activity concealing his cheating. 

The justice states the unfairness among victims. The status quo of recovery of damage in victims would be different; some victims might have already received dividends several times; but another victims might not receive any dividends yet; if the defrauder goes into bankruptcy before all victims received dividends in same ratio, and if they can seek damage compensation as same as their expense of purchasing bonds, this treatment shall be not justified.

16.3    State liability

The Osaka District Court approved the fraud victim’s claims regarding a huge defrauding case, ordered our government to pay about JPY 674,440,000 as damages compensation, on June 6th, 2007.[1]

Daiwa Toshi Kanzai was mortgage securities company and it was accused of defrauding investors by hiding the fact that it was effectively bankrupt and then offering them high returns on investments. The firm allegedly collected about 111.2 billion yen from 17,000 investors, but only about 3.5 billion yen of this amount was secured, and a large numbers of investors, many of them elderly, lost their money. The victims were the purchasers of land mortgages that were issued by the company. The values of land mortgages, however, were quite small not proportionate to the estimated values of mortgaged lands. Daiwa Toshi Kanzai, thereafter, went bankrupt in 2001, thus the purchaser victims were left in the situation not to be able to restitute their investment at all.

Previously, the plaintiffs filed law suits to real-estate appraisers to pay damage compensation and they won in every case, while they filed a law suit to Japanese government to pay about 3,990,000,000 in virtue of negligence for supervising the company. The Osaka District Court endorsed the claims of 260 of plaintiffs who purchased the securities after 1998.

Securities Company is necessary to get a license from the Ministry of Finance every 3 years. Daiwa Toshi Kanzai, founded in 1985, also needed to get it as securities broker who issued land mortgages secured by real property such as golf courses. The Kinki Regional Office of the Ministry of Finance dealt with the renewal procedure on 3 times from 1991 to 1997.

But until the last license renewal, Daiwa Toshi kanzai already had huge amount of nonperformance loan to six affiliated  companies. At the time, Daiwa Toshi Kanzai was insolvency, the company had not efficient financial status to be able to get renewal license from the department. However the department gave a renewal license to Daiwa Toshi Kanzai.  

In the lawsuit, most controversial  issue  was whether the regional department of the Finance Ministry acted appropriately in its decision to renew the license of Daiwa Toshi Kanzai in December 1997 as a brokerage despite issuing a business improvement order to the firm just two months earlier when it emerged that the whole Daiwa Toshi Kanzai group including its affiliate companies was saddled with excessive debts. To the claim of the plaintiff,  government objected it and insisted that the department had no recognition to the insolvency of the Daiwa Toshi Kanzai and had no authority to investigate the state of finance concerning  associated companies. However ,”It could easily be perceived that the firm was running on a hand-to-mouth basis, using the money from sales of financial instruments such as mortgage-backed securities to make intereSCPAyments, and was in danger of collapsing,” the ruling said.

It was the first ruling to acknowledge the responsibility of an overseeing government body in a compensation lawsuit that involved property rights connected to losses suffered by consumers..

The court endorsed damage compensation might be seen so small. The litigation to the government, however, is usually very difficult to win. The court tends to reluctant to accept the victim’s plea because of the nature of authority that is so abstract and vague in the extent. Prior this case, we had filed a lot of lawsuits related consumer fraud case including” Toyota Shoji case” that sold many consumers a ten of thousand factious warehouse receipt of gold in early 1980th. This case is small step, but should be evaluated a big step in the history of commercial trading fraud case. 

The Osaka Appeal court approved this original court decision.

16.4    comparative, fault offsetting

In damages action concerning unfair trading practices, most ruling says that victims should take a liability on comparative fault, because victims also have position to be able to prevent making problematic transaction, notwithstanding they fail to perform their due care.

This thought should not have reality. Fundamentally, retail customers usually do not sufficient information to product or services concerned; moreover , by virtue of performing unfair commercial practices, many customers usually tend to depend on advice and solicitation available and have not enough competent to evaluate it sufficiently; the most important thing is that vigorous traders deprive the opportunity of considering to make erroneous economical decision and exploit customers’ interest, taking advantage of vulnerable position both knowledge and bargaining power in customers.

On the other hand, most rulings seem to pay attention to the issue. Whilst it accuse the unfair commercial practices and commiserate the weal position not to be able to resist the fraudulent or aggressive practice and approve the liability of traders, same ruling may point out the existence of occasion for victims no to make a contract.

Meanwhile, rulings to deny fault offsetting on customer’s side increasing gradually. In a lawsuits regarding dispute of commodity futures transaction, the Hiroshima District Court , on 14th May 2010,rejected the counter claim of fault offsetting by a trader. The court said as follows:

” If a victim seem to have fault by the viewpoint of third party side, it is not reasonable that the liability of offender should be reduced; it is necessary to take account of the relationship between a victim and a offender, considering whether the fault offsetting is justified. When the victim has fault, if the illegality of activity of offender is material, it shall accord the notion of fairness not to lessen the claim of damages.

In the case, it could not deny that there existed the easiness, recklessness and carelessness which contribute to be incurred and expanded in damages of the plaintiff after staring trade. However, the defendant employee performed their business conduct , breaching suitability rule, explanatory obligation, duty of care to new customer and obligation of preventing cross order; these practices was illegitimately as a whole and these should extremely serious, conducted intentionally; the state of illegality should be significant. Therefore, the defendant have not qualification to blame the fault of the plaintiff side. Moreover, as the defendant is in the position to protect a customer ‘s interest due diligence, the fault of the defendant should not take account in damage compensation, and it is suitable to the notion of fairness.”

17    product Liability

17.1    regulation

The Product Liability Act (Act No. 85 of 1994) was enacted in 1994, which is based on the 1985 European Product Liability Directive (EEC 85/374).

The act approved a strict or a no-fault product liability scheme that enable to any person who suffers personal injury or property damage as a result of defective product to recover compensation from the manufacturer without the need to prove negligence.

Article 3(Product Liability): the manufacturer, etc. shall be liable for damages arising from the infringement of life, body or property of others which is caused by the defect in the delivered product which was manufactured, processed, imported, or provided with the representation of name, etc. described in item 2 or item 3 of paragraph 3 of the preceding Article, provided, however, that the manufacturer, etc. shall not be liable when the damages occur only with respect to such product.

Since enacted the act, about 100 court rulings are found nationwide. The law admits states of the art defense that a manufacturer should not be liable for harm caused by a product that met the best prevailing standards of design, performance and safety at the time it was manufactured.

Article 4(Exemptions): in cases where Article 3 applies, the manufacturer, etc. shall not be liable as provided in Article 3 if he/she proves that:(i) the defect in such product could not have been discovered given the state of scientific or technical knowledge at the time when the manufacturer, etc. delivered the product;

Concerning the food poisoning case, the ruling of the Tokyo District Court on 13th December 2002 rejected the counterclaim of the state of art defense stated by the defendant.

17.2    Litigation, rulings

The Product Liability Law was enacted in July 1995 in Japan. At the end of August 2006, it was apparent to the National Consumer Affairs Centre that the number of court filing damages suits reached 95 cases. The number of court judgment is fewer than this figure, 32 cases in my confirmation until March 21, 2007.[[43]][[44]] The detail and analysis of court rulings can be find the following NCAC report.[[45]][[46]]

It is said that Japanese people tend to resolve the disputes by settlement out of court rather than filing lawsuits to the court. Actually, the number of the court filing and ruling cases would be fewer than U.S. However, I suppose that it would be many rather than U.K, at least. The paper indicating above tendency is “The Unreluctant Litigant? An Empirical Analysis of Japan’s Turn to Litigation”.[[47]]

By the way, in Australia, it is said that there are more than 25 judgments regarding the product liability after reform to the Trade Practices Act in 1992. [[48]]

The NCAC, on 23th October 2008,  issued a report concerning the details of  product liability disputes inquiries and court rulings in 2007 as well as the transition of them.

17.2.1     Car

In April 25, 2007, the Tokyo District Court ruled the Subaru car had defect and ordered the company to pay damage compensation to the plaintiff at a limit of 300,000 yen.

In the case, the car of plaintiff was ignited from engine room suddenly in February 2004, when he was driving in the motor way. In the court procedure, the plaintiff insisted that the car fire was caused by the defective fuel tube, and asked 3,000,000 yen as damages. On the contrary, the car denied such defect and insisted the capability of causation in the ignition.

The court said that the car engine was ignited by the defect of the fuel tube: it became deteriorated and torn; therefore the spark in an engine caught a fire to injected fuel. The court concluded that there was a defect in the fuel hose and it was lack of advanced safety to be accomplished with.

17.2.2     Conjac jelly

Two product liability claims were filed in different district courts. In one case  that a infant in Gumma Prefecture was choked by freeze conjac jelly to die, his parent filed damage claim to the Himeji Branch of the Kobe District Court; the defendant is “Mannan Life”, a manufacture of the conjac jelly. The plaintiff claim that the product has a just size to choke a victim’s throat and it has a nature difficult to be chewed up and swallowed; therefore it has a design defect.   Articles of the Kobe Shimbun, the Yomiuri Shimbun and the Mainich Shimbun reported on 4th March 2009.   

Another case was filed to the Nagoya District Court. A plaintiff was a daughter of an elderly woman, who was 87 years old and choked a conjac jelly to her throat to die. The plaintiff claimed that the product had a unsuitable figure and solidarity to be able to swallow at one gulp by which a eater was in danger to be choked his throat to die; it has not efficient safety as food product that should to equip with and the defendant manufacture did not efficient warning regarding it . The article of the Kyodo Press reported it.

17.2.3     Health food staff

Nagoya district court approved the plaintiffs’ claim on 30th November 2007.

The plaintiffs ate the food which contained the Amame-shiba and after that they suffered from inflammation of the bronchioles. The plaintiffs claimed their illness were caused by the food, therefore the selling company was liable for their physical damages. The danger of the Amameshiba had been known until 2000 at the latest: about 10 people who ate the food contained Amameshiba had died during from 1994 to 2000 in Taiwan.

The court said the food was defective because it did not equipped with safety, and the court ordered the defendant maker to pay 76,200,000 yen as compensation. The ruling also accused the medical doctor who recommended the food. However, the court rejected the liability of the publishing company that featured the Amame-shiba food.

17.2.4     Battery

On 22nd April 2010, the Sendai Appeal court ruled that a mobile phone manufactured by Panasonic was defective, thus a plaintiff suffered burn injury under lowered temperature on his leg; the plaintiff who was sleeping in a table with heater so called “Kotatsu” in Japan, was suffered burn injury on his leg which was touched to mobile phone though trousers.

17.2.5     Building

The Nagoya District Court approved a damage compensation claim to the Aichi Prefectural Office, concerning negligence for inspection of necessary solidity to earthquake. The decision was issued on 24th February 2009. It was reported in an article of Asahi Shimbun. A court here Tuesday ordered the Aichi prefectural government, a Tokyo-based consultancy and its chief to jointly pay damages to a hotel operator for failing to stop construction of a faulty hotel designed by disgraced former architect Hidetsugu Aneha. It is the first time that a court has found a local government responsible for overlooking fabrication of quake-resistant structural data in a series of lawsuits over the work by Aneha. The district court awarded damages of 57 million yen. Handa Denka Kogyo Co., which operated the Centre One Hotel Handa in Handa, Aichi Prefecture, had sought 516 million yen in damages from the prefectural government, consulting firm Sogo Keiei Kenkyujo and its director, Takeshi Uchikawa.(IHT/Asahi: February 25,2009)

17.2.6     Lift

According to the article of the Asahi Shimbun, the Shindler lift faces a lawsuits. In 2006, a high school student was suffered a fatal accident by a lift which was manufactured by Shindler lift. Although  the parents of the victim have been asking the causation of the accident since the incident occurred,  the company does not make it clear; therefore, they filed a lawsuits to the lift maker for damage compensation on 12th December 2008; the amount is 250,000,000 yen.

18    Lender Liability

18.1    counterclaim to refutation of payment

18.1.1     Civil Law

Generally, a customer can reject payment to creditor whose conduct is against good faith based on the Civil Code (art 1(2)) or abusing right (1(3)). This kind of claim may be admitted in the case where a creditor is neglect to supervise the management of distributer connected with the creditor, or assure the existence or content of sales and credit contract.vir distributor.

18.1.2     Installment Sales Law

A customer who canceled or rescinded a contract with distributor by credit contract can reject claim repayment by a creditor having a connected relation with the distributor. It stipulates in the Installment Sales Law (art.30-4).

18.2    Compensation by own responsibility

18.2.1     Civil law

If the creditor fails to investigate the conduct of connected sales business in spite of some claim regarding sales practice such as misrepresentation or omission, he might be imposed duty of compensation with selling connected company.

Creditor also might face a claim of invalid of the contract by the basis good moral or mistake. Otherwise, consumer may seek a damage compensation to a creditor if he can proves the negligence of the creditor.  Customers suing damages to the creditors have been insisting breach of inspection or supervising duty, based on good faith in civil law.

But in such damages actions, they have to show the negligence of creditors concerning the execution of their inspection duty. It might not be easy for consumers to prove them.

18.2.2     Installment Sales Law

In 2009, revised Installment Sales Law eventually inserted a connected lender liability clause (art. 35-3-13). It stipulates that a customer who cancels or rescind the contract due misrepresentation or non-performance can ask reimbursement of repayment to the connected creditor.

However, the regulation has decisive defects: it only apply to credit card transaction and does not apply to non-performance by distributor’s bankruptcy.

If a customer want to get relief from creditor by virtue of illicit conduct of distributor, he/she shall be due to the Civil Code; Tort, Debt obligation law or Mistake.

The creditors have been denying the existing of such inspecting or overseeing obligation against the member shops in good faith principle; the inspections is for protecting the creditors’ interests.

Revised Installment Sales Law lightens difficulty of burden of proof on consumer side; by  the history of this law reform, it seems to consider the rationale of connected and several liability on a obligation of direct supervising the distributor connected with the creditor. as a result of this considering, the law limited the application to the certain credit contract except credit card transaction.

However, it shall not pass by the viewpoint that creditors take interest in both getting customer introduced by distributors and getting interest by loan to the customer by virtue of connection with member shop, as well as taking advantage supervising distributors rather than customers. On the view point, the connected lender liability clause shall be applied to credit card transaction as well as UK and Finnish law.

18.3    Reimbursement liability due to intermediary conduct

When a distributor acts as intermediary of a credit company to form the financing contract with the purchaser, the purchaser can consider that the recognition of the distributor is as same as the one of the credit company. It is base on following art.5 of the Consumer Contract Act 2001.

