Dial Q2 Shock Bills: Japanese Supreme Court Limits NTT's Claim Based on Good Faith

Judgment Date: March 27, 2001

In the early 1990s, Japan experienced a surge in consumer issues related to "Dial Q2" services – a premium-rate telephone service that allowed users to access various information and entertainment content provided by third-party Information Providers (IPs), with charges conveniently billed by NTT (Nippon Telegraph and Telephone Corporation, the plaintiff) alongside regular phone bills. While innovative, the service quickly led to numerous cases of "bill shock," where unsuspecting subscribers received enormously high phone bills, often due to unauthorized use by family members, particularly minors. A landmark Supreme Court of Japan (Third Petty Bench) decision on March 27, 2001 (Heisei 7 (O) No. 1659) addressed whether NTT could claim the full amount of such charges from a subscriber whose child had used the service without permission, especially when NTT's initial rollout of the service lacked sufficient warnings and safeguards.

The Dial Q2 Service and the Skyrocketing Bill

The defendant, Y, was a residential telephone subscriber with NTT (X). Y's standard telephone service contract was governed by NTT's tariff (本件約款 - honken yakkan). Article 118, Paragraph 1 of this tariff stipulated that the subscriber was liable for charges for all calls made from their telephone line, regardless of who actually made the calls.

NTT launched its Dial Q2 service in 1989, expanding it nationwide by October 1990. This service enabled users to connect to IPs by dialing "0990" numbers. The IPs offered a wide array of content, and users were charged both a call toll by NTT and an information fee set by the IP, with NTT acting as the billing and collection agent for both.

The dispute arose when Y's 15-year-old son, A, without Y's knowledge or consent, made numerous lengthy calls to Dial Q2 services between January and early February 1991. These calls were primarily to chat lines featuring conversations with unknown women. As a result:

• Y's February 1991 phone bill (covering January usage) included Dial Q2-related call tolls amounting to ¥81,525.
• Y's March 1991 bill (covering early February usage) included further Dial Q2-related call tolls of ¥19,555.
  These charges were vastly in excess of Y's usual monthly phone bill, which was typically under ¥10,000. Y was unaware of the Dial Q2 service's existence until receiving the shockingly high February 1991 bill. Upon understanding the cause, Y immediately took measures to block Dial Q2 access from the family's phone line.

NTT's Standard Contract vs. The New Reality of Dial Q2

A critical aspect of the case was NTT's rollout of the Dial Q2 service:

• General Accessibility: The service was made generally accessible from existing residential phone lines without requiring subscribers to opt-in specifically.
• Insufficient Initial Warnings and Safeguards: While NTT publicized the service launch in newspapers and made new tariff terms available at its offices, it did not individually notify existing subscribers like Y about the specific nature of Dial Q2, its content (which included adult-oriented and potentially addictive services), the significant risk of incurring extremely high charges, or, initially, provide easily accessible means for subscribers to block the service.
• Gradual Implementation of Countermeasures: Measures such as an ethics review board for Q2 programs and a user-initiated blocking service were introduced over time. For instance, the call-blocking option only became available in October 1990, and a dedicated Dial Q2 hotline for information and complaints was established in March 1991.
• Problematic Content and High-Risk Period: At the time of A's unauthorized use (January-February 1991), many Dial Q2 programs were adult-oriented or "party lines" (allowing multiple anonymous users to chat simultaneously), which were particularly attractive to, and prone to misuse by, minors and could easily lead to very high charges. NTT's preventative measures and consumer safeguards were still in their early, and arguably insufficient, stages.

NTT sued Y for the outstanding Dial Q2-related call charges. Both the Hiroshima District Court (Onomichi Branch) and the Hiroshima High Court (on appeal) dismissed NTT's claim. These lower courts generally found that enforcing the standard tariff (Article 118) to make Y fully liable for these specific Dial Q2 charges, given the circumstances of the service's introduction and nature, would be contrary to the principle of good faith and fair dealing. NTT appealed to the Supreme Court.

The Supreme Court's Nuanced Ruling: A 50/50 Split Based on Good Faith

The Supreme Court, in its judgment of March 27, 2001, partially overturned the lower courts' decisions. While it acknowledged NTT's right to claim some payment, it significantly limited that claim based on the principle of good faith.

