Consumer Protection

Digital Deception or Fair Play? Applying Japan's Premiums and Representations Act to Online Advertising

Japanese Attorney at Law - Bengoshi L.L.

• 9 min read
Flowchart summarising Keihyōhō compliance for online ads: advertiser liability, affiliate monitoring loop, mandatory #AD/#PR disclosure, and stealth-marketing prohibition effective Oct 2023.

TL;DR

  • Japan’s Act against Unjustifiable Premiums and Misleading Representations (Keihyōhō) applies fully to online ads; there is no “digital carve-out.”
  • Advertisers are liable for affiliate and influencer claims; 2022 guidelines mandate contracts, monitoring and swift takedowns.
  • As of Oct 2023, undisclosed “stealth marketing” is expressly prohibited: ads must be clearly labelled (#AD / #PR, etc.).
  • Platforms escape direct liability in most cases, but regulators exert indirect pressure and may leverage other laws.
  • To stay compliant, build clear third-party rules, maintain claim substantiation, monitor content and train marketing teams.

Table of Contents

  • The Keihyōhō Framework: Core Principles
  • Applying the Framework Online: The “Digital/Analog Integration” Principle
  • Focus Area 1: Affiliate Marketing
  • Focus Area 2: Stealth Marketing
  • The Role of Digital Platforms
  • Other Emerging Digital Challenges
  • Compliance Strategies for Businesses in the Digital Age
  • Conclusion

The digital realm has revolutionized advertising, bringing unprecedented opportunities for businesses to reach consumers but also creating new challenges for regulation. Affiliate marketing, influencer collaborations, sophisticated targeting, and native advertising formats blur the lines between organic content and commercial promotion. In Japan, the primary law governing advertising fairness – the Act against Unjustifiable Premiums and Misleading Representations (景品表示法 - Keihin Hyōji Hō, or Keihyōhō) – predates the modern internet. How does this foundational consumer protection law grapple with the complexities of online marketing?

While Japan implemented significant revisions to the Keihyōhō in 2023 (effective October 1, 2024), these amendments didn't create a separate rulebook for digital advertising. Instead, Japanese regulators operate under a principle of "digital/analog integration," meaning the existing rules apply across all media. However, recent regulatory actions and guidance demonstrate a clear focus on applying these principles robustly to online practices, particularly affiliate marketing and the increasingly scrutinized area of stealth marketing.

This article explores how the Keihyōhō framework applies to digital advertising in Japan, focusing on key areas of concern like identifying the responsible party, affiliate marketing management, and the recent prohibition of stealth marketing.

The Keihyōhō Framework: Core Principles

Before diving into digital specifics, it's essential to recall the Keihyōhō's core prohibitions relevant to advertising:

  1. Misleading Representations (不当表示 - Futō Hyōji): The Act broadly prohibits representations likely to interfere with consumers' voluntary and rational choice-making. The main categories are:
    • Superior Misrepresentations (優良誤認表示 - Yūryō Gonin Hyōji): Misleading claims about the quality, standard, or other substantive aspects of goods or services (Art. 5, Item 1). This includes falsely claiming superiority over the actual product or competitors' offerings.
    • Advantageous Misrepresentations (有利誤認表示 - Yūri Gonin Hyōji): Misleading claims about price, quantity, or other transaction terms, making them seem significantly more favorable than they are in reality or compared to competitors (Art. 5, Item 2).
    • Other Designated Misleading Representations (内閣総理大臣が指定するもの - Naikaku Sōri-daijin ga Shitei suru Mono): The Prime Minister (delegated to the Consumer Affairs Agency, CAA) can designate specific types of representations likely to be misunderstood by consumers (Art. 5, Item 3). Examples include bait-and-switch advertising, certain comparative advertising practices, and, crucially, the recently designated category of stealth marketing.
  2. "Supplier" Limitation: A key structural element of the Keihyōhō's misleading representation rules (Article 5) is that they primarily apply to representations made by "an Entrepreneur... in connection with the transaction of goods or services which the Entrepreneur supplies" (事業者が自己の供給する商品又は役務の取引について行う表示 - jigyōsha ga jiko no kyōkyū suru shōhin mata wa ekimu no torihiki ni tsuite okonau hyōji). This "supplier" requirement is central to understanding liability in the digital advertising ecosystem.

Applying the Framework Online: The "Digital/Analog Integration" Principle

Japanese regulators have consistently maintained that the Keihyōhō applies equally to online and offline advertising. There are no special exemptions or rules solely for digital content. A misleading claim is misleading whether it appears in a newspaper, on television, or on a social media feed.

