Consumer Protection

A New Path for Resolution: Understanding Commitment Procedures under Japan's Revised Premiums and Representations Act

Japanese Attorney at Law - Bengoshi L.L.

• 8 min read
Infographic showing the Keihyōhō commitment procedure flow

TL;DR

  • Japan’s 2023 amendments to the Act against Unjustifiable Premiums and Misleading Representations (Keihyōhō) introduced a commitment procedure (effective 1 Oct 2024) that lets companies avoid cease-and-desist and surcharge orders if the Consumer Affairs Agency certifies their remedial plan.
  • Eligibility is limited; egregious or repeat cases are excluded, and revocation restores full penalties.
  • The first certified plan (Feb 2025) shows the CAA expects concrete fixes, enhanced compliance programs and—often—voluntary refunds.
  • Businesses should treat the procedure as a strategic, resource-intensive alternative that still entails public disclosure and monitoring.

Table of Contents

  • What are Commitment Procedures?
  • The Commitment Procedure Process: Step-by-Step
  • Scope and Exclusions: When is Commitment Available?
  • Strategic Considerations for Businesses
  • Practical Implementation and First Case
  • Conclusion

The 2023 amendments to Japan's Act against Unjustifiable Premiums and Misleading Representations (景品表示法 - Keihin Hyōji Hō or Keihyōhō), which primarily took effect on October 1, 2024, introduced several significant changes aimed at strengthening consumer protection. Among the most impactful procedural innovations is the establishment of a "commitment procedure" system (確約手続 - Kakuyaku Tetsuzuki).

This system offers a new avenue for resolving suspected violations of the Act, providing an alternative to formal administrative sanctions like cease-and-desist orders or surcharge payment orders. Modelled conceptually after similar mechanisms in global antitrust enforcement (including Japan's own Antimonopoly Act), the commitment procedure allows for potentially faster, more collaborative resolutions between the enforcement authority and businesses. For companies operating in Japan, understanding how this procedure works, its scope, and its strategic implications is crucial.

What are Commitment Procedures?

In essence, commitment procedures allow a business suspected by the Consumer Affairs Agency (CAA) of violating the Keihyōhō (regarding either excessive premiums or misleading representations) to propose a voluntary plan of corrective actions. If the CAA approves this plan, it will refrain from issuing formal administrative orders (措置命令 - souchi meirei or 課徴金納付命令 - kachōkin nōfu meirei) for the conduct covered by the plan.

This mechanism aims to achieve several objectives:

  • Promote Voluntary Compliance: Encourage businesses to proactively address potential issues identified during an investigation.
  • Ensure Swift Resolution: Enable quicker correction of problematic conduct and remediation of consumer harm compared to potentially lengthy formal proceedings.
  • Increase Enforcement Efficiency: Allow the CAA to resolve certain cases more efficiently, potentially freeing up resources for more complex or egregious violations.

It's important to note that entering the commitment procedure does not constitute an admission of legal violation by the business. The process is initiated based on the CAA's suspicion of a violation, not a formal finding.

The Commitment Procedure Process: Step-by-Step

The process, outlined in the revised Keihyōhō (Articles 26-33) and detailed in CAA operational guidelines (運用基準 - un'yō kijun), generally follows these steps:

  1. CAA Investigation and Notification: The process begins after the CAA has initiated an investigation into a potential Keihyōhō violation. If the CAA finds sufficient grounds to suspect a violation and deems the commitment procedure appropriate for the specific case, it may issue a formal "Commitment Procedure Notice" (確約手続通知 - kakuyaku tetsuzuki tsūchi) to the business under investigation. This notice outlines the suspected violation, the relevant legal provisions, and informs the business of its right to apply for commitment procedure certification. The CAA holds discretion on whether to issue this notice; it is not an automatic step in every investigation. Guidelines suggest the CAA will consider factors like the need for swift correction and whether a business-proposed plan might yield a more effective, tailored remedy. Businesses can also proactively consult with the CAA during an investigation to explore the possibility of entering this procedure.
  2. Business Application and Commitment Plan Submission: Upon receiving the notice, the business has 60 days to decide whether to apply for certification. If it chooses to proceed, it must submit a formal application accompanied by a detailed "Commitment Plan" (確約計画 - kakuyaku keikaku). This plan is the core of the procedure and must outline the voluntary measures the business commits to undertake.
  3. Content of the Commitment Plan: The plan must propose concrete measures designed to:CAA guidelines provide examples of typical measures, including:
    • Cease the suspected violating conduct (if ongoing).
    • Remedy the effects of the suspected violation on consumers (影響是正措置 - eikyō zesei sochi).
    • Ensure future compliance and prevent recurrence.
    • Discontinuing the problematic representation or premium offer.
    • Issuing clear notifications to affected consumers about the issue (e.g., clarifying misleading information).
    • Implementing or strengthening internal compliance programs, including employee training, advertising review protocols, and monitoring systems.
    • Undertaking specific actions to restore consumer benefit, potentially including voluntary refunds (返金 - henkin), although refunds are not strictly mandatory.
    • Securing a board resolution confirming the commitment to cease the conduct and prevent recurrence.
  4. CAA Review and Certification (確約認定 - Kakuyaku Nintei): The CAA thoroughly reviews the submitted Commitment Plan based on two key criteria:If the CAA determines that the plan meets both criteria, it will issue a "Certification of the Commitment Plan" (確約認定 - kakuyaku nintei). If the plan is deemed insufficient or unreliable, the CAA will reject the application.
    • Sufficiency (十分性 - Jūbunsei): Are the proposed measures adequate to eliminate the suspected violation and remedy its impact on consumers?
    • Reliability/Certainty (確実性 - Kakujitsusei): Is it likely that the business will reliably and effectively implement the proposed measures?
  5. Effect of Certification: Once a plan is certified:
    • The CAA will not issue a cease-and-desist order or a surcharge payment order regarding the conduct covered by the certified plan.
    • The CAA will publicly announce the certification, disclosing the name of the business, an outline of the suspected violation, and the contents of the certified Commitment Plan. The announcement clarifies that the certification does not constitute a formal finding of a legal violation.
  6. Implementation and Monitoring: The business must implement the measures outlined in the certified plan. The plan often includes requirements for the business to report its implementation progress to the CAA, sometimes involving verification by an independent third party (like external legal counsel).
  7. Revocation of Certification: If the business fails to implement the certified plan without justifiable reason, or if the certification was obtained based on false information, the CAA can revoke the certification (認定の取消し - nintei no torikeshi). Revocation effectively nullifies the benefits of the commitment procedure; the CAA can then resume its investigation and potentially issue formal administrative orders based on the original suspected violation. Notably, the statute of limitations for imposing surcharges is tolled during the commitment procedure and extended for two years following a revocation, preventing businesses from using the procedure merely to run out the clock.

Scope and Exclusions: When is Commitment Available?

The commitment procedure is potentially available for suspected violations of both the rules concerning premiums (Article 4) and misleading representations (Article 5 – including superior misrepresentations, advantageous misrepresentations, and other designated misleading representations like stealth marketing).

However, the CAA's operational guidelines clarify that certain cases are generally considered unsuitable for commitment procedures:

  • Malicious or Severe Violations: Cases where the business is suspected of acting intentionally or with gross negligence, such as making representations known to be baseless.
  • Repeat Violations: Businesses that have been subject to Keihyōhō measures (like cease-and-desist orders or surcharge payment orders) within the previous 10 years for similar conduct are typically excluded.
  • Criminal Conduct: Actions that might warrant direct criminal penalties under the revised Keihyōhō are unlikely candidates for commitment procedures.

The procedure offers a middle ground between formal administrative orders and less formal administrative guidance (指導 - shidō). Guidance is typically used for minor issues or where a violation isn't clearly established but there's a risk (osore) of violation. Commitment procedures apply when there's a concrete suspicion of a violation that could otherwise lead to formal orders.