1. Tariff Clause Generally Reasonable, But Subject to Good Faith:
   The Court first recognized that Tariff Article 118(1), making the subscriber liable for all calls from their line, was generally a reasonable provision. It served to minimize NTT's call charge collection costs and thus contributed to providing telephone services at lower and more rational rates for all users. Therefore, based solely on the literal wording of the tariff (本件約款の文言上は - honken yakkan no mongonjō wa), Y was indeed liable for the call charges incurred from A's Dial Q2 use.
   However, the Court emphasized that a telephone service contract, even one governed by a standard tariff (an adhesion contract), is fundamentally a bilateral private law contract. As such, it remains subject to general legal principles, including the principle of good faith and fair dealing (信義誠実の原則 - shingi seijitsu no gensoku, Civil Code Article 1, Paragraph 2). The rights and obligations arising from the contract must be considered in light of this principle.
2. Dial Q2 as a "Change in the Factual Basis of the Contract":
   The Court reasoned that when the factual circumstances underlying a contract undergo a significant change, leading to outcomes vastly different from what the parties originally anticipated or could reasonably foresee, the content and scope of the parties' contractual rights and obligations must be carefully re-examined.
   The introduction of the Dial Q2 service was deemed such a fundamental change:
   • Traditional telephone use was primarily for interpersonal communication, and the associated charges were generally predictable and fit within ordinary household expenses.
   • Dial Q2 services were fundamentally different. They offered access to a wide variety of information and entertainment, often with no inherent time limits, and carried the intrinsic risk of leading to "easily結び付く危険を内包していた" (containing an inherent risk of easily leading to) high charges.
   • The Supreme Court found that the launch of Dial Q2 by NTT in this manner changed the factual basis (契約のよって立つ事実関係が変化 - keiyaku no yotte tatsu jijitsu kankei ga henka) upon which standard residential telephone contracts had previously rested.
3. NTT's "Responsibility/Duty" (責務 - sekimu) as a Public Utility Introducing a High-Risk Service:
   The Court held that given the novel and high-risk nature of Dial Q2, NTT, as a public utility providing an essential service (residential telephone lines) to a wide range of households, had a responsibility or duty (sekimu) under the principle of good faith when launching this new service in a way that made it generally accessible from existing phone lines. This responsibility entailed:
   • Providing specific and adequate information to existing subscribers about the Dial Q2 service, its content, its potential dangers (including the risk of high charges, unauthorized use by minors, and problematic content).
   • Implementing possible and reasonable measures to prevent these risks from materializing, or at least to mitigate them (e.g., offering clear and easy opt-out or blocking mechanisms from the outset).
4. NTT's Failure to Fulfill This Responsibility:
   The Court found that, at the time Y's son A made the unauthorized Dial Q2 calls, NTT had not sufficiently fulfilled this responsibility. Its warnings to existing subscribers were inadequate, and its preventative measures (like blocking options) were still in their nascent stages and not fully effective or widely known. Y, the subscriber, was unaware of Dial Q2 and its specific risks. The excessively high charges incurred by Y were, in significant part, a consequence of NTT's failure to adequately discharge this responsibility.
5. Limitation of NTT's Claim Based on Good Faith and Equity:
   The Supreme Court acknowledged that the subscriber (Y) bears a general responsibility for managing the use of their telephone line. However, considering NTT's failure in its own responsibilities regarding the introduction of the high-risk Dial Q2 service, the Court found it would be contrary to the principle of good faith and the concept of equity (衡平の観念 - kōhei no kannen) to hold Y liable for the entirety of the disputed Dial Q2 call charges, especially those incurred before Y became aware of the problem and had an opportunity to take countermeasures (like blocking the service).
   The Court determined that an equitable resolution, balancing the responsibilities of both parties, was to limit NTT's claim against Y to 50% of the Dial Q2-related call charges incurred during the period of Y's unawareness. NTT's claim for amounts exceeding this 50% was deemed impermissible.

Justice Masamichi Okuda, in a concurring opinion, further elaborated on this, suggesting that the 50% apportionment of the burden was an equitable solution analogous to the principles underlying comparative negligence, where both parties contributed to the unfavorable outcome.

Analyzing the "Changed Circumstances" and Good Faith Application

The Supreme Court's approach in this case is noteworthy:

• It did not strictly apply the traditional legal doctrine of "change of circumstances" (事情変更の原則 - jijō henkō no gensoku), which usually pertains to unforeseen external events making contract performance impossible or radically different, and typically leads to contract termination or revision. Here, the "change" was introduced by one of the contracting parties (NTT, by launching Dial Q2). The remedy was a reduction of NTT's claim, not a full termination.
• The Court used the term "sekimu" (責務 - responsibility or duty in a broader, moral, or societal sense) to describe NTT's obligations regarding the safe rollout of Dial Q2, rather than "gimu" (義務 - a strict legal duty, the breach of which would typically lead to a claim for damages against NTT). This allowed the Court to use good faith as a flexible tool to adjust NTT's claim against Y, rather than opening the door to counterclaims for damages against NTT for breaching a specific legal duty.
• The 50% reduction reflects a judicial attempt to balance the subscriber's general line management responsibilities with the service provider's heightened responsibilities when introducing novel, high-risk services that fundamentally alter the existing contractual landscape for consumers.

It is also important to note, as highlighted in legal commentaries, that the Supreme Court issued other Dial Q2 related judgments on the same day. In cases where the subscriber could reasonably be expected to recoup the charges from the actual unauthorized user (e.g., a lodger or an employee who misused the phone), or where the subscriber had implicitly or explicitly consented to the use, NTT's claims for the full amount were generally upheld. This suggests that the particular vulnerability of an ordinary household subscriber, unaware of a new high-risk service being used by a minor family member without consent, was a key factor in the Court's decision to limit NTT's claim to 50% in this specific leading case.

Relevance for Modern Digital Services

Although Dial Q2 services are now a thing of the past, the legal principles articulated by the Supreme Court in this 2001 judgment remain highly relevant. In an era of rapidly evolving digital and information services, where new features, applications, or billing models can be introduced by providers that significantly alter the risk or cost profiles for existing users of ongoing services (such as internet access, mobile phone plans, or subscription streaming services), this case stands as an important precedent. It underscores that service providers, particularly those with a public utility character or a dominant market position, have a responsibility under the principle of good faith to ensure that consumers are clearly, adequately, and timely informed about such changes and the potential new risks they entail, and to provide reasonable safeguards. A failure to do so might lead courts to limit the provider's ability to strictly enforce standard contract terms for unexpectedly high charges incurred by consumers.

Conclusion

The Supreme Court's decision in the Dial Q2 telephone charges case represents a significant application of the principle of good faith and fair dealing to moderate the strict application of a standard contract term in light of new, high-risk services introduced by a dominant service provider. By finding that NTT had not adequately fulfilled its responsibility to inform and protect existing subscribers from the novel dangers of the Dial Q2 service, the Court equitably limited NTT's claim for charges arising from unauthorized use by a minor to 50%. This ruling serves as a lasting reminder of the judiciary's role in ensuring fairness in consumer contracts, especially when new technologies or service models introduce unforeseen burdens or risks for consumers.