The primary challenge in the digital space lies not in whether the law applies, but how it applies, particularly concerning:

  • Identifying the Responsible Party (表示主体 - Hyōji Shutai): In complex digital campaigns involving advertisers, agencies, platforms, affiliates, and influencers, determining who is legally responsible for a misleading representation under the "supplier" definition can be complex.
  • Ensuring Compliance Across Channels: Advertisers face the challenge of ensuring representations made about their products by third parties (like affiliates or influencers) comply with the Keihyōhō.

Focus Area 1: Affiliate Marketing (アフィリエイト広告 - Afirieito Kōkoku)

Affiliate marketing involves third-party publishers (affiliates) promoting an advertiser's products or services on their own websites or social media channels, typically earning commissions based on resulting clicks or sales. This model can incentivize exaggerated or misleading claims by affiliates seeking to maximize conversions.

Who is Responsible?

Regulatory bodies and study groups in Japan have consistently concluded that, under the Keihyōhō, the advertiser (the business supplying the goods/services being promoted) is generally considered the responsible party (the hyōji shutai) for representations made by its affiliates. This holds true even if the advertiser delegates content creation to the affiliate. The rationale is that the advertiser initiates and benefits from the affiliate program and has ultimate control over its own product marketing, including the terms offered to affiliates.

Revised Management Guidelines (管理上の措置に関する指針 - Kanri-jō no Sochi ni kansuru Shishin)

Recognizing the risks inherent in affiliate marketing, the CAA revised its "Guidelines Concerning Measures for Businesses to Manage Premiums and Representations" in June 2022 to explicitly address advertiser responsibilities in this area. These guidelines, while not legally binding regulations themselves, outline the expected standard of care for businesses to avoid liability under the Keihyōhō (specifically relating to the general duty under Article 26 to take necessary measures to manage representations properly). Key recommendations for advertisers managing affiliate programs include:

  • Clear Communication: Clearly conveying Keihyōhō compliance requirements and the company's advertising standards to affiliates.
  • Contractual Obligations: Including compliance clauses in affiliate agreements.
  • Content Monitoring: Implementing systems to monitor representations made by affiliates, potentially focusing on high-performing affiliates or those in high-risk categories. This includes checking if affiliates appropriately disclose their relationship with the advertiser (see Stealth Marketing below).
  • Substantiation: Ensuring that any claims made by affiliates (especially regarding product performance or benefits) can be reasonably substantiated by the advertiser.
  • Corrective Action: Establishing procedures to promptly correct or request the removal of problematic representations made by affiliates.
  • Record Keeping: Maintaining records of communications with affiliates and potentially preserving examples of affiliate advertising content for a reasonable period.

Failure to implement such management measures could expose the advertiser to liability if its affiliates engage in misleading representations.

Focus Area 2: Stealth Marketing (ステルスマーケティング / ステマ - Suterusu Māketingu / Sutema)

Stealth marketing, or undisclosed advertising, involves promoting a product or service in a way that masks the commercial intent, making it appear as organic, independent content or opinion. This practice has drawn significant criticism globally for deceiving consumers.

Japan's Explicit Prohibition (Effective October 1, 2023)

After considerable debate and study, Japan directly addressed stealth marketing by issuing a Cabinet Office Notice (内閣府告示第19号) under Keihyōhō Article 5, Item 3. This notice designates the following as a prohibited misleading representation:

"Representations made by a business operator regarding transactions for its goods or services which are found difficult for general consumers to identify as being the business operator's representation."

This explicitly bans advertising practices where the commercial nature of the message isn't clear to the average consumer.

What constitutes a prohibited "Sutema" representation?

The CAA's accompanying operational guidelines (運用基準 - un'yō kijun) clarify the two key elements:

  1. Is it the "Business Operator's Representation"? The core question is whether the business operator (advertiser) was substantively involved in determining the content of the representation, even if it's presented by a third party (like an influencer or blogger). Involvement can be explicit (e.g., providing specific text/images, requiring pre-approval) or implicit (e.g., providing detailed instructions, requests, or guidance that effectively dictates the message). If the third party independently creates content based purely on their own opinion without the advertiser's involvement in the content, it's generally not considered the advertiser's representation.
  2. Is it "Difficult for Consumers to Identify" as such? If it is the advertiser's representation, is its commercial nature sufficiently clear to the average consumer viewing it? The guidelines state that representations are not considered difficult to identify (and thus are not prohibited stealth marketing) if:
    • It's obvious from the overall context that it's an advertisement (e.g., an ad in the clearly marked advertising section of a newspaper, a TV commercial, the business's own official website or social media account).
    • There is a clear and conspicuous disclosure indicating it's an advertisement or promotion. Examples of acceptable disclosures include labels like 「広告」 (advertisement), 「宣伝」 (promotion), 「プロモーション」 (promotion), or 「PR」. These disclosures must be placed where consumers can easily notice them (e.g., near the beginning of a post, not buried in hashtags). Vague disclosures or disclosures contradicted by other statements (e.g., "This is my personal opinion, #AD") may not suffice.