Strategic Considerations for Businesses

The introduction of commitment procedures presents both opportunities and challenges for businesses under CAA investigation:

Potential Advantages:

  • Avoidance of Formal Orders: This is the primary benefit. Certified commitment plans prevent the issuance of cease-and-desist and surcharge payment orders, which carry significant legal and financial consequences.
  • Mitigated Reputational Harm: While the commitment itself is public, avoiding a formal finding of violation and the associated negative publicity of a souchi meirei or kachōkin nōfu meirei can be advantageous.
  • Control over Remedies: Businesses can proactively propose remedies tailored to their specific situation, potentially leading to more practical and less disruptive outcomes than imposed orders.
  • Faster Resolution: Compared to potentially drawn-out formal investigations and appeals, the commitment procedure can offer a quicker path to resolving the matter.

Potential Disadvantages and Risks:

  • Public Disclosure: The certification and the commitment plan details are made public, clearly associating the company with the suspected violation, even without a formal finding.
  • Effort and Resources: Developing a comprehensive and acceptable Commitment Plan requires significant internal effort, potentially including legal counsel and compliance resources.
  • Implicit Acknowledgment: While not a formal admission, proposing a corrective plan inherently acknowledges the CAA's concerns about the conduct in question.
  • No Preclusion of Private Actions: A certified commitment plan does not prevent consumers or competitors from pursuing private litigation (e.g., damage claims) related to the underlying conduct.
  • Revocation Risk: Failure to fully implement the plan carries the risk of revocation and the reinstatement of formal enforcement action.

The Role of Refunds (返金 - Henkin)

While the Keihyōhō itself does not directly mandate consumer compensation as part of administrative enforcement, the CAA guidelines indicate that including measures for consumer redress, such as voluntary refunds, within a Commitment Plan is considered a positive factor when assessing the plan's "sufficiency."

The 2023 revision also made the separate surcharge refund mechanism more flexible by allowing refunds via electronic money (in addition to cash). This increased flexibility might encourage businesses to incorporate refund schemes into their commitment proposals more readily as a demonstration of good faith and effective remediation. The first certified commitment plan case did indeed include partial refunds to affected customers.

Interaction with Voluntary Reporting (自主申告 - Jishu Shinkoku)

The Keihyōhō has a system (Article 9) where businesses that voluntarily report a potential surchargeable violation before an investigation begins can receive a 50% reduction in the surcharge amount. There were concerns that the availability of commitment procedures (which can avoid the surcharge entirely) might disincentivize early voluntary reporting. While the CAA hasn't explicitly stated that prior voluntary reporting guarantees access to commitment procedures, proactive self-reporting and cooperation are generally viewed positively and could potentially influence the CAA's decision on whether to offer the commitment procedure route if an investigation is subsequently opened.

Practical Implementation and First Case

The CAA published detailed operational guidelines for the commitment procedure system in April 2024, clarifying the criteria for initiating the procedure, the requirements for commitment plans, and typical remedial measures.

In February 2025, the CAA announced the first-ever certification of a commitment plan under the revised Keihyōhō. The case involved a nationwide fitness gym chain suspected of making advantageous misrepresentations regarding its membership fees (specifically, promoting limited-time discounts that were allegedly available beyond the stated period). The certified commitment plan included:

  • A board of directors' resolution to cease the suspected conduct and prevent recurrence.
  • Measures to thoroughly inform general consumers about the representations made.
  • Enhancements to the company's internal compliance systems related to advertising review.
  • A plan to provide partial refunds (representing the difference between the standard and discounted fees) to customers who had joined during the relevant period without receiving the advertised discount.
  • A commitment to report the implementation status of these measures to the CAA.

This first case provides valuable insight into the types of violations the CAA might deem suitable for commitment procedures and the range of corrective actions expected in a certifiable plan.

Conclusion

The introduction of commitment procedures marks a significant evolution in the enforcement landscape of Japan's Act against Unjustifiable Premiums and Misleading Representations. It provides a potentially valuable pathway for businesses to resolve suspected violations proactively and avoid formal administrative sanctions. However, it requires a careful strategic assessment, a willingness to implement meaningful corrective measures, and an understanding of the associated public disclosure. As the CAA gains more experience with this new tool, businesses operating in Japan should monitor its application closely and consider its implications for their compliance strategies and responses to regulatory investigations.