Lessons for Australia – How (Japan and) other countries are dealing with current consumer issues

Tezukayama University Professor Michelle Tan (who Commented recently on my previous blog on the new DPJ government and law reform) spoke with me on this topic at the big SOCAP (Society of Consumer Affairs Professionals) conference in Sydney over 25-6 August. Key conference themes were the impact of the GFC and world-wide recession, and the new nation-wide Australian Consumer Law reforms. We emphasised the need for Australia to unify consumer nation-wide by ‘trading up’ not only to best practice from among its states and territories, but also to emerging global standards. Our presentation compared developments in consumer policy/administration generally, product liability and safety, consumer credit and unfair contract terms, collective redress and consumer ADR. (Powerpoints and a related Working Paper are here, drawing on my various Submissions to aspects of Australia’s current consumer law reform program.)

I suggested that Japan’s experience shows how consumers have benefitted by firms generally provided excellent customer service, but that the burst of its own ‘bubble’ economy and consequent ‘lost decade’ of economic stagnation over the 1990s led to some (even large firms) cutting too many corners. Across most firms, however, the slowdown probably led to even greater attention to consumer service – unlike Australia at least until the GFC, where firms paid less attention when the economy was booming. And in Japan, those instances of corner-cutting generated growing momentum in consumer law reform, as more generally in the European Union. Belatedly, we may be seeing a similar phenomenon unfolding now in Australia.
Japan’s experience is also instructive for another major reason. Significant consumer law re-regulation has occurred even amidst broader economic liberalisation – or perhaps precisely because of it. Indeed, it has occurred despite the government’s judicial system reform initiatives designed to reduce ex ante regulation overall, in favour of greater market forces plus ex post compensation via private law claims – a model exemplified by the US, but also quite influential in Australia.
Michelle Tan also presented the following general overview about developments in Japan, which help explain some emphasis given to consumer issues in the election manifesto of the Democratic Party of Japan. It still remains to be seen how (quickly) some of those DPJ initiatives will be introduced, but already Japan’s new Consumer Affairs Agency has commenced operations pursuant to legislation enacted under the former LDP-led coalition government. Indeed, the DPJ was unhappy with former PM Aso’s selection of a former Cabinet Office top official to head the Agency and the new government may well now call for his resignation and appoint another.
The Japanese Fundamental Act on Consumers, which dates back to 1968, is an extremely important law that sets out the basic principles and framework of consumer protection in Japan – the “Constitution” in the area of consumer protection. This framework sets out the roles of national and local government (as well as business and consumers) with respect to consumer protection. But even despite a major revision of the act about 5 years ago, until last year there had never been a serious attempt to establish a single administrative agency with primary responsibility for consumer affairs.
So the introduction of a Consumer Affairs Agency, overseen by the Cabinet Office, represents a complete upheaval of the current system. The Consumer Agency commenced operations on 1 September this year, somewhat earlier than the original plan for a October-November start. (This was a sudden decision, no doubt a result of pre-election jitters within the LDP and, more importantly, the bureaucracy – who wouldn’t have wanted the inauguration date set back at this late stage.) The new agency has jurisdiction over laws covering most areas such as consumer transactions, food and product safety as well as having authority to regulate in areas where legislative gaps exist ( e.g. konnyaku jelly). In addition, a new central product injury surveillance system is in the planning.
What is the background to such recent reforms in Japan? Japanese consumers have very high expectations of their companies. Companies are expected to deliver an extremely high level of customer service. And they are punished severely by consumers, and more recently, even by the law, if they don’t deliver. Despite an extraordinarily high level of customer service, in recent years there have been a range of issues arising, notably involving food products (particularly sensitive) and product related injuries and deaths, and the current