Article 5 (Third Parties Entrusted to Intermediate and Agents):

 (1) The preceding article shall apply mutatis mutandis to cases where a business operator entrusts a third party to intermediate a consumer contract between the business operator and a consumer (which shall be referred to simply as “entrustment” for purposes of this paragraph), and the third party (which includes a person entrusted by such third party (including any person who is entrusted through more than two layers of entrustment) who shall be referred to as “entrusted person, etc.” hereinafter) commits any acts set forth in paragraphs (1) to (3) of the preceding article with respect to a consumer. In this case, “the business operator” referred to in the proviso of para. (2) of the preceding article shall be deemed to be replaced with “the business operator or the entrusted person4, etc. provided in para. (1) of the following article.”

(2) Any agent of a consumer (which includes a subagent (including any person appointed as a subagent through more than two layers). The same shall apply hereinafter), agent of a business operator and agent of entrusted person, etc. as above involved in the execution of a consumer contract shall be deemed to be the
consumer, business operator and entrusted person, etc., respectively in the application of paragraphs (1) to (3) of the preceding article (including the case where it is applied mutatis mutandis pursuant to the preceding paragraph. The same shall apply in the following article and in Article 7).

18.4    Court cases

18.4.1     Kimono sales

“Aizenen Yamakyu”, Kimono’s distributor, sold expensive Kimonos aggressively to a lot of consumers; they have explanatory that they did not have any obligation of payment, if they would act as monitors of Kimono. This practice is called as “Monitor Syo-ho (sales practice)”, currently regulated by the Specific Commercial Trading Act as a sales inducing work-in-home. The National Consumer Affairs Centre issued the reserch report regarding the responsibility of creditors connected with the rogue traders. But, the distributor went bankrupt in 2000; the company could not perform his obligation to the creditors, therefore, purchasers had to continue their payment to the creditors due to their contracts. The 234 purchasers, who were located in Hokkaido, filed lawsuits to the 7 credit companies, claiming that they did not have any obligation of total amount of 560,000,000 yen to the creditors. Same lawsuits were filed in nationwide. On 2nd March 2009, the plaintiffs settled with creditors connected to distributor. On settlement agreements in the Sapporo District Court, the creditors waived most of their claims instead of paying a portion of claims, 76,000,000 yen.

18.4.2     excessive Kimono sales

The Osaka District Court, on 23th April 2008, approved the liability of the credit company for the excessive selling of the distributor

The defendant credit company was in association with the distributor and financed the purchasing of the plaintiff; while the plaintiff was ex-employee of the distributor, she bought a lot of “kimono”, Japanese traditional clothes, and “futon”, Japanese style mattress from the distributor.

By the reason why the payment was  sometimes exceeding her wages and the defendant credit company has been recognizing it, the court approved that the credit company was liable with the distributor by tort; the court, therefore, ordered the defendant to pay damage compensation of the amount payment as from the time when the total payment had exceeded her gross income.  

18.4.3     home -in woks

If the undertakings conduct misrepresentation or omission violating the CCA in the tripartite credit agreement, the consumer not only rescind the contract with the supplier, but also he might be able to revoke the credit contract with creditor, because the supplier acted as a role of a intermediary of the creditor stipulated in sec.5 of the CCA concerning concluding the credit agreement.  The Osaka Summery Court, on 9th January 2004, approved the creditor’s liability in the tripartite credit agreement concerning a home-in-work case.

The Kobayashi Summery Court, on 22th March 2006, approved the creditor’s liability in the tripartite credit agreement concerning a home repair case by via doorstep selling.

18.4.4     movable store building

The Tajimi branch of the Gifu district court, on 19th Jun 2007, provided interesting ruling concerning a consumer credit contract by which the purchaser was financed from the creditor connected with the distributor who scammed the purchase. 

The defendant was purchaser of a movable store building from a supplier connected with the plaintiff creditor and formed a tripartite credit agreement with the plaintiff company; the supplier acted as a intermediary of the plaintiff when the defendant concluded the finance contract with the plaintiff.

The plaintiff filed a claim to the defendant in arrear and the defendant made a counterclaim that the credit contract was void by virtue of mistake: whilst the supplier scammed the defendant, the credit contract was void, because the credit contract was induced by the mistake of the supplier who acted as a intermediary of the creditor at a credit contract formed.

A person who, when he gave a declaration of will, was mistaken about its content, or did not intend to give a declaration with this content at all, is  void if it is to be assumed that he would not have given it if he had known the state of affairs and on a rational assessment of the case. It is stipulated in sec. 95 of the civil law.

The court approved the counterclaim of the defendant. When the supplier employed the credit contract as a measure of fraud, the defendant could insist that the credit contract was void by mistake, even though the mistake existed in the inducement of the defendant and therefore the defendant did not make the inducement clear to the creditor. 

As the justification reason of the decision, the court stated as follows: by forming the membership agreement, the creditor can acquire the new borrowers via marketing of the member distributor and also can earn the membership fee from the distributor; when the tripartite credit agreement was employed by a measure of fraud of the distributor, the recognition of the creditor connected with the supplier, the recognition of the supplier should be regarded as same as the supplier at the judgment of the existence of the mistake, because the supplier acted as a intermediary of the creditor; the thought was accordance with the principle of the good faith and the consideration of reward; although the creditor could not argue that the supplied was only a third party on the credit agreement and that the credit contract was not influenced by the defect on the purchasing contract, it should be allowed.

If the above contract is a consumer contract, the issue is resolved by the statutory regulation as follows.

19    ADR

19.1    Regulation

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

19.2    Procedure

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 et.al.  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.

19.2.1     National Consumer Affairs Centre

The Cabinet approved the reform of the National Consumer Affairs Law on 4th March 2008. The bill will be discussed on the current diet, and be enforced in April 2009.

On the basis of the law, the center is entitled to make settlement on consumer disputes through a specific committee whereas the centre only can give an advice to a consumer. The system is one of the alternative dispute resolution.  

How does it relate to the new consumer affairs organization proposal?

On the other hand, our government is considering the establishment of new consumer affairs body. This  law revision was scheduled prior to the establishing the new organization; as a result, the relation between the law revision and the establishment of the new administrative body is not clear. These matters may have become linking together in the way to discussing.

19.3    Financial services

The Financial Services Agency showed the details of redress of disputes concerning financial services transaction on 16th June 2008. The result was submitted on the conference of the Association Tackling with Financial Services Disputes. An article of the  Asahi Shimbun  and the Sankei Shimbun reported on 18th June 2008.

The association was established by representatives of industries and consumers in addition to the government in 2001; it is formed by 18 financial industry groups such as banking, securities, insurance and so on; it provides the Alternative Dispute Resolution concerning Financial Services. The association held his meeting on 17th June 2008; at the meeting, the status quo of claims and resolutions in 2007 were reported.

According to the report, the number of claims was 164,400 and the figure of cases allegedly causing damages was 31,518, whereas it was 13,742  in 2003; the growth of claims of financial services was triggered by rash of refusing payment of insurance.

The largest number of claims was concerning indemnity insurance in which the number was 92,975; and the figure of application to the ADR was 10,148 in a life insurance and was 17,447 in an accident insurance.

However, the figure of cases that are dealt by the grievance committee is extremely in lower level; only 387 cases was filed to the ADR by virtue of not resolved by private negotiations. It means that only 1 % of claims were handled through the ADR . 99 percent of claims are treated by each member companies; the Japan Damage Insurance Association, who received about 17,000 claims in 2007,  asked the committee to review only 0.1 percent of complaints he received; the Life Insurance Association sought the committee to review  0.3 percent of the total complaint received. Whilst the number of complaints to the Bankers Association are 2,174, only one case was asked judgment to the committee by the association.

These associations explain that member companies could have been solving complaints from customers effectively through inner procedures. But, these solutions might not take account of recommendations and assistance by specialist; they are based on judgments by in-house officers. it is still vague what sort of complaints are received by the associations and what relieves are provided to customers; the rationality of these solutions also still unclear.  

Regarding claims concerning commodity futures transactions, about 60 percent of claims are treated through a mediation procedure of disputes resolution committee.

19.4    Private sectors

19.5    Current status

The number of certified bodies is only 10 including several Bar Associations up until April 2008: Japan Sports Arbitration Organization; the Home Appliance Product Liability Centre; Japan Commercial Trading Arbitration Association; Japan Consumer Advisory and Consultant Association; Land and Housing Inspection Associations in Ehime and Osaka; Automobile Product Liability Consultation Centre.

The number of filings to the ADR organization is also quite a few; It was reported that the Osaka Bar Associations have dealt with only 40 cases. Although the Japan Sports Arbitration Organization dealt with one case, it did not reach agreement. But it does not mean that there is few disputes in Japan; the number of mediations filed to the judicial court has been increasing; the figure is about 450,000 cases and it is double of 1998.

19.6    National Consumer Affairs Centre

In state-run organizations, the National Consumer Affairs Centers plays a important role as neutral party between businesses and consumers.

The function of ADR in the National Consumer Affairs Centre may enhanced more.  The center provides the details of the procedure. Our government revises the law, setting up the ADR committee dealing with disputes resolution independent to the centre; the committee deals with the mediation and arbitration; the committee is consisted of the members within 15, who is appointed by the chairperson of the board of the NCAC, approved by the prime minister. The revised law, which enacted on 2nd May 2008, will be enforced on 1st April 2009.

On 20th August 2009, the National Consumer Affairs Centre reported the  result of ADR procedure until 14th August 2009. The number of applications was 30.  According to the report.,  cases were finished; 2 cases were settled whereas 2 cases were unsettled and 1 case was dropped.

19.7    Private sectors

19.7.1     general

An alternative dispute resolution center jointly managed by 19 organizations in various fields will open in Osaka on Monday with the purpose of settling disputes outside court, and more quickly and cheaply than litigation, it has been learned. 

19.7.2     consumer credit

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 defective products, each industrial product sectors establish private ADR. An article of the Yomiuri Shimbun reported it on 1st March 2009. Although there are 26 such bodies certified by the central government nationwide, many of them specialize in a specific field each. The new center located at the office of the Osaka Bar Association in Kita Ward is the first of its kind designed to solve disputes requiring expertise in several fields. Experts in member organizations include lawyers, certified social insurance and labor consultants, certified tax accountants and specialists in consumer issues.

19.7.3     securities transaction

The Japan Securities Trading Association is about to get certification of ADR and is  entitled to instrumentality procedure regarding securities disputes within June. The association will take the procedure nationwide, in 47 prefectures.

The Association has dealt with mediation procedure of resolution regarding securities trouble, entrusted by securities companies. The number of consultations was 6,438; the number of claims was 773; and the number of petitions of mediation was 173 in year of 2007. However, the claims which can be resolved in the procedure would be limited to disputes which the difference between businesses and customers is small or in the troubles that are regarding evaluation of damages, I suppose from my experience. The court procedure might be more effective to get preferable resolution if you can take consultation of your claims to suitable lawyers. If you choose the procedure of ADR, you should refer the criteria of resolution concerning court rulings about securities cases. You can view useful information of the ruling on lawyers group website “Shokenmondai Kenkyukai”. 400 court decisions has been listed in the site and the useful consideration  and comment about significant cases are posted. The information is provided by the lawyers who work for victims damaged by securities trouble.

19.7.4     Medical malpractice

The Alternative Disputes Resolution Institution for Medical Malpractices will be established in next year based on the ADR Law enacted in April 2007.[1] The organization is interesting because the victims by medical malpractices will be involved in the establishment.

Many compensation claims related to medical malpractices are filed with courts in Japan. The number of suits was 1,110 in 2004 and 9999 in 2005.[2] We can find court rulings concerning the cases in web-site[3] of the Supreme Court frequently.

The criminal cases concerning medical malpractice are relatively few rather than civil cases. But the number was 91 in 2005. Period of procedure District courts in big city have specific division dealing with medical malpractice. For instance, Osaka District Court has 2 divisions. Therefore the judicial procedure seems to be accelerated compared with previous time. However it takes over two years at least until finishing first ruling; although the period has been shorten recently. Until 2000, average period that a court procedure took was over three years. Nevertheless, the period is too long.

In the case where difference between each party’s statements is small and the disputes are focused in the amount of damage, the ADR might be the measure of effective resolution.

[1] http://www.jiji.com/jc/c?g=soc_date3&k=2007062400177

[2] http://www.mhlw.go.jp/shingi/2007/04/dl/s0420-11c_02.pdf

[3] http://www.courts.go.jp/search/jhsp0010?action_id=first&hanreiSrchKbn=01, http://kanz.jp/hanrei/search.html?cat=11

20    Consumer policy

Research Institute of Economy, Trade and Industry (RIETI) revised a paper regarding the consumer policy in Japan.

In addition to the establishment of the Consumer Agency, it shows  both the amendments to the Act on Specified Commercial Transactions and the Installment Sales Act and the amendments to the Consumer Product Safety Law for the enhancement of safety measures concerning age-related deterioration.

21    Civil Law reform

21.1    Origin of our Civil Law

Our civil code had been enacted in Meiji era, based on a statutory law regime in Garman Law and French Law; it is different from case law regime such as UK or US. 

Whilst Family Law and Inherit Law were changed under pressure of victorious nations such as U.S after Japan was defeated the world war second, other components and structure have not been changed a hand read year except wording from old Japanese to modern language.

21.2    Study on private group

Actual work of civil law reform was carried by the civil law reform review panel; it had formed in 7th October 2006. The panel is going to compile and publish a draft of law reform up to the end of March 2009; it publishes an interim report concerning discussed articles in web-site continually.

The panel is planning to build the Consumer Contract Law onto the Civil Law.  As long as the published interim report, the contents of the law reform seems to follow the Garman Civil Code,  BGB,  in both a framework and a component of articles.

The civil cord reform may be necessary for making accordance with the stabilized precedents partly. However, I do not agree to build a consumer protection law onto the Civil Code. Whilst coherent consumer protection regime  should be accomplished through fixing a fragmentation among current consumer protection regulations, to build some article concerning consumer protection onto the civil code shall impair to establish a comprehensive consumer protection law and its interpretation not conflicted.

21.3    Study on our government

Japanese government decided to start a discussion concerning Civil Law reform in Legislative Council of the Ministry of Justice.  The Asahi Shinbun reported on 23th August 2009.

21.4    Proposal of inclusion of consumer law in the Civil Law

One of targeted issues to be considered is whether the Consumer Contract Law should be concentrated in revising civil code.

According to the proposal, the definition of consumer is individuals who make contracts concerning their activities except business activities or skilled businesses. On the other hand, the definition of businesses is legal entities and other group or individuals who make contracts for the purpose of business activities or skilled business activities. The proposal does not take account of the difference between the general consumer and the vulnerable consumer.

21.5    Skepticism to law reform

Our Civil Law had been enacted in 1896, and a part of the law, such a family law, was revised after the World War Ⅱ; but other articles of the code remained as they were.

Civil Law reform is ongoing, discussing in the Justice Ministry. However, the necessity of revising should be skeptical.

Whilst it has been almost 100 years since the law was enacted, several inefficiencies are pointed out the necessity of law reformed as follows:

  1. as articles are not materially understandable, these should be stipulated easy to understand.
  2. several existing articles appear to be different from  criterion of court rulings established, therefore those standard should be refracted in Civil Code.
  3. new incidents which were not in the time of enactment appear rapidly, and existing article can not tackled with those issues.
  4. international trading standard is not always suitable to our Civil Code, hence several part of those standards should be adapted because international trading are conducted safely and  without obstructions. 

However, to this argument, there can be  possible objection:

  1. our civil law had already be re-written by modern Japanese language recently; in addition, it seems to be impossible to re-write Civil Code articles in easy to understand, because articles is so abstract that it never can remove the difficulty of understanding.
  2. the difference between Civil Code articles and criterion in could rulings does not incur any problem to solve disputes so far.
  3. our Civil Code  is abstract enough, therefore most articles allows to interpret to newly incidents or disputes and significant problem are not reported or pointed out.  
  4. international standard in commercial trading seems to be not always useful to protect our reasonable interest in civil disputes except commercial issues.

Professor Kiyoe Sumi, Rikkyo University, pointed out her concern in the Asahi Shinbun on 29th April 2010:  the law of obligations dealt with our ordinary life, and this reform would change them step by step; world of nature according to which the strongest survives could be possible to appears by this law reform. 

In addition, I want to point out that the law reform will become obstacles to develop court decision and enact other law reform such as consumer protection law concerned: The law reform propose some articles, such as unfair commercial practices and fair contract clause,  in the Consumer Contract Law to be inserted in revised Law without change or modified. 

When the Consumer Contract Law  enacted on 2004, our congress adopted a resolution that the law should be reviewed after 5 years. The task had been dealt on the Cabinet Office until recently, but it was stopped on the way of the law reform. The details of discussion can be viewed on the website of the Consumer Affairs Agency, and the latest conference  was held on 17th January 2007.

On the discussion,  targeted issues included whether several regulation such as prohibition of unsolicited call and suitability rule should be applied in a consumer contract generally, in addition to the reform of fair contract regulation.

If the articles stipulated in the Consumer Contract Law transferred to the Civil Code, above mentioned law reform will face difficulty because our Civil Law has a nature of fundamental regulation and is not easy to be revised frequently. This could result as a significant disturbance for development of consumer protection law.

Individual issues

22    Door-step selling

22.1    Definition and scope

The doorstep selling is regulated by SCPA. The law includes the practice that the trader calls a consumer to the shop and solicits to purchasing, hiding his sales purpose. If the consumer makes a contract in the shop, the Specific Commercial Trading Practices Law is applied.

22.2    Touting

In UK law concerning doorstep selling, the definition of doorstep selling does not including touting. Doorstep selling means the sales away from business premise.

However, it regulate good or service sales contract which  is made,  

  •  during an unsolicited visit by a trader to the consumer’s home or to the home of another person; to the consumer’s place of work; or
  •  during an excursion organized by the trader away from premises on which he is carrying on any business.

It is not including the contract combined in the business premise. 

The Specific Commercial Trading Practices Law in Japan is applied to sales, if the contract is combined in the business premise as long as a consumer is solicited by a doorstep trader away from a business premise. The touting sales practices were defined as doorstep sales in 2004 revision of the Law. The law revision was based on the serious damages of touting, especially in the younger people.[[49]]

 The number of inquiries to the consumer centre in 2001 was 9,697 cases, while 3,825 cases in 1995.According to the survey of the National Consumer Affairs Centre in 2001, solicited goods or services by touting were as follows: 1) Cosmetics-34.5%; 2) Beauty salon treatments-17.0%; 3) Accessories-7.8%; 4) Facial equipment using supersonic waves-6.1%; 5) Painting-5.6%

Actually, the breach of the law does not influence of the effect of the law. It only becomes an object of the administrative order. if a consumer is going to rescind the contract, the unfair practices described in the Consumer Contract Law: a misrepresentation, misleading and undue influence.

However, as long as an administrative order issues promptly and properly, it would bet expected to prevent the expansion of such unfair practices.  Is there necessity to regulate the touting in UK? 

22.3    State of disputes

The data of inquiries to the National Consumer Affairs Centre indicates the increasing of these sales practices at least until 5 years ago.[[50]] The number of inquiries in 2002 was 19,265 cases. The details of inquiries during 5 years were as follows: 1) accessories-21,690; 2) Discount membership-7,920; 3) Teaching material-5,570; 4) Painting-4,590; 5) Personal computer-4,260

The number has been decreasing gradually. In 2006, the number of inquiries falls to 9,544 cases.[[51]]

The result of survey to the married women revealed that 77% of respondents had experiences of visiting by doorstep selling traders within a year. The survey was conducted by the National Consumer Affairs Centre in last summer, and 1,800 in 3,000 married women answered the survey.

32% of respondents faced the difficulties for the doorstep trader not to leave their home in spite of their request. 5% of respondents had experience to be called out loudly by the doorstep seller when they asked the trader to leave home, while 5% of the respondents made the contract in fear.[[52]]

As a result in above survey, 57% of the respondents seek to introduce the opt-in rule in the doorstep selling. it is necessary to introduce the opt-in rule in doorstep selling as soon as possible in Japan.

22.4    Individual disputes

22.4.1     house repair sales

In 2005, METI issued the administrative notification [[53]] regarding consecutive house repair doorstep selling. The order notes that the traders have to take account of the necessity of goods or services and the ability to payment of purchaser when the traders sell goods or services.

First, the notification prohibits for trader to make contract with people who is difficult to decide due to lack of his ability. The administrative body can order the trader to take a suitable action. If the customer is lack of ability of decision making as a whole, he can get relief by civil law. The contract of the people is void or recession. However, the civil law does not prepare the article applied to the people who have simply difficulty bundling contract. In other word, where it is not apparent for the consumer not to have am ability to make a contract, he can rescind it when he does not make a contract if he has ordinary discernment for the contract. For example, a consumer makes a property reform contract as an expense which is equivalent of the new home building.

Second, the solicitation which is not suitable for the customer’s knowledge, experience and the state of finance is prohibited. For instance, where the income of consumer is limited within a pension, if the trader solicited the property maintenance contract by borrowing money, it is not suitable for the consumer. If the trader makes misrepresentation or undue influence on above mentioned contracts, a customer can claim null or rescission on the basis of civil law (s. 90, s. 95, s.96 (1)), specific practices act or consumer contract law. In addition, consumer can claim damage compensation by tort (s. 709).

22.4.2     Propane gas sales

The National Consumer Affairs Centre warns doorstep sales troubles of propane gas increasing, especially in Kanto district, reported on 9th July 2009.  1,258 cases were revealed in consumer centers in 2008; It is 1.3 times increase compared to the figure in 2007.

22.4.3     Solar panel sales

Disputes on solar panel sales are increasing gradually;  a recent report of the National Consumer Affairs Centre warns. Whilst the number of the disputes was 1,719 in 2008 fiscal year, whereas it was 1,418  in 2007 fiscal year.  This tendency continues in this year. About 80% of the disputes are conducted be doorstep selling.

23    ecommerce

23.1    Claims and disputes

E-commerce is regulated by SCPA, as one of a distant selling.

As long as a present law applied to e-commerce, consumers can not withdraw or cancel the contract by  cooling off rule, whereas the contract by doorstep selling can be cancelled by the rule. The Specific Commercial Trade Act set a turn rule. In distance selling, companies have to stipulate the terms and conditions previously in case they admit the return of goods or services; if they do not disclose the details of the terms and conditions, the interpretation suggests that customers can return goods or services anytime.

The government  puts the reform bill of the Specific Commercial Trade Act before parliament: in case the sellers do not state the terms and conditions regarding the return rule, consumers can cancel the contract within 8 days from forming the contract.

However, this law reform is diminishing the right of customers under above interpretation of the current law. The government should revise the law due to that customers can be enjoying an unconditional withdrawal right within certain period. The European Union ‘Distance Selling Directive’ states the consumer’s right to cancel the distance contract within a minimum of 7 working days without giving any reason and without penalty, except the cost of returning the goods.

Why could Japanese consumers not enjoy the withdrawal and cancellation right in distance contracts? There should be no differences between Japanese consumers and European consumers.

23.2    Regulation

Eventually, our law may catch up with the developed country in the  field of consumer privacy  protection concerning unsolicited e-mail. The revised Specific Commercial Trading Act, which  asks e-mail sender to furnish a opt-in requirement, was enforced on 1st December 2008. The same requirement is stipulated in the Act of Promoting Proper Sending Specific E-Mail. Each acts also impose the business to save the communication log via e-mail.  However, those laws do not stipulate any civil liability for breach of the prohibition; only administrative and/or criminal sanction is imposed on the wrongdoers .

23.3    Redress

The Nagoya District Court rejected the claim of a damage compensation by 780 scammed bidders of internet auction, on 29th March 2008. The ruling was posted on website at the Supreme Court on 13th June 2008.

The plaintiffs were the bidders who had bought goods such as car navigation system and DVD recorders at the internet auction operated by the defendant, Yahoo Japan. They, residents throughout nation of 46 prefectures, claimed a damage compensation against the defendants, because they could not get the purchasing goods that were sold by the auction.

The defendant had stipulated comprehensive escape clause for the failure of performance obligations on the time of alleged transactions whereas the current compensation clause in his self regulation lays down his responsibility on a limited scale within 500,000 yen. The claimants made several assertions: the clause was void because it is significantly disadvantageous for bidders; the defendant failed to arrange the measure for to secure the performance like as a escrow services between bidders and sellers in auction; it was not enough to prevent fraudulent selling in the internet auction site; therefore such auction system was defective and the defendant was negligent to prepare the system preventing such swindle. On the contrary, the defendant argued they had no negligence; the bidders had opportunity to investigate the sellers calling directly or considering the statement by other bidders on the defendant auction site; through these investigation, if they had any questions, they could choose their behavior not to participate to the auction; the bidder could use the clearing house voluntarily when they wanted to prevent these scams, although it needed a fee; current system had reasonable basis.
The court rejected the claim: the defendant raised reasonable attention to the bidders in suitable occasions.

I have some hesitation to agree this court decision. The defendant might say that the internet auction does not differ from the non-virtual auction. But there are several differences between them, and these rationalize the responsibility on the side of internet auctioneer like as Yahoo. It the non-internet auction, the auctioneer shows the goods to bidders; the bidders can confirm visibly the existence of the goods in the auction room, and they can investigate these items before their biddings. Therefore the probability that the performance of the obligation fails seems to be rare, whilst the bidden goods may be defective; on the other hand, the auctioneer can get profit of fee that these transaction is formed; the auctioneer prepare the opportunity of selling for the seller and it is estimated as significant assistance of scam, if it is only negligence. In general, the person who gets profit connected with the transaction should take responsibility of some sort together with the seller if the performance fails. You can see it in the case of credit transaction in UK. The section 75 of the Consumer Credit Act stipulates that the creditor who loans the purchaser has the connected liability together with the seller. If that is the case, it is rather fair that the internet auctioneer takes responsibility as well as the seller.

Anyway, the escrow service is already available by some electronic money provider such us WebMoney; the company prepares such services since December 2003.  

23.4    Disputes and ruling

The Supreme Court , on 11th November 2008, rejected the claimant’s  damage claim  that the defendant operator of an internet auction site should have  his own civil liability in case a auctioneer did not perform his delivery obligation.  

 The ruling was approved the original court decision, adding no particular reason.

A Plaintiff was winning bidder and a defendant, ” Yahoo Auction”,  was an operator of an internet web site.

24    Multi-level Marketing

24.1    Regulation

While multi-level Marketing practice is not prohibited in our regulation, the Specific Commercial Practices Act imposes a strict regulation on business conducts.

24.2    Administrative enforcement

The Tokyo metropolitan government ordered to suspension business during 1 year to a multi-lever marketing company on May 22, 2007.[[54]] The company induced the young people to participate the business, making a representation that was false or misleading in a material particular concerning the profitability. To the participant who could not pay the initial money, the company suggested to be loaned from consumer finance company.

The number of consultations in nationwide consumer centers is continuing in certain amount level nearly 20,000. In 2005, it was counted 21,544.[[55]]. It is almost impossible for many participants who have not stable income to continue their monthly repayment, eventually they usually fall in the situation to loan from multiple consumer finance companies. Some of them fall in insolvency, and are compelled to file a bankruptcy claim.

It is easy to blame these youngsters. And it is apparent that the rogue multi-level marketing company. But the consumer finance company cannot run away from their responsibility. They have to respect the suitability rule; therefore they must take account to the borrower’s affordability of repayment. They have a duty of equitable query to the borrower; occupation, income, property and so on.

Several cases have been reported that the consumer finance companies gave their concession such as cutting capital of loan almost one half in settlement agreement, as a result of negotiation through consumer lawyers group. But it is not in usual. Above mentioned, almoSCPArticipants must take legal insolvency procedure to get resolution.

24.3    Court case

Members of multi-level marketing scheme are victims of unfair practices; however, in case the victim is a senior member, he also would be an entity who has responsibility to a criminal accusation, adding a responsibility to pay damage compensation in intention or negligence to lower-level members. 

Recent article of the Yomiuri Shimbun reported this case as follows:

” Dozens of upper-level investors in bedding supplier L&G K.K.’s alleged pyramid scheme were deeply involved in the company’s business operation under the instruction of the firm’s chairman, it has been learned. Police suspect that these investors, together with the chairman and 21 senior officials, who were all arrested Thursday on suspicion of violating the Organized-Crime Punishment Law by being part of an organized fraud, invited people to join the investment scheme, despite being aware the company was facing bankruptcy. The alleged scam garnered about 126 billion yen from about 37,000 investors. The Shinjuku Ward, Tokyo-based company, which is known for issuing its own electronic currency, Enten, currently is in the midst of bankruptcy procedures. According to the Metropolitan Police Department, the company held briefing sessions during which they would solicit new investors. These sessions were run by sales department staff including the firm’s chairman, Kazutsugi Nami, the department manager, the department section chief and instructors, which included 13 of the 22 people arrested. However, the people doing the actual soliciting were the investors, who were ranked in groups depending on the number of new recruits they attracted. About 300 individuals topped this hierarchy, dozens of whom helped the company’s executives operate the Enten market. According to a former executive of the company, these major investors attended the company’s twice-monthly business meetings along with the executives. Some investors reportedly received an annual reward of 30 million yen for their contribution to the company’s business. During one meeting, an executive reportedly showed Nami some data and told him the company would be unable to continue if the situation remained unchanged. Despite this, the senior investors continued to recruit new investors.”

25    Fair contract

25.1    Mobile phone contract

25.1.1     claims

Many consumer make complaints to the mobile phone company. They claim that they are imposed significant cancelation fee,  whereas purchasing cost seems inexpensively, the Yomiuri Shimbun posted an interesting article on April 9, 2010.

” Authorities are receiving an increasing number of complaints recently over so-called 0 yen mobile phone contracts that turn out to be anything but a bargain. The Internal Affairs and Communications Ministry and the Consumer Affairs Agency received more than 2,000 inquiries and complaints about cell phone contracts in fiscal 2009. Complaints about “yen0” mobile phones were particularly conspicuous. “I bought [a mobile phone] as I thought it was free, but only the down payment was 0 yen,” one complainant said.”I got a huge bill when I canceled my contract,” grumbled another. At this time of year, when many people enter schools and companies and the number of new cell phone subscriptions increases, the ministry and the agency are urging consumers to be especially careful as they sign up to the complicated mobile phone sales system. The ministry’s Telecommunications Consumer Advice Center received 1,316 complaints about mobile phone fees in fiscal 2006. In fiscal 2009, it received 2,027 complaints–1.5 times the number of three years ago. Meanwhile, the Consumer Affairs Agency has received 387 such complaints since the agency was launched in September. Disgruntled consumers most often claimed they purchased a cell phone after being told the handset was free of charge, but later were instructed to pay large sums of money to clear their remaining financial obligations for the handset loan when they tried to cancel their contracts. “The problems were caused by the very complicated cellular phone sales system,” an official of the ministry’s Telecommunications Customer Policy Division said. For example, SoftBank Mobile Corp.’s Web site carried an advertisement that says in large letters, “Full lineup of mobile phones at no actual cost!” However, the fine print tells a slightly different tale: “The actual cost is the difference between the monthly installment payment and the upper limit of the special monthly discount price.” This means that only the down payment of a handset is free; the handset itself is not. Subscribers are supposed to pay for a handset in monthly installments. But at the same time, SoftBank’s monthly discount service subtracts the amount equivalent to the monthly handset installment from the subscriber’s monthly call charges. If a subscriber opts for a contract to pay 24 installments and continues the contract for more than two years, the charge for the handset is balanced out. However, if the subscriber cancels the contract in less than two years, he or she will be obligated to pay the remaining amount. The company said its price policy is explained in a booklet and at shops, and customers should have no problem grasping it. But an official of the ministry said subscribers do not necessarily understand the meaning of the phrase “0 yen handset” and the difference between handset installment payments and monthly call charges. Meanwhile, some sales agents of KDDI Corp. and NTT Docomo Inc. also are selling a “0 yen cell phone” if customers subscribe to a plan that halves the basic charge with a two-year contract or one with two or more optional pay services. The price plan is automatically renewed after the third year, but if subscribers cancel the contract before maturity, they muSCPAy additional cancellation fees. The ministry said it was inappropriate to virtually force customers to subscribe to options to enable companies to sell a mobile phone for “0 yen.” However, KDDI and NTT Docomo said the service is freely and independently offered by sales agents without being instructed by the telecommunications companies.

The sales system has become complicated due to the increasing cost of mobile phones. Telecommunications firms used to compensate sales agents to offer discounts to attract new customers. Therefore, such heavily discounted handsets as “1 yen mobile phones” have come onto the market. However, handset prices have shot up since the ministry, in response to concerns the sales system was not transparent, in 2007 asked telecommunications firms to distinguish between handset payments and call charges. Some handsets now cost more than 50,000 yen, and sales agencies have begun complicated discount plans to try and diffuse this cost. Mitsuru Suzuki, a former member of the Former Fair Trade Commission and Toin University of Yokohama Law School professor, believes the misleading wording could become a legal problem. “I think the sales system has gotten complicated as sales agencies try to keep subscribers for longer contract periods,” he said. “If the [contract] terminology causes customer misunderstanding, which leads them to choose inappropriate services, this might violate the Law for the Prevention of Unreasonable Premiums and Misrepresentation concerning Products and Service.”

25.1.2     litigation

Kyoto Consumer Contract Network, a non-profit consumer organization formed by lawyers et al., is going to have a consultation from consumers concerning cancellation of mobile phone contract. The group implies to file a lawsuits, an article on 8th April said.

Mobile phone service providers, such as NTT Docomo or KDDI, impose consumers several strict and material sanction to cancellation of contracts. For instance, if customer makes contract 2 years tied contract, he/she can get advantage an basic fee reduced by half. However, if he/she cancel the contract within 2 years, he/she may be imposed penalty JPY9,975. The contract is renewed every after 2 years automatically, and same sanction shall be imposed if he/she cancel the contract on the way.

The group blames the contract shall be unfair because it aims to make a customer close in the contract and it impose a customer unfair penalty which restrict a freedom of contract significantly; the group points out that the sanction imposed penalty after 2 years passed has no reasonable basis.

25.2    Validity of repair compensation clause

How amount of expense can a landlord asks to pay a tenant? The Kyoto District Court ruled that the agreement, which imposed a tenant a burden to pay a certain amount of compensation of repairing house of tenant, was void due to violation of the Consumer Contract Law on 30th September 2009.

25.3    “Konkatsu” related contracts

Activity to get married is so called “konkatsu” in Japan. Introducing business in terms of marriage also is prosperous,  but troubles, such as reimbursement at a contract cancelled, also are increasing year-on-year. NCAC  warned it, the Mainichi Shimbun reported: 2006 fiscal year: 2,848; 2007 fiscal year: 2,975; 2008 fiscal year, 2,418 (up to 20th February 2009).

The national Consumer Affairs Centre alerted the expanding of the number of troubles regarding marriage assistance business. The articles of Yomiuri Shinbun reported the details of troubles. The Specific Commercial Trading Act approves for customers to terminate their contracts of  a marriage assistance; however such kind of trouble dons not decrease by the regulation, whilst the policy maker has been expecting the diminishing it; The NCAC showed the status of disputes on its finding report in 2004 and the situation is not changing.  The number of inquiries to the consumer centers in 2007 is 20 cases which was doubled compared with previous year.

25.4    Life insurance contract

Even if a customer fails to pay insurance premium, a life insurance company does not always have a title of discharging  the contract by the violation of the contract; it may be against the Consumer  Contract Law;art.10 of the law makes an article void which may harm  a consumer interest one sided. The Tokyo Appeal Court ruled it on 30th September 2009, overturned the judgment of the Yokohama District Court.

In the case, the plaintiff delayed a payment of insurance premium in January 2007.  The customer had been making payment through an automated bank transfer; but in January 2007, the insurance premium was not paid by the lack of balance of bank deposit.  According to the contract, if a customer failed a monthly payment until the end of next month, the contract was dissolved automatically without any warning by the company; therefore the insurance company insisted it by the article.  The customer claimed that the article was void by virtue of violation of the Consumer Contract Law and the contract was still continuing.

Although the original court, Yokoyama district court, rejected the complaint of the plaintiff, the appeal court overturned it and approved the argument of the plaintiff. The appeal court said that in the case of payment by an automated bank transfer, slight thoughtfulness or procedure carelessness may cause a lapse of contract. As it invited a critical disadvantage to a customer, the court ruled that the article was void against the article 10. 

25.5    mileage point

Non-profit Consumer group, “Hyogo Consumer Network”, plans to file an injunction suit against the Japan Airline, seeking  ban of an irrational article for customer.

The company does not admit to restore a mileage point when a holder consumes it, even if an appropriated transaction is cancelled. The consumer group claims that the article should be regarded as a unilateral disadvantageous agreement; therefore it is against the Consumer Contract Law. An article of Yomiuri Shimbun reported it on 13th March 2009.

26    Consumer loan

26.1    fair lending practice

When the money lending forced a borrower to pay, it can be regarded as abuse. In the case that plaintiff asked compensation to the money lender who lends him money mortgaged by his pension, the Osaka District Court on March 5, 2004 accepted a claim of the plaintiff. The court said that this kind of lending got him poverty and the lender could foresee it.

To the type of poor management indebtedness, consultant and education is important. However, “the excessive spending” is the problem based on the excessive credit on one side. Money lender must lend money suitable to debtor’s ability of payment.

The concept of responsible lending of lender is getting more important to prevent debtor’s excessive spending. The upper of lending should be restricted within possible amount for a borrower to be able to repay it without sacrificing his ordinary life. For the responding the issue of excessive lending, the Money lenders Restriction Law states that the money lenders have to investigate for debtor’s possibility of repayment considering his financial status, trust worthiness, the state of indebtedness and repayment plan, and never contract of lending passing over his payment ability (s. 13).

Guidance [[56]] The guidance of the law stipulates the criteria of excessive lending. According the guidance: when lenders lending unsecured and no warranty loan by simplicity examination on a counter, lending amount never pass over £2,000 or within 10% of annual income of debtor (3-2-1(1));Lenders never solicit customer borrowing money passing over his necessity or stimulate his borrowing intention (3-2-1(2));When lenders lone unsecured and non warranty money to a customer, they have to confirm their customer’s borrowing intention by make them write necessity terms: expecting amount of borrowing, indebted amount, annual income and so on (3-2-1(3)):As to lend unsecured loan, lenders have to investigate debtor’s income and indebtedness through credit information institution and stipulate it in document (3-2-1-(4)) [[57]].

As to lend with mortgage, lenders have to write down whether a borrower would be able to pay without selling mortgage, considering his condition: income, business plan, assets, family, daily life, state of debt and payment plan, loan terms and condition such as interest rate. If lenders deem that a borrower cannot pay his debt without selling mortgage, they have to confirm and write down borrower’s idea regarding selling time and his daily life plan after selling mortgage.

This requirement is necessary as same as guarantor (3-2-1(5));To a guarantor, after investigating his income, assets, family, sate of daily life, debts from another lender, state of repayment, and so on. In addition, lenders have to write down the possibility of payment when he has to pay his debt. Lenders have not asked guarantor for payment passing over his possible payment (3-2-1(6);

26.2    Over indebtedness

It is estimated that there are over 2.29 million debtors who borrow money from more than 5 lenders. In fiscal 2005, the Consumer Affairs Centre, an independent administrative agency, dealt with 63,128 cases of multiple debts–triple the figure of five years ago.[[58]] According to a 2006 report of the Centre, the estimated 2 million debtors overall are struggling under the yoke of paralyzing debt. Although a figure of personal bankruptcies registered 240,000 in 2003, thereafter the figure has been reducing and the figure was 180,000 in 2004.[[59]]

According to the financial Services Agency, the number of debtors who borrowed money from over 5 finance companies was estimated about 1,250,000 at the end of December 2007 whereas it is generally said that the debtors in over-indebtedness are over 2,000,000.

It was reported in the session of the consumer issue committee of the rural democratic party. The history and present condition concerning this issue in Japan is well explained in recent essay in English. 

Japan money lenders association suggest to use a check seet to prevent over-indebtedness.

26.3    Interest rate restriction

In controversial dispute on which lower court ruling were divided, the Supreme court showed a criteria. The ruling was on 20th April 2010.

When consecutive borrowing and paying are held on primary loan contract and each payment is to the total amount borrowing money,  a capital in the Interest Rate Restriction Law, which applies cap interest rate depending on capital amount,  is new loan adding to remaining amount of loan; the remaining capital amount shall be calculated by the lawful interest rate promised;  therefore, if there is overpayment, it shall be allocated to payment in each payments shall be paid in remaining loan based on above mentioned primary contract. 

On the process of each payment performed, if the total amount which consists remaining loan and new loan excesses the criteria amount in the Interest Rate Restriction Law,  the  Appling interest rate  shall be changed; the previous interest rate which is beyond the new interest rate adapted is void. If total amount of loan is lowered the criteria amount in the law, the previous interest rate shall be never applied again.

26.4    Guarantee fee

Guarantee charge is deemed as interest; if the lump sum of the charge and the interest exceeds the cap rate of the Interest Rate Cap Law, the agreement of guarantee is void even if the interest rate is legitimate. When the guarantee contract is made with different company except for a lending company, the guarantee contract could not be void because the contract should differ from the lending agreement. Sendai Appeal Court approved the original ruling that the guarantee contract should be connected with the lending agreement, therefore the interest rate should be calculated based on a total amount of both expenditure, even if the guarantee contract differs from the lending company.

26.5    Late charges compensation

Money lenders who obtain repayments as a result of the performance of debtors without legal grounds for doing so is under a duty to make restitution to them with late charges based on art.704 of the Civil Code, if they know that they have no right to be able to hold excessive interest beyond a rate stipulated in the Interest Rate Restriction Law.

Furthermore, debtors claims 6% annum of existence restitution based on the Commercial Law which stipulates such figure differing from the Civil Code; it is because the money lenders are in position to be able to take advantage of excessive repayment as commercial interest rate.

The Supreme Court, on 10th July 2009,  concluded  that the money lenders had no obligation  to pay 5% annum as late charge based on art. 704 of the Civil Code, in case  they received the repayment from debtors prior to the Supreme Court ruling on 13th July 2007 ; the Supreme court ruled that debtors did not perform their duty in voluntary, in case their payment were excessive against the Interest Rate Limitation Law, even if money lenders receive performance by debtors in conformity with the Money Lenders Law.

Same ruling was held on 14th July 2oo9 by the Supreme Court.

26.6    excessive repayment litigation

26.6.1     Litigation

According to the Supreme Court, the number of the civil lawsuits filed to nationwide district courts was over 200,000 in 2009.  It was 20% up compared with 2008. 

Officials of the supreme court suggested the 30% – 50% was inhabited by asking a reimbursement of excessive repayment to money lender sectors.  In Tokyo District Court, the ratio of this kind of lawsuits was 45.8%, whereas it was 1.4% in 1999. The rapid increase started in 2006, 18.7%.

26.6.2     extinctive prescription of reimbursement

An extinctive prescription of reimbursement of excessive repayment usually starts from the day after excessive repayment have done. Even if borrowers have consecutive loans based on a fundamental loan contract, the extinctive prescription would start severally in each loan.

The basic contract in terms of consecutive loan may include the agreement that borrowers allocate the expressive loan repayment to new loan. In the case, should the start of extinctive prescription consider as same as a general loan contract above mentioned?

The Supreme Court ruled on 3rd and 6th March 2009 that the extinctive prescription in above case starts from the day after the new loan contract has been executed; it does not start severally in each past loan executed.

26.6.3     Extent of reimbursement in usury case           Osaka District court decision on 11th July 2008

Consumer loan contract, in which APR was 84%, was void, the Osaka Court of Appeal ruled on 11th July 2008;  the ruling ordered the defendant money lender paying reimburse of all of payment including a capital sum that was loaned to the plaintiff.

Himeji Branch of Kobe District Court did not approve the claim of the plaintiff who asked to repay all of his payment; however, Osaka Court of Appeal changed the original court’s decision. 

Money lenders are punished based on the Investment Law, if loan APR is in excess of 109.5%, whereas loan APR exceeding from 10% to 20% is void by the Interest Restriction Law. In this excessive lending case, court ruling tend to decide that money lenders must reimburse all of repayment including lenders’ capital sum.

But, if APR does not exceed above mentioned interest rate, it is not clear whether courts decide that lenders have to repay their capital sum to borrowers in addition to lawful and excessive interest, even though the contract is void in breach of ethical rule (civil law, art.90).

Himeji Branch of Kobe District Court did not approve the claim of the plaintiff who asked to repay all of his payment. However, Osaka Court of Appeal changed the original court’s decision ubi supra.           Supreme court decision on 10th June 2008

The Supreme Court on 10th June 2008 concluded on a dispute about the extent of profiteering in usury lending.

According to the Japan Times on 11th June 2008, the defendant, formerly a senior member of the Goryo-kai, a group affiliated with Japan’s largest underworld syndicate, the Kobe-based Yamaguchi-gumi, was once called a loan shark tycoon in Japan.

The plaintiffs borrowed money from a lender linked with the Goryo-kai at an annual interest rate of more than 1,000 percent: the plaintiffs borrowed money from illegal loan outlets controlled by Kajiyama between November 2000 and May 2003; they were made to pay back the loans at exorbitant annual interest rates of between several hundred and several thousand percent–far higher than the maximum rate of 29.2 percent permitted under the Investment Deposit and Interest Rate Law, faced threats and coercive action during collection, the Yomiuri reported. 

The plaintiffs argued that the loan contracts themselves were invalid as unethical contract and demanded ¥35 million in principal, interest and compensation for mental anguish, as well as punitive damages for unethical practices.

Borrowers can ask reimbursement of excessive payment exceeding a cap of the Interest Rate Restriction Law. The law declares that even if borrowers agree with their payment of excessive interest, the contracts are void. Therefore, the  payment exceeding the cap of restricted rate become earnings no based on the legitimate contract. In other word, getting interest within the law shall be permitted.

If the interest rate is breach of the Investment Law that impose criminal sanction to the lending exceeding the cap interest on the law, borrowers can sue compensation claim based on tort to loan sharks. What extent of reimbursement can lenders deduct against borrower’s claim based on tort?

One is that usuries can hold the profit to the extent to the cap of interest rate legitimated by the Interest Rate Restriction Law, in addition to the principal. Second view says that usury can only withhold his principal, therefore he cannot ask to pay the interest even if it is legitimate. Third opinion indicates that lenders have to pay all of repayment by borrowers: the lending by loan shark is “an unethical act” which is considered to be based on unlawful causation or inducement, therefore asking repayment of principal is breach of civil law (art. 708); therefore lenders cannot withhold both interest and principal.

In June 2006, the Matsuyama District Court ordered the defendant, a operator of a gangster-linked moneylender, to pay about ¥3.6 million in compensation to seven of the 11 plaintiffs. However, the court of appeal, Takamatsu High Court, overruled that decision in December that year, ordering Kajiyama to pay about ¥14 million to all 11 borrowers; in other words, the defendant had been ordered to compensate the 11 plaintiffs only for interest.

The focus of the trial was on whether the plaintiffs would be able to have their initial principals returned, as well as the illegal high intereSCPAyments they made.

The Supreme Court approved above third view and ordered the defendant loan shark to restore all repayment by a borrower: the court ruling applied a provision in the Civil Code that “the return of payments made for things contrary to public order and decency cannot be demanded” to the business of loan-sharking; the ruling indicated that loan sharks should not be able to demand victims who borrowed money from them pay back their loans and that the victims should be compensated for the entire amount they have already paid back; in a word, the court ordered a loan shark to compensate his customers for both the principal and the illegally exorbitant interest rates he charged, overruling a high court decision. The court sent the case back to the Takamatsu High Court, ordering it to recalculate the award to include the principal.

Earlier this year, Japan and Switzerland reached an agreement to divide some 58 million Swiss francs (about $57 million or ¥6 billion at current exchange rates) seized by Swiss authorities from a bank account related to the Goryo-kai, with the portion due Japan to be returned to loan-shark victims.           Takamatsu Appeal court decision on 19th December 2008

On 19th December 2008, the Takamatsu Appeal court approved a borrower’s claim that a usury had to reimburse all of amount repaid by the borrower; the amount included loan obligations and lending interest, the Yomiuri Shimbun reported. This ruling is based on the Supreme Court Decision which asked to the original court to review the amount of compensation in lending by usury.

26.7    Law reform

Our cabinet decided that revised Money Lending business act will be enforced in 18th June 2010. The decision on the cabinet was held on 18th April 2010.

According to this law reform, lending interest rate would be restricted up to 20%; and lending which is over one third of annual income would be prohibited principally.

On the other hand, this law reform faces significant opposition from money lending businesses; they insists loudly that the requirements of lending restriction should be made more toned downed. According to the opinion, revised law would destroy poor customer who faces difficulty to borrow money from legitimate lender, therefore poverty people would be forced to use unlawful financial sector, so called “Yamikin”.

Consumer Lending Business lauded that the law revision would make the status of borrowers worse to access to consumer loan companies; therefore, they would force to have their loan from usuries. This report stresses bad influence by the law revision. Is it true? Money Lenders Association is expositing a law enforcement that obliges money lenders to prohibit lending to customers who already owe debt not mortgaged beyond one third of their yearly income.  The consumer lending business association published a report in terms of the status of borrowers. The summery can view in this site.

However, the government is going to enforce this law reform routinely. On the other hand, some lawmakers even  in the ruling Democratic party agree such allegation; they say that the restriction may make borrowers,  who fall already in the situation of  over indebtedness, difficult to borrow money from lawful money lenders, thus they are forced to take their loan from illegal lending business.

This argument may be  protecting  money lenders who get serious damages due to ten of thousand claims by overpayment debtors. Excessive lending shall not improve the over indebtedness; on the contrary, it make the situation of poor’s getting worse. To prevent this concern, it is necessary to prepare the effective system for pours to be lined from public sectors immediately, adding to be fulfilled social welfare to ensure living of pours.

26.8    state of lenders and debtors

The Financial Services Agency conducted survey to the status of money lenders and consumer loan borrowers before enforcement of revised Money Lending business act in June 2010.  The finding results of businesses  and  consumers can be  viewd  on the agency website.

26.9    Validity of contact

The Legislative Council of the Ministry of Justice is progressing the Civil Law reform. Today, 8th committee has held in 27th April 2010. Whether an article concerning repayment to apparent obligee was necessary to change was included in this time discussion.

Article 478 in Civil Law stipulates that if an debtor does repayment his debt to an apparent obligee, the repayment is valid when the debtor is bona fide and no-fault for believing the obligee as a true right-holder. Many court rulings show that real right-holder’s fault should not been required to the result; therefore, even if real right-holder is no fault, the repayment to apparent obligee by debtor is valid.

In Japan, to show a seal and bank book to a bank is usual way for a depositor to prove his identification to a bank.  Identity theft is a material issue in Japan as same as other countries; to give relief to an no-fault victims, the Depositor Protection Act was enacted and enforced in 28th February 2006. But the law only applies to identity theft cases by forged or stolen cash card or credit card through ATM, and the law restrict individual who can get relief. In other word, the act does not apply the case where offering deposit repayment is asked by a seal and bank book, as well as internet banking.   

When  a pretended depositor with seal and bank book  asks repayment from his/her account, even if the seal or the bank book is stolen or forged, a repayment to the offering person is possible to be valid. This result is not affected whether real right-holder is no-fault.

Consumer Protection Committee of JFBA insists that fault to a true right holder shall be required as a condition for a bank to be exempted his obligation. To the proposal, banking sector opposes because repayment to a depositor is obligation to customer and not fresh contract in which a bank has an opportunity not to respond. If a right-holder’s fault is required to the repayment of a bank, the bank is necessary to confirm to real right-holder whether the obligee is real right-holder or not; acceding to the circumstances, there would be impossible case where the bank executes it; if the bank owes responsibility even in the case, it is not fair. Banking sector would stress it and insist to be lightened his burden in repayment. 

However, this claim is not enough: a bank is in a position where he could make sure to real right-holder ahead of his repayment, whereas a innocent bank customer had no opportunity to interrupt for a bank to repay deposit to pretended obligee.  Such no-fault customer should be protected rather than a bank.

27    Investment trading

27.1    Claims and litigations

According to the NCAC, the number of inquiries concerning a investment transaction is significantly increasing; private equities, FX trading, futures and options. The transition is as follows:2003: 4,281, 2004; 4,902, 2005: 6,105; 2006: 7,585; and 2007: 9,004. The figures is doubled in recent 4 years; average amount of damages is around 6 million yen and elderly people is targeted. The Mainichi Shimbun reports it.

“COMPARATIVE REPORT ON CONSUMER POLICY REGIMES”[[60]], compiled by the DTI in 2003, is quite interesting. Regarding consumer redress, the country report[[61]] concerning Japan concluded “Most consumer complaints regarding goods and services are handled through negotiations between consumers and businesses.”

 This remark is right and wrong. Actually, the ratio of consumers who file complaints to the court is few. But it would not be few comparing to EU countries. It is pointed out in “Product Liability Litigation in Japan” on March 25th 2007.

 For instance, the tendency can be found in investment disputes, especially securities and futures. The court rulings regarding securities can be viewed in website[[62]] of the lawyers group. The number of court rulings that consumers won is 400 so far. These rulings were almost within a decade and the number would be more and more if consumes failed.

 The number of litigations of commodity futures transaction between consumers and business is more than securities. Osaka District Court has 26 civil divisions. Probably each divisions deal with several cases constantly.

 Of course it must be admitted that almost consumer disputes are resolved through negotiations between consumers and businesses as above notice. However consumer who files lawsuits is not so few. And the court decision has been pulling up the level of consumer relief. The role of litigation or court decision is quite important in Japan. 

27.2    Commodity Futures

27.2.1     Customer

The law divides a customer as individual retail customer and professional investors, and gives more protection to the individual investors rather than professional customers.

Professional investors mean Futures Commission Merchants, Qualified Institutional Investors under Securities and Exchange Law, Commodity Investment Sales Managers(Commodity Pool Operators), Commodity Investment Advisors(Commodity Trading Advisors), relevant parties provided in foreign laws and commercials. [Article 107 of Ministerial Ordinance]

27.2.2     Regulation

Outline of 2004 Commodity Exchange Law” presents the outline of code of conduct of Commodity Futures Practices act:

FCMs shall engage in his/her business of accepting consignment of commodity transactions, without conducting a solicitation that results in or might result in the lack of protecting consignors through inappropriate solicitation in light of the knowledge, experience or status of assets of a customer [Article 215 of the Law].

Customer solicitation rule is defined in a detailed manner in “Customer protection guideline of commodity futures trading” established by the Competent Ministries.

27.2.3     Prohibition of unsolicited call

New Law introduced opt-in scheme as a rule of solicitation.

Previous law only stipulated prohibition of unfair solicitation [Article 214 (v)~(viii) of the Law]. the Law prohibited unfair solicitation, which had been regulated by Ministerial Ordinance. Followings are the cases to be prohibited: 1) Soliciting a customer who has declared his/her intention of not making consignment of a transaction, including his/her intention of not accepting such solicitation, 2). Soliciting in a manner which may cause trouble to a customer, 3). Informing a customer of the trader’s trade name and that the solicitation is intended for a transaction of commodity futures without confirming the customer’s intention as to whether he/she will accept such solicitation, 4) Recommending a customer to have both short and long positions of the same commodity in the same contract month in the same amount.

27.2.4     Disclosure

FCMs had been required to explain certain items [Article 47 of former Ministerial Ordinance]. The new law precisely regulates FCM’s duty to explain risks to customers. FCMs shall explain 1. to 4. below to customers except for professional investors* [Article 217.1 of the Law]. If FCMs fail to explain 1., 2. or 3., they shall be liable for the losses of the customers [Article 217.2 of the Law]: 1). Commodity futures trading system – Leverage Effect [Article 217.1(i) of the Law], 2). The risk of loss (possibility of the loss exceeding the amount of margin deposit) [Article 217.1 (ii) of the Law], 3). Matters which may influence the judgment of customers decisions [Article 217.1 (iii) of the Law], 4). Matters related to major points of consignment contract [Article 217.1 (iv) of the Law and Article 104 of Ministerial Ordinance]
In commodity futures transaction, broker-dealers may buy or sell futures over their own position along with customers’ position on commission.

Certainly, Commodity Futures Transaction allow their activity legitimately. Whilst they should have Chinese wall between their own dealing to dealing on commissions, their trading position may be contrary to their customers’ position. Attorneys of customers claim that the broker-dealers should make their position clear to their customers due to their good faith or fiducially duties; however, lower court rulings have been divided for two decades.

The Supreme Court eventually concluded in this controversial issue on 16th July 2009; in the ruling, broker-dealers have reveal their own position to their existing customers, whenever they make own dealings in opposition to their customers’ position.

27.2.5     explanatory duty

If a customer had some experience of securities trading, a customer should not be deserve participating commodity futures trading, so long as the aim of such trading were going to have in long term and those trading did not conduct frequently.

This thought should be quite naturally; it can be found in many court rulings. For instance, the Kobe district court ruling on 27th March 2009 mentioned it; the decision asserted that above mentioned experiences did not justify that the customer had suitability for the futures trading.

27.2.6     suitability

New law maintains the suitability rule as previous law.

27.3    securities

Securities transaction is regulated by several regulations; the Financial Instruments and Exchange Act, which was enforced September 30, 2007 and details of Act and Regulations can be viewed in FSA web site and the Financial Instruments Salas Act are significant.

27.3.1     Stock trading

Tokyo Appeal Court accepted the claim of the plaintiff and ordered to the Nomura Syouken, giant securities company in Japan, to pay JPY 57,500,000 as damage compensation, on May 30, 2007. 

The plaintiff claimed to the defendant company to pay about  JPY 100,000,000.  According the rule, the plaintiff is a single woman, now 56 years old. She was lured securities transaction by a employee of the defendant several years ago, but at the time she had been quite busy for nursing care to his father at the trading period, therefore she was not afford to manipulate her transaction. In other word, she was in the situation to be forced to be obeyed by the employee’s advice and recommendation on her trading.

The court said that the employee took advantage this situation, and exploited his position of power and he continued to solicit her to many high risk societies trading such as EB bonds which caused her a huge amount loss. The court also said it was equivalent for the customer’s securities account to be ruled substantially by the broker, therefore the trading practices was regarded as unfair practices; it did not consider the plaintiff’s ability, intention of investments, financial status, and on the other hand the employee‘s advise substantially intends to get charges overt these consecutive trading by the plaintiff’s loss.

Eventually, the court concluded that the defendant was regarded unfair commercial practices were equivalent to pay damage compensation based on tort. The court expanded the amount of damage compensation as ten times rather that the ruling of district court. The district court only admitted the compensation regarding the EB bond transactions in virtue of high risk and not suitable for the plaintiff.

The Securities Product Practices act that recently revised the Securities Practices act strengthens consumer protection, and seeks for the securities business to take account of the customer’s suitability, including investigating it prior to both making a contract and advising a transaction by the regulation.

27.3.2     FX trading

The Financial Services Agency has an idea that FX leverage must to be regulated because present figure may be too speculative: in 2010, the magnification shall  be curved under 50 times, and in 2011 the figure would be more lessened, under 25 times. Acceding to the result of FSA survey on January 2009, amongst 122 FX trades, 41 traders offer their customers over 100 times magnification whereas the number of traders who adapt magnification under 25 times is only 20 . Some traders offer 600 times as magnification, whereas futures trading leverage is from 10 to 20 and securities margin trading is about 3 times. The Japan Federation of Bar Associations claimed that the leverage should be limited at least under 25 times, on 28th May 2009.  

27.3.3     Structured products

On March 26, 2010, the Osaka district court approved a claim of a customer who asked to pay an compensation from a securities company, Nomura;  the ruling is posted on a website of the supreme court. The court blamed the defendant  that the sales of the products should be regarded as a gamble and the products was not suitable for the plaintiff whose trading intention was conservative.

27.3.4     Loco London

The Kyoto District Court says that the Loco London transaction is a gambling that the criminal law is applicable. The decision was on 12th August 2008, Mainichi Shimbun reported.

27.4    unlisted shares

Will unlisted shares go up?  Rogue traders undertake it, and they recommend consumers to purchase them. Damage claims have been significantly increasing recently.  According the NCAC, claims concerning private equities in 2005 fiscal years had increased to 1,298 whereas the number of claims in 2004 was 222. 

While many court claims were filed to nationwide courts, judges recognized the illegality of scam trading. Therefore, it affected the court procedure of interrogation. The Tokyo Appeal Court, on 15th May 2008,  approved a customer’s claim without the interrogation of the defendant; the ruling asserted that the sales promotion of private equities should be presumed as fraudulent commercial practices.

27.5    scandalous delisting of stock

The Tokyo District Court approved about ¥230 million in damages, on 25th 2008, to 176 of the 289 individual investors who sued for financial losses incurred by the scandalous delisting of Seibu Railway stock in 2004.

The plaintiffs were individual investors and four trust banks, including Mitsubishi UFJ Trust and Banking Corp. The defendants include Seibu Railway Co., Prince Hotels Inc. and Yoshiaki Tsutsumi, former chairman of Kokudo Corp., which was once the core firm of the Seibu Railway group. The individual investors demanded a total of ¥1.32 billion, and the trust banks sought ¥12.1 billion, from the defendants.

During the court battle, the plaintiffs argued that Seibu Railway stock had continued to be listed on the market thanks to the falsification of its financial statements and that they suffered losses through the purchase of stock that they should have never acquired. The defendants countered that the plaintiffs’ own investment decisions caused the losses.

In the decision, the court  found the individual investors had been damaged by the plunge in Seibu Railway stock after the railway declared in October 2004 that it had been falsifying ownership data on Kokudo’s holdings. The Tokyo Stock Exchange delisted Seibu Railway stock in December that year. The judge acknowledged the investors’ losses and ordered the defendants to pay compensation.

More than 10 similar lawsuits have been filed over the Seibu Railway scandal.  In September 2007, the Tokyo District Court ordered Kokudo to pay ¥680 million in damages to All Nippon Airways Co.

28    Insurance, pension plan

28.1    explanatory duty

We have been suffering damage by frequent earthquakes. Hanshin earthquake in January 1995 was recent largest one. Following it, Tyuetsu earthquake in October 2004 and Noto earthquake in March 2007 happened. Therefore, many consumers form contracts of earthquake insurance, voluntarily or by solicitation of an insurance company. However, it is difficult for consumers to understand precisely the meaning of terms and condition in earthquake insurance contract, even if they can read it literally. The Supreme Court ruling on December 9th 2003 was the case where it became dispute concerning whether the explanation duty of the insurance company was suitable.

The plaintiffs were victim of the Hanshin earthquake disaster, and they made an insurance contract with the defendant insurance company before then. Afterwards, the plaintiffs suffered the damage of their properties by fire based on the earthquake. according to the written contract, the damage caused by the earthquake was not covered by insurance claim; Plaintiffs’ damage was caused by enlarged conflagration after the earthquake, therefore their damages were not included within the fire damage claim; although there was earthquake insurance to be paid to the fire caused the earthquake and the insurance was bundled with usual fire insurance, these agreement was excluded from claimants’ contract and the plaintiff company did not explain it. As a result, the plaintiffs made signature on the contract agreements, while the plaintiffs had not well understanding that they could not get payment by the fire claims caused by earthquake. The plaintiff claimed for their fire damage based on their insurance to the defendant company, but the defendant refused plaintiffs’ claims.

The claimants argued that the defendant failed to explain the details of earthquake insurance and therefore they could not have precise perception as their contract did not contain the earthquake insurance. The plaintiffs claimed that the defendant commercial practices constituted the breach of explanation duty in good faith. The plaintiff claimed not only property damages, but also the mental distress damage caused by loss of their opportunity to receive the claim of earthquake insurance. Original court ruling The Osaka Appeal Court October 31th, 2001[63] approved a part of plaintiffs’ claims as following: the information of the earthquake insurance was significantly important; the information was necessary for the plaintiffs to make their informed decision for their contract; in the situation where there were significant imbalance in information and bargaining power between the plaintiffs and the defendant, the defendant company should have performed efficient explanation concerning the earthquake insurance. The decision stated that the defendant, in addition to the content of the earthquake insurance, should have explained the meaning of stamping seal on the column described for the plaintiffs not to take agreements of earthquake insurance in good faith, The defendant should have explained that the plaintiff might suffer disadvantage by stamping their seal to the column described not to make an agreement of earthquake insurance; notwithstanding, the defendant was considered failing to explain them in negligence. The court concluded that if the defendant had performed his explanatory obligations, there would have been opportunity for the plaintiffs to make contracts concerning the earthquake insurance and the mental distress damage of the plaintiffs was the loss caused by the breach of accessory duty.

However, the Supreme Court Decision on December 9th 2003[64] did not endorse the original court ruling, stating as follows: the earthquake insurance contract was not about physical loss like as injury or death, but only about property damage; therefore, even if the defendant’s practices was insufficient in providing information or explanation, it was not regarded as illegal omission that was worthy of the plaintiffs’ mental distress damage; the plaintiffs stamped their seal to the column described not applying the earthquake insurance, thus the plaintiffs could recognize that the fire insurance was different from the earthquake insurance and they had opportunity to confirm the additional information concerning the earthquake; the fact that the plaintiffs stamped their seal to the column presumed that the plaintiffs recognized the content of the contract and the meaning of stamping seal to the column; on the other hand, there could not admit any proof that the defendant hid the terms and condition regarding the earthquake insurance. The ruling concluded that even if the defendant performed unsuitable commercial practices in providing explanation, there was not enough proof that could justify the plaintiffs’ claim approved.

The conclusion of the Supreme Court is based on the presupposition that if the defendant provides the written information to the plaintiffs, the plaintiffs might have perception of the contents of the document. However, as the ruling of Osaka Appeal Court indicated, it is usually difficult for the consumer to understand the content of insurance contract if they have not suitable explanation of the meaning by the defendant. Even if the plaintiffs can read it literally, the fact does not mean that they can understand the content precisely. It is because there is significant imbalance in information and bargaining power between the plaintiffs and the defendant. The defendant should bear the duty of confirmation regarding the plaintiffs’ recognition of the content of the contract in question. If the defendant comes to know that the plaintiffs’ recognition is wrong, the defendant should have to correct them and confirm that the plaintiffs make their informed decision. The Supreme Court ruling is considered insufficient because of neglecting the imbalance of information and ability between the plaintiffs and defendant.

28.2    Personal pension plan

The National Consumer Affairs Centre compiled and published a result of personal pension plan complaints in 2008 fiscal year, in July 22, 2009.

Banking sector started to sell a personal pension plan over the counter. According to the NCAC, accumulated number of the complaints which were dealt with the center was 1,398 cases since then. Recently, the number tends to increase rapidly. In 2008 fiscal year, 477 complaints were drawn to the centre, doubled compared with 205 cases in the previous fiscal year.

The result shows many problematic conducts over the sales by banking sector, such as a misrepresentation, lack of risk disclosure of the instrument or an aggressive sales marketing. Obstructions to conducting the right of cooling by consumers are reported.

28.3    Syuhan Nenkin case

It was already reported in several newspapers in UK. Syuhan Nenkin was a private pension fund managed by “Zenkoku Kouri Syuhan Kumiai Chuokai” (the All Japan Liquor Merchants Cooperative Association (AJLMA). The member of the association is small and medium sized liquor sales merchants.  The AJLMA invested 80 per cent of its total assets, JPY 14,500,000,000 (£70m), in the Invaro scheme via a Canadian firm which issued named “chancery bond” from February 2002 to March 2004. The bond is strictly risky as investment, so called structured bonds.  

The bond was issued by the Canadian company, a Specific Purpose Company, which invested to Invaro, a Liverpool-based litigation-funding company in Briton. The firm’s core activity was lending legal fees and insuring lawyers to make personal injury claims in return for a fee. The lawyers were mainly acting in motor accident or miners’ illness cases. At one point, Invaro employed 200 people and had 80,000 claims on its books. 

Invaro went into voluntary liquidation in June 2004 after trading for a little over two years. At that time key activities included lending and assisting individuals to make personal injury claims in return for a fee. At the time of liquidation the company was dealing with 80,000 claims. According to claims from liquidators, the company owes £85 million. 

The association was one of investors worldwide, including hundreds of British investors. The pension fund became insolvency and stopped the payment since December 2003 and abolished the scheme in March 2005. Thus, about 20,000 members of the association have been left without a pension.    

The members of the association filed lawsuits with Tokyo District Court and Osaka District Court. However, the chances of any money would be supposed being returned “probably quite small”. 

29    Franchise

29.1    Regulation, guidance

METI issues a guidance of a franchise business on 17th March 2009. It underlines to make a suitable representation to a franchisee. Actually, there has regulations that make sure the business to be fair; notwithstanding, there has been also a lot of disputes in this business type; and a lot of court rulings which approved claims of franchisees has been accumulated up until now. The guideline seems to be base on the standard which has been formed in these court decisions.

29.2    Unfair commercial practices

The Supreme Court ruled on the dispute regarding unfair contract terms issue on June 11, 2007[65].

A defendant was a franchisee store of major convenience store chain, Severn Eleven Japan. The defendant formed the contract with the plaintiff franchiser. In usual scheme of the contract, the claimant distributes to each store including the plaintiff. It also makes multiple distributions per a day possible. Generally, foods are delivered two to five times a day from factories to each store. Since products are delivered as needed, stores don’t need large stock areas. Annex to the contract indicated it and the explanation of plaintiff’s officer prior the forming contract was same, too. As above mentioned the defendant deliver the goods several times per day, therefore the stock that was not sold, have to be discarded. Initial explanation, the defendant said that the cost of the discarded products was not charged to the plaintiff as franchisee. And it was stipulated in the annex attached the contract document, in addition to the guidance of management issued by the claimant.

In the preparation to open the store, however before forming contract, the plaintiff officer explained the defendant store that the cost of discards goods should be included in merchandise cost, therefore the discarded goods cost was in charge of the defendant. After making contract, the claimant sought paying to the defendant the lump sum costs of discarded goods, because there was no clause that stipulated who was in charge of payment regarding discarded products.

Osaka Appeal Court admitted the plaintiff’s claim: according to Generally Accepted Accounting Principles, the plaintiff’s claim was reasonable and there was presumption to be interpreted the contract as the plaintiff’s claim. Supreme Court decision However, the Supreme Court reversed the original verdict and favored the defendant’s plea: as interpretation of this contract, the defendant’s argument was possible, because there was no definition concerning the sales goods cost and the interpretation that the sales goods cost included the discarded goods cost. The defendant argument was reasonably accorded the content of annex attached to this contract document; therefore the defendant’s plea was more persuasive than the plaintiff’s claim.

As supporting opinion attached this ruling, Isao Imai and Ryoji Nakagawa, both Supreme Court Judges, blamed the plaintiff’s commercial practices: in the contract terms, there could not be found the definition of sales goods cost, therefore it was quite ambiguous. The contract term should be clear and comprehensible, because it was standard business terms that was stipulated unilaterally by the plaintiff and the terms were not negotiated with the defendant, so the defendant had no other way except to accept it. And the requirement of clearness and comprehensiveness over the contract terms was quite important by the reason why the franchisees including the defendant were small personal entrepreneur and they usually have less information or recognition to Generally Accepted Accounting Principles. The contract terms was so ambiguous that it should not be suitable, in the stand point of material difference regarding the knowledge, information bargaining power between the defendant and the plaintiff.

For instance, the principle of interpretation of standard business terms in German civil code is referable and interesting: § 307 Control of content (1) Provisions in general conditions of business are ineffective if they unreasonably disadvantage the user’s contracting partner in a manner contrary to the requirements of good faith. An unreasonable disadvantage can also arise from the fact that the provision is not clear and comprehensible. Our law has not such clause. For the purpose of preventing confusing for interpretation of contract terms amongst transaction by the business parties, it is necessary to make it clear in civil law clause like as a German law.  Concerning the consumer contracts, the disadvantageous terms for consumer are void by the Consumer Contract Law (sec. 10).

The court decision is not so remarkable and prominent rather than previous ruling. The original court ruling might change if the contract were made by business and consumer. The judgment seems to be prejudiced by the nature of contract that was formed between business parties. The interpretation of a contract should be done by good faith taking account of the difference of knowledge, experience and bargaining power between contract’s parties, even if the both contract parties are business peoples. Although the Supreme Court Ruling did not refer it, the concept of the ruling would be based on the supporting opinions.

This ruling overturns the plaintiff’s commercial practices as de facto standard; therefore the influence would be significant to the actual managing practices in Plaintiff Company. For reference, as of 2005, there are 43,667 convenience stores in Japan. Among them, 7-Eleven leads the market with 11,310 stores, followed by Lawson and FamilyMart. 

29.3    case

Regarding to a dispute related convenience franchise case, the Supreme Court ruled in favor to the franchisee on June 12th, 2007[66]. It followed to the ruling on June 11th 2007, but the point at issue was different from the previous case. Focused issue was the extension and degree of explanation obligation by franchiser.

The plaintiff was a convenience store franchisee, who formed an agreement with defendant franchiser in 1995 and became a Seven-Eleven franchise. While total profit is determined by subtracting purchase costs from total sales in usual, the defendant, however, asked his franchisees to exclude perishable goods discarded and losses from shop lifting from the purchase price. The basis of the claimant’s petition is not clear, because the ruling is not yet published in the web-site of the court. Assuming from the report of press,[1] he might insist that he did not take a explanation whether the cost of perishable goods discarded was deducted his profit or the defendant practice was unfair in virtue of reaching their best-before dates when the defendant decided. The plaintiff claimed reimbursement of paid partial royalties, about 34 million yen, to the defendant whereas he paid out of the about 386 million yen in total royalties from 1995 to 2003.

The Tokyo District Court rejected the claimant’s claim, but the Tokyo High Court ordered the defendant to pay back about 22.43 million yen in royalties, saying the obligee was not given an adequate explanation when he signed the franchise agreement with the obligor.

The Supreme Court’s No. 2 Petty Bench approved the plaintiff’s claim regarding to the method of calculating royalties whereas approved the legitimacy of the defendant’s royalty calculations and returned the case to the Tokyo High Court, stated that further deliberation was necessary to determine whether sufficient explanation was given to the plaintiff at the time the royalties’ agreement was signed. Presuming the result of the original ruling, the Tokyo Appeal court might accept the plaintiff’s claim as same as his previous decision.

The point of issue is whether the information duty based on good faith is imposed to the defendant or not and how the defendant must perform it, if the duty is accepted. This contract is formed between businesses to business. However, a small sized business like the plaintiff is materially inferior to the defendant in knowledge, information and bargaining power. Probably it is likely considered as consumer to business contract. Therefore, the defendant is necessary to inform adequate and enough information to the plaintiff in good faith, referring actual level of plaintiff’s knowledge, experience and so forth. In that situation, what basis of the benchmark is suitable considering the degree and extension of explanation duty performed by the defendant? Taking account of particularity of this case, where the plaintiff is not so different from a consumer in knowledge and experience, the benchmark is based on the existence individual in actual case. At least, recent tendency of lower court decisions might accept this conclusion. On contrary, in EU countries, the benchmark is supposed average consumer or reasonable person. Is it average business in general or existence body in individual cases?

Other major convenience store chains use a similar calculation method to Seven-Eleven, and a number of similar cases have been filed across our country. If the high court determines the franchisee did not receive an adequate explanation, it could affect litigation involving other convenience store operators.

30    Scam

30.1    work-in-home

Work-in-home scams or disputes have been more increasing along with progressing internet age in Japan[[67]]. The status quo of disputes was reported by the report compiled by the Tokyo Metropolitan government in 2002[[68]] and 2004[[69]]. Regarding disputes with Credit Company, the National Consumer Affairs Centre reported the finding in April 2006[[70]] and Kanagawa prefectural government issued the same report[[71]] in 2004.

 Provably the manner of scam would be as same as in other countries. The rogue traders solicit consumers to participate the work-in-home businesses using personal computers, inducing to make a good profit. In those cases, the traders, in condition to introduce the works,  ask for the consumers to have skill to use several sorts of computer software, the trader says, and the consumer is stirred up to purchase the learning materials and computer hardware from the trader. Notwithstanding, even if the consumer finishes the training menu, the trader never introduces any work to the consumer and the victim can not only recover the initial investment.

 The Trade Practices Act in Australia regulates this kind of scheme comprehensively (art. 59).  In Japan, the Specific Trading Practices Law regulates the work-in-home. But the law is less protective than the TPA in virtue of not comprehensive. The law limits the goods, rights and services regulated. The computer data processing services was added the list several years ago after the disputes regarding work-in-home scam were seriously expanded.

The law prohibit the touting the scheme (art. 53(3)). The trader is obliged the information duty and prohibit the unfair trading practice like as false representation and omission of material matter, in addition duress.

On the other hand, a consumer has a cancellation right within 20 days since the contract document stipulating the cancellation right delivered (art. 58(1)) If a trader makes a false representation, the consumer can rescind the contract (art. 58-2(1))  

The administrative body supervises the trader and it can seek the trader any material which prove that the trader does not commit the false representation (art. 54-2).

30.2    Telephone bill scam

The complaints concerning communication services are on the increase in the field of charges for telephone usage. The General Affairs Ministry suggested it on the report on 15th April 2008. The report presents the feature of trouble in communication services in 2007.

According to the Consumer Advice Centre Concerning Electronic Communication, the number of complaints in 2007 was 10060: the claims concerning charges for phone usage was top; next was phone scam; third was a defamation via internet. For 4 years till 2006, a phone scam was top.

30.3    Identity theft

According to the National Police Agency, the number of bank transfer scams involving automated teller machines plunged 64.2 percent last year to a record low 7,340 cases. The  article was posted  by the Japan Times on 22th January 2010.

” The amount of money swindled in the billing scams tumbled 65.3 percent to about ¥9.58 billion, also the lowest since officials started compiling statistics in 2004, the year the fraud became a social problem. Damages from the crime had topped ¥25 billion every year between 2004 and 2008. A typical case of bank-transfer fraud using an ATM is the “It’s me” scam, in which a person posing as a relative asks the victim over the phone to remit money, saying it’s needed to get out of trouble. The agency said the number of billing fraud cases that led to an arrest increased 28.8 percent to a record 5,669 in 2009, accounting for 77.2 percent of all billing fraud cases reported to police, up sharply from 21.5 percent the preceding year.”

The financial Services Agency revealed the significant growth of identity theft scam, reported on 6th November 2007. According the report, the number of the identity theft tends to increase in every year. Especially, the scam by thy stolen banking card is most significant: 2,412 cases in the later period in 2007 fiscal year. in 2006 fiscal year, the 6,848 cases were proved. The number seems to decrease.

On the other hand, the growth of identity theft scam on the internet banking was critical: 137 cases in the second half of 2007 fiscal year, from April to September 2007; the detriment amount was about 154,000,000 yen. In 2006 fiscal year, the number of scams was 103 cases while 49 cases were proved in 2005 fiscal year. The growth rate is doubled in every year.

The Depositor Protection Act from forgery or stolen card only applies to the banking card; the regulation does not apply to both the credit card and internet banking. But, to the victims of the identity theft through the internet banking, the banks paid compensation to the victims over 74 cases in 82 cases (90.2%) , voluntary. In the forgery banking card scam, the bank also paid compensation over 554 cases in 568 cases (98%), while 87o cases in 1,648 cases (52.8%) were resolved by compensation in the stolen card frauds.

Reported by the Japanese Bankers Association in Japan on 7th February 2008, made clear by survey to the 178 banks nationwide, the number of such scams is 181 cases and the damage amount is about 133,000,000 yen, in 2007. Each figure is increasing rather than last year: the number was 44 cases and the amount of detriment was 43,000,000 yen in 2006.

According the Depositor Protection Act, only damages of deposit withdrawn by plastic cards are compensated; the detriment by other withdrawing measures, a savings passbook and internet banking, is not reimbursed at all.

However, under the increasing scam, Japanese Bankers Association may consider the repayment in the case of withdrawing deposit by the savings passbook or a internet banking voluntary.

30.4    Billing fraud

By the end of April, the number of billing frauds are estimated 7,836 and the damage are deemed 11,182,760,000 yen in 2008, the National Police Agency described.

According to the National Police Agency, 30% of victims of billing fraud rejected assistance from banks, who recommended their customer to examine the reliability of the instruction of money transfer, the Asahi Shimbun reported on 22th June 2008.

The agency inquired to 429 of victims in their thirties to nineties cheated more than 3 million yen in last year; more than 80% of victims had believed that they never might be defrauded. Even though 30% of victims were cautioned by banks, they transferred money as directed by scammers.

30.5    Tree Planting scam

Since April last year, local consumer affairs bureaus in five prefectures in the Kansai region have received about 50 inquiries regarding potentially unscrupulous investment packages advertising overseas tree-planting projects, The Yomiuri Shimbun reported. Scammers defrauded the victims to invest in tree-planting projects in  Australia and the United States. Scammers presented that the project was to plant paulownia which grew fast and absorbed a large amount of carbon dioxide, therefore it would help combat global warming. According to the victims, the scammers promised victims to get dividends at the time the trees were felled; the money they invested would double within as little as five years. After victims invested in a tree planting project, they could not became  to contact with the traders,  making it impossible for them to cancel the contract.

30.6    ” Green-ownership Scheme”.

Who owes responsibility of failure of “Green-ownership investment”? Around two decades ago, our government established ” Green-ownership Scheme”. At that time, forestry industry was in the state of financial deficit, therefore our government considered to start new system: it raised a investment money in exchange for an ownership of forest equity; the scheme was about to strike a dividend of  money which was a payment by public auction of lumber growing in the forest. The scheme had set up  from 1984, and a initial maturely date arrived at 1999. However, based on the consecutive falling of timber market since the schemes started, investors could not be paid back even their principle. The scheme has been said as “State-run Tree-planting Scam” from beginning. The number of investors is estimated at 86,000, and total sum of raised money is about 50 billion yen, by the article of the Asahi Shimbun on 3rd August 2007. This problem has been pointed out and discussed in our parliament several times. Our government faced an accusation, because the falling below per risk would be foreseen initially by the tendency of lumber market diminished, but it was not noticed to the investors efficiently. The investors might file a lawsuits to our government for damage compensation in near future.

30.7    Investment scam

Tokyo metropolitan government instructed the elderly to be exploited by the solicitation of fictional investment. It was reported on November 16th 2006.[[72]]

According to the government, elderly victims drastically increased compared previous year. The consultation related to the investment during April to September in 2006 was 359 (181 in 2005); the number of elderly was 202 (84 in2005).  The details of investment were Private Equity (164), commodity futures (73), investment to anonymous association (31). An amount of average investment is 3,532,000 in Private Equity; 6,206,000 in commodity futures; 4,048,000 in investment to anonymous association. Of course, the amount of investment is not equal to his damages. However invested money is not restored in my view.  

Rogue traders canvass consumers that the private equity would increase in value at the Initial Public Offering. The exploding of consultation numbers regarding Private Equity is pointed out in the remarks of the National Consumer Affairs Center. According to the report in April 2006[[73]], the consultation to the rural consumer centers increased from 222 in 2004 fiscal year to 1296 in 2005 fiscal year. This tendency seems to be reflected more to the elderly. 

Regarding to the commodity futures transaction, most market is situated in foreign country or private market, the trader would say. Usually, they do not buy and sell acutely in foreign market, because they need to have a license in the market and usually it is not easy to get it for them. If they have not a suitable license, they have to entrust their customer’s order to the licensed broker in foreign market. However, they are almost puppet and only prepare the information of foreign market to the rouge traders.

30.8    E-commerce, cyber crime

17 Victims who purchased products such as DVD, paid JPY370,000, for participating virtual land transaction sued selling company and et.al  asking to pay a compensation to the Osaka district court on 28th April 2010.

The plaintiff claimed that the virtual space did complete partly and virtual space was not eligible for investment whereas the defendants promised the plaintiff to earn money by selling or letting the space, therefore these sales should be fraud.

The National Police Agency published the report regarding the state of cyber crime in the 2008 fiscal year. According to the agency, police across Japan uncovered 6,321 cases of Internet-related crime last year, and increase of 15.5 percent and the highest number since comparable data were first kept in 2000. It can be viewed in English on an article of the Japan times on 27th February 2009. The figure represented a threefold jump from 2,081 cases recorded in 2004. There were 112 cases of threats made over the Internet in 2008, up 53 from the preceding year, the NPA said. In one instance, a woman was referred to prosecutors in connection with posts she made on an entertainer’s blog. The comedian was forced to close his blog due to a flood of abusive messages from other Net users. There were 61 libel cases involving the Net, down 18. However, police received a record 11,516 requests from the public to look into potential libel cases, up 29.8 percent. Police unearthed 1,740 cases of illegal access involving the use of stolen passwords, up 20.7 percent. The cases involved 137 people, up 11. Fraud cases mainly involving Internet auctions inched down 0.3 percent to 1,508. Offenses against a law restricting Net-based dating services jumped threefold to 367, while offenses against an ordinance aimed at protecting youths soared 90.0 percent to 437. Police across the nation were asked by the public to check up on 81,994 potential cybercrimes in 2008, up 12.0 percent. The figure which hit highest crime levels in 2008 is led chiefly by cases of online defamation. 

The number of reports of online defamation increased sharply to 11,516, up 29.8 percent from the previous year. Our government revised the electronic message sending law, Act on Specified Commercial Transactions and Act on Regulation of Transmission of Specified Electronic Mail. This law revision may stimulate the increasing of the number of cyber crimes in future. Double opt-in measure is said to be useful for marketing under the revised law regime. The definition of double opt-in is that a user has subscribed for a newsletter or other email marketing messages by explicitly requesting; it and confirming the email address to be his own. This is usually done by responding to a confirmation email sent to the email address in question. On a double opt-in list, all email address must be confirmed before they are added. A request for confirmation is sent to the submitted address and the address owner must take some action to confirm that he is the owner of the email address, the address is working and he indeed wants to subscribe. The confirmation action, usually, is as simple as replying to the confirmation request or clicking on a link. This measure is expected to eliminate the chance of abuse where somebody submits somebody else’s email address without their knowledge and against their will. But there should be no difference double opt-in rule and opt-out rule: that measure may give effectiveness of nuisance to consumers.

30.9    Secret winning Pachinko game

It is difficult for general people, including me, to win and get premium in Pachinko, Japanese pinball. It is neither more or less than a gambling; therefore there is no way to win the gambling. Some rogues firms raised money from gamblers to promise secret way of pachinko game. So far, there have been several court rulings that approved claims of damages or repayments by defrauded customers. A ruling of Osaka District Court on 6th March 2009 constituted a part of customer oriented decisions.

The article of the Yomiuri Shimbun reported it as follows.  

” The Osaka District Court has ordered a Tokyo-based firm to repay 3.86 million yen to a man who had paid the firm for pachinko-playing tips, stating in its ruling that the methods did not work. Presiding Judge Hiroshi Ogawa has ordered the firm to reimburse the man from Osaka Prefecture for all money he paid for lessons in pachinko “techniques.” According to the ruling, the 52-year-old dispatch worker approached Nihon Risachi Koryaku Data Banku after seeing an advertisement in a pachinko magazine in which the firm claimed its staff could demonstrate winning pachinko strategies and tutor customers until they won. After a staff member assured the man that the method was foolproof, the man paid the firm 1.05 million yen in November 2007 and was coached at a pachinko parlor in Osaka Prefecture, but he was unable to make money when he played. The firm later told the man that in order to win big he would have to learn an additional method. Thinking the money he had already spent would go to waste if he did not achieve a large win, he made six payments to the firm of between 200,000 yen and 800,000 yen before June last year for additional coaching, but still did not land a jackpot. The man reportedly took out a loan against his life insurance policy to pay for the lessons. During the trial, the firm insisted that pachinko is a game and that the plaintiff was at fault for thinking it could earn him money. The judge rejected the firm’s argument, saying: “There was no substance to the methods, and the firm’s advertisement contradicts the reality of the situation. It’s illegal to lure customers in such way.” The firm did not comment after the ruling other than saying it had not received a written ruling. In a similar suit, the same firm last month was ordered by the Amagasaki branch of the Kobe District Court to repay about 7 million yen to a man of Nishinomiya, Hyogo Prefecture, who had purchased what he said was useless information. Supposed winning methods for pachinko have been the subject of complaints sent to consumer centers nationwide. Members of the Osaka Bar Association last year established a defense counsel for people lured into paying for instruction in such methods.

Recently, Tokyo district court ordered the instruction business, who promised to win pachinko, to pay compensation to the plaintiff who lost money to by the instruction text. The ruling was held on 24th April 2010.

30.10 shrimp fostering investment

The Yomiuri reports a shrimp fraud case on 4th and  5th  July 2008.

” The chairman of an investment firm  was arrested Wednesday on suspicion of swindling money from investors in fictitious overseas shrimp farms.  According to the police, Tokyo-based World Ocean Firm has collected about 85 billion yen from investors, about 75 billion yen of which was used to pay dividends and return the principal to investors to secure their trust. The police believe the company made 10 billion yen through the fraud. According to a senior official at the Metropolitan Police Department, the company established nine accounts to receive money from investors. About 84.85 billion yen was transferred to the accounts from about 35,000 people from spring 2005 to May 2007. The chairman  was an former executive officer of Yuzen, a Tokyo-based company that employed a multilevel marketing system. The company started collecting money from about 3,000 people in 1998 telling them, “If you pay a 1 million yen membership fee and purchase top label products and cosmetics, you will receive 250,000 yen each month.”

30.11 Home improvement

According to the National Police Agency, the number of arrested rogue traders was 220 in 67 cases in 2006.[[74]] These are against the Specific Trading Practice Law. It was published in February 2007.

The disputes related to home repair sales by doorstep selling are not decreasing. The agency issued below report in July 20, 2005.[[75]]

In March 18, 2007, Hokkaido prefectural government issued an order the company to stop his business because of breach against doorstep selling act (the Specific Trading Act).[[76]] According to the prefectural government, the company was against the duty on the law: indicating the solicitation purpose on visiting (sec. 3); misrepresentation (sec. 6(1)); and inefficiency of content in written document delivered to consumer (sec. 5): 1) the company disguised the purpose of his visiting. Although his real purpose was to sell the quite expensive home repair services, he hide it and pretended the purpose of his visiting to provide inexpensive cleaning services of water pipe; 2) after carrying out the cleaning services, they misled the consumer, said that a floor bottom got wet seriously so that it was necessary to put a desiccating agent even if the services was not so effective; 3) moreover, the company misled the consumer that the consumer had not right of cancellation based on the Specific Trading Act, because the repair services provided dependant on specific order by the consumer. In the purchasing contract of a desiccating agent, the company deceived the consumer to say that it was exclusion of the article giving the cancellation right because of the consumable goods; 4) the company deceived the necessity of repair concerning to the roof and bath.

30.12 Plumbing repair

On an article March 2008, the NCAC reported a feature of complaints regarding a spate of problems involving plumbing repair services. A number of problems can take place in the plumbing system such as in the kitchen, bathroom and/or toilet and problems include water leakages from taps or blockages in pipes. In the event of such a problem, it is often the case to look up distributed advertisements and flyers and/or advertisements in telephone books to find a plumber appearing to provide services at a ‘low cost.’ However, there have been spates of consumer inquiries and complaints relating to plumbers called to provide services in an emergency situation concerning their fees and services provided. Under these circumstances, NCAC provided the following information to consumers in order to prevent further consumer damages.

As for plumbing repair services provided to a consumer who called the plumber by looking at advertisements such as flyers, PIO-NET received 1,104 consumer inquiries and complaints in the Fiscal 2006 and 795 in the Fiscal 2007 (there were 522 cases in the corresponding period of last year, demonstrating a year-on-year increase of 273 cases with an increase rate of 52.3%). In this manner, the number of consumer inquiries and complaints shows an upward trend year by year.

After looking through distributed advertisements, flyers and telephone books, the consumer called a plumber advertising ‘Water leakage repair service – Base rate: From 3,000 yen.’ The consumer asked the plumber to perform the repair by assuming that the fees would be reasonable though was charged at a surprisingly high rate.

The consumer called a plumber to have a water leakage and pipe blockage repaired. However, the plumber did not explain the causes or status of the problems in a sufficient manner but insisted that the installation needed to be replaced. The consumer consequently concluded a contract which bore high costs.

 When making a complaint to the company, the consumer was intimidated and payment was demanded. The consumer felt threatened and paid what the company asked for.

30.13 Land banking

Defrauded consumers by a land-banking scheme are cheated by scammers again and again. The National Consumer Affairs Centre reported the status quo of the injuries in 2006.  The traders invite the former victims to carry out measurement or advertisement of their plots to promote them; but their real aim is to get the payment of the measurement or the advertisement from the victims. Tokyo metropolitan government revealed the names of 6 land-bank companies that rejected the demand of the disclosure concerning the details of their market promotion.  The latest criminal case was detailed on 9th May 2008.

Up until about 20 years ago, many companies marketing plots of land as an investment opportunity had been damaging a number of consumers located in urban area such as Tokyo and Osaka. This scheme was similar as a land-banking fraud in UK. 

Rogue traders offered “investment opportunities” to private individuals under a scheme in which fields purchased by the company were divided into plots of land and then sold for investment purposes. Lands sold in Tokyo were located in rural area, Hokkaido, Aomori; Osaka people bought lands situated in Mie, Nara and Hyogo prefecture. Lands acquired were divided into smaller plots and sold to private individuals with a view to be developed as a housing or industrial estates near future.

30.14 Role of utilizing personal loans in scam

Utilizing personal loans seems applicable for multiple indebtedness debtors by virtue of reducing monthly payments for plural consumer credit companies.

But, this practice tends to expand the term of repayment and increase the total sum of debt. Moreover, the practice is useful for swindlers to defraud multiple borrowers: the swindlers induce the debtors to utilize their loans; they assert the practice is useful for them to enlighten every time repayment; they say it is necessary to deposit securities or pay charges for their works.

The National Police Agency warns that this kind of consumer fraud is increasing, reported 28th December 2007.

The number of scam is estimated above 5,000 cases in 2007 and the amount of damages is calculated about 3,200,000,000 yen till October 2007.

[1] http://www.hyogoben.or.jp/hanrei/pdf/0002.pdf

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

[3] http://www.keidanren.or.jp/japanese/policy/pol217.html

[4] http://www.consumer.go.jp/seisaku/shingikai/keiyaku5/file/yoshi.pdf

[5] http://www.yomiuri.co.jp/national/news/20070803it13.htm

[6] http://www.courts.go.jp/hanrei/pdf/8B2BAEC7DB79F1EC492571240026988E.pdf

[7] http://www.consumer.go.jp/kankeihourei/kihon/20040602-kihon.html  

[8] http://www.fsa.go.jp/news/newsj/17/hoken/f-20060301-1.pdf

[9]  http://www.metro.tokyo.jp/INET/OSHIRASE/2007/01/20h1b400.htm

[10] http://www.pref.hokkaido.lg.jp/NR/rdonlyres/261F50A9-7F38-4C93-9ABD-F465C44B5064/0/hp181211.pdf

[11] http://www.pref.shizuoka.jp/seibun/sb-12/kouhyou/sinihonhukuzyu.html

[12] http://www.pref.gifu.lg.jp/contents/news/release/H18/z00001253/files/190123.pdf

[13] http://www.courts.go.jp/hanrei/pdf/8B2BAEC7DB79F1EC492571240026988E.pdf

[14]  http://www.consumer.go.jp/seisaku/shingikai/keiyaku2/file/shiryo4-3.pdf

[15] http://www.jcfia.gr.jp/channel/newspdf/67.pdf

[16] http://www.kokusen.go.jp/pdf/n-20040415.pdf

[17] http://www.fsa.go.jp/status/kasikin/20070330/09.pdf

[18] http://www.kantei.go.jp/jp/singi/saimu/kettei/070420/gaiyou.pdf

[19] http://www.kantei.go.jp/jp/singi/saimu/kettei/070420/honbun.pdf

[20] http://www.fsa.go.jp/news/18/kinyu/20070611-3.pdf

[21] Money-Lending Business Control and Regulation Law; Regulation for Loan Business in Japan

[22] Administrial guideline for management of money lenders

[23] http://www.fsa.go.jp/news/newsj/17/kinyu/20060307-1.pdf

[24] http://www.yomiuri.co.jp/dy/national/20070616TDY03004.htm

[25] http://www.leicester.gov.uk/sys_upl/documents/departments/dpt_2275.pdf

[26] See Akemi Kon, Yuri Bengoshi no heya

[27] See Mainich Shimbun: October 10, 2006.

[28] http://edinburghnews.scotsman.com/index.cfm?id=1120972006

[29] http://www.city.osaka.jp/Lnet/oshirase/20050811.html

[30]  http://www.courts.go.jp/hanrei/pdf/3309D34DD6ABBFFD492570D90026971D.pdf

[31]  http://www.courts.go.jp/hanrei/pdf/20070501160212.pdf

[32] http://www.yomiuri.co.jp/national/news/20070526i105.htm

[33] http://www.courts.go.jp/hanrei/pdf/20070403112951.pdf

[34] http://www.kokusen.go.jp/

[35]  http://www.kokusen.go.jp/hello/pdf/g_gyoumu05.pdf

[36] http://www.yomiuri.co.jp/book/news/20070514bk12.htm

[37] http://www.ombudsman.jp/

[38] http://www1.neweb.ne.jp/wa/kabuombu/

[39] Aashi Shmbun: http://www.asahi.com/life/update/0517/TKY200705170327.html

[40] Mainichi Shimbun: http://www.mainichi-msn.co.jp/keizai/wadai/news/20070527k0000m020108000c.html

[41] http://www.consumer.go.jp/seisaku/caa/soken/seido/hourei/file/gaidorain-sinkyu.pdf

[42] http://www.courts.go.jp/hanrei/pdf/20070531182751.pdf 

[43] See NCAC, the change of the consultation related to the accident caused by defective products and the court filing based on the Product Liability Law (October 6, 2006)

[44] http://www.kokusen.go.jp/pdf/n-20061006_3.pdf

[45] See NCAC, the report concerning use of the Product Liability Law (July 2006), http://www.consumer.go.jp/kankeihourei/seizoubutsu/file/hokoku.pdf

[46] Recent ruling would be the Kyoto District Court case. It can be found in the court website, http://www.courts.go.jp/search/jhsp0030?action_id=dspDetail&hanreiSrchKbn=01&hanreiNo=34235&hanreiKbn=03

[47] Tom Ginsburg and Glenn Hoetker, http://www.journals.uchicago.edu/JLS/journal/issues/v35n1/350104/350104.web.pdf

[48] CLAYTON UTZ, Landmark survey reveals Asia Pacific product liability hotspots (February 27, 2007)

[49]  http://www.kokusen.go.jp/pdf/n-20020807_3.pdf 

[50] http://www.kokusen.go.jp/cgi-bin/byteserver.pl/pdf/n-20020606_2.pdf

[51] http://datafile.kokusen.go.jp/jpl_graph_show.asp

[52] Asahi Shimbun: March 23, 2007

[53] METI, August 12, 2005,  http://www.meti.go.jp/policy/consumer/tokushoho/kaisei2005/060130tokushouhou_tsuutatsu.pdf

[54] http://www.metro.tokyo.jp/INET/OSHIRASE/2007/05/20h5m300.htm

[55] http://www.kokusen.go.jp/pdf/n-20061108_2.pdf

[56] Revised in 2006, http://www.fsa.go.jp/news/newsj/17/kinyu/20060307-1.pdf

[57] There are 5 credit information institutions in Japan: Consumer Information Center, Japan Information Center, Personal Credit Information Center Consumer Credit Information Bureau and Teranet.

[58]  http://www.kokusen.go.jp/pdf/n-20060322_2.pdf

[59] http://www.courts.go.jp/sihotokei/nenpo/pdf/DMIN1-2.pdf

[60] http://www.dti.gov.uk/files/file34673.pdf

[61] http://www.dti.gov.uk/files/file34828.pdf

[62] http://www2.osk.3web.ne.jp/~syouken/

[63] http://www.courts.go.jp/hanrei/pdf/A5AEEE141ACF94E949256B590025BA7F.pdf

[64]  http://www.courts.go.jp/hanrei/pdf/69E243819A9B5CC849256EA2002681A1.pdf

[65]  http://www.courts.go.jp/hanrei/pdf/20070611112940.pdf 

[66] http://www.yomiuri.co.jp/dy/national/20070612TDY02008.htm

[67] http://www.kokusen.go.jp/pdf/n-20040903_2.pdf

[68] http://www.shouhiseikatu.metro.tokyo.jp/sodan/tokei/pdf/bunseki_1510.pdf

[69] http://www.shouhiseikatu.metro.tokyo.jp/torihiki/f_tori/pdf/gyoumu.pdf

[70] http://www.shouhiseikatu.metro.tokyo.jp/sodan/kyusai/pdf/h_hokoku32.pdf

[71] http://www.pref.kanagawa.jp/osirase/syohi/sodan/kyusai/kyusai_kako/0408.pdf

[72] http://www.shouhiseikatu.metro.tokyo.jp/sodan/kinkyu/061116.html

[73] http://www.kokusen.go.jp/pdf/n-20060406_2.pdf

[74] http://www.npa.go.jp/safetylife/seikan35/20070223.pdf

[75] http://www.kokusen.go.jp/pdf/n-20050720_1.pdf

[76] http://www.asahi.com/english/Herald-asahi/TKY200611010149.htmlhttp://www.pref.hokkaido.lg.jp/NR/rdonlyres/5AB084CC-5F10-497B-8AE6-B23E9672FA0F/0/hppress190308.pdf


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