JAPAN Trends and Developments Contributed by: Kensaku Yamamoto, Laarni Vinas, Junko Asai and Kosuke Masuda, SHUSAKU
vided by Amazon or YouTube, can trigger pen- alties under Japanese law, including the Unfair Competition Prevention Act. Be Cautious with “No.1” Advertisements: Insights From Recent Legal Cases and Consumer Protection Measures In today’s competitive marketplace, businesses often resort to “No.1” advertisements, such as “best in sales”, “top customer satisfaction”, or “number one in cost performance”, in order to stand out and attract customers. These “No.1” ads can be effective marketing tools if objective data authorises them. However, if misleading or lacking in factual basis, they can violate advertis- ing regulations like the Act Against Unjustifiable Premiums and Misleading Representations ( 景品 表示法 ,). Recent enforcement actions by the Con- sumer Affairs Agency (CAA) and court rulings highlight the growing scrutiny of these practic- es, especially as the agency released a detailed report on “No.1” ads in September 2024. This section outlines the legal risks of “No.1” ads, particularly those based on subjective evaluations, and the necessary precautions businesses should take to avoid legal pitfalls. Why are “No.1” ads problematic? Significant impact on consumer decisions The CAA’s concern stems from the fact that “No.1” advertisements significantly influence consumer purchasing decisions. The agency conducted consumer surveys as part of its report, and nearly 50% of respondents indi- cated that such advertisements either “strong- ly” or “somewhat” impacted their decision to purchase a product or service. A misleading “No.1” advertisement can have a disproportion- ate impact, misleading consumers into thinking they are selecting the best option when this may not be the case.
Subjective evaluations as a basis for “No.1” ads A growing concern for regulators is the increase in “No.1” advertisements based on subjective evaluations, such as customer satisfaction or recommendations from experts. These adverts are frequently based on surveys or “image sur- veys” rather than objective performance metrics. For instance, phrases like “customer satisfaction No 1” or “cost performance No 1” give consum- ers the impression that the ranking is based on reliable, unbiased customer feedback. However, over 50% of consumers mistakenly believe these rankings reflect evaluations from actual users when in many cases, the surveys are based on impressions rather than direct product use. In its March 2024 press conference, the CAA emphasised its focus on subjective “No.1” ads, particularly those based on “image surveys”. The agency made it clear that it is especially concerned with ads that measure perceptions rather than objective performance. The report notes that “subjective evaluations” are problem- atic when consumers believe they are based on actual users’ feedback, which may not be the case. The role of research companies in misleading advertisements Another issue highlighted by the CAA is the prob- lematic relationship between advertisers and the research firms conducting surveys. Often, advertisers rely too heavily on external research agencies without sufficiently verifying the meth- odology or legitimacy of the survey. This leads to the proliferation of dubious “No.1” rankings, as seen in several enforcement actions. The 2022 “Protest Letter on Unfair ‘No.1’ Surveys” from the Japan Marketing Research Association (JMRA) is a testament to the growing concerns about these practices within the industry itself.
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