Who is Liable?

Consistent with the Keihyōhō's general structure, the primary entity liable for violating the stealth marketing prohibition is the business operator (advertiser) whose goods or services are being promoted and who was involved in determining the content. The influencer, blogger, or other third party making the post is generally not directly liable under the Keihyōhō unless they themselves qualify as a "supplier" of the goods/services or are acting in such a capacity as to be deemed inseparable from the advertiser.

Enforcement: Violations of the stealth marketing notice (as an Article 5, Item 3 violation) are subject to administrative actions by the CAA, primarily cease-and-desist orders. They are not subject to administrative surcharges or the new direct criminal penalties.

The Role of Digital Platforms

The entities hosting digital advertisements – search engines, social media networks, e-commerce marketplaces, etc. – play a crucial role. However, directly regulating platforms under the Keihyōhō for misleading third-party ads faces hurdles due to the "supplier" requirement. Platforms typically don't supply the goods or services being advertised by others on their sites.

While direct liability is limited, regulators may exert indirect pressure. Furthermore, Japan's Act on Improving Transparency and Fairness of Digital Platforms imposes certain disclosure and procedural obligations on very large platforms, which could tangentially aid in managing advertising issues. However, the primary responsibility for ad content compliance under Keihyōhō currently rests with the advertiser. Some commentary differentiates between e-commerce platforms (which may have a stronger interest aligned with regulators in preventing misleading seller practices on their marketplace) and SNS platforms (where content moderation often intersects more directly with freedom of expression concerns).

Other Emerging Digital Challenges

The application of the Keihyōhō also faces challenges in other digital contexts, such as:

  • "Dark Patterns": User interface designs that manipulate consumers into making choices they might not otherwise make (e.g., difficult cancellation processes, pre-checked boxes). While not explicitly addressed by Keihyōhō revisions yet, some patterns could potentially fall under existing misleading representation rules if they deceive consumers about transaction terms. This is an area of growing global regulatory interest.
  • "Zero-Price" Services: How does the Act apply to services offered "free" to consumers but monetized through data collection and advertising? Misrepresentations about data handling itself could potentially be targeted, but applying rules based on "transactions" requires careful consideration when no direct monetary payment occurs.

Compliance Strategies for Businesses in the Digital Age

Given the complexities and regulatory focus, businesses advertising digitally in Japan should adopt proactive compliance strategies:

  1. Clear Third-Party Guidelines: Establish clear, contractually binding guidelines for affiliates, influencers, and agencies regarding Keihyōhō compliance, including mandatory disclosures for sponsored content (#AD, #PR, etc.).
  2. Robust Monitoring: Implement systems to regularly monitor online representations made by third parties promoting the company's products. Focus on high-risk partners or campaigns.
  3. Disclosure First: Ensure all company-controlled advertising and instruct all third-party partners to clearly and conspicuously disclose any material connection or commercial intent. Transparency is key under the new stealth marketing rules.
  4. Substantiation is Universal: Maintain adequate and objective substantiation for all claims (quality, performance, price comparisons, etc.) before they are made, regardless of whether they appear in traditional media or online posts by third parties.
  5. Internal Training & Review: Ensure marketing, legal, and compliance teams are trained on Keihyōhō requirements, particularly concerning digital practices and third-party management. Implement robust internal review processes for marketing materials.
  6. Prompt Correction: Have procedures in place to quickly address and correct or remove any misleading representations identified, whether made directly or by third parties.

Conclusion

Japan's Keihyōhō, while maintaining its media-neutral core principles, is being actively applied and interpreted to address the challenges of the digital advertising landscape. The responsibility for compliance rests squarely on the shoulders of the businesses supplying the goods and services, even when utilizing third-party marketers like affiliates and influencers. The explicit prohibition of stealth marketing further underscores the regulatory demand for transparency. Navigating this environment requires a deep understanding of the law, diligent management of third-party relationships, and a commitment to clear, accurate, and substantiated advertising across all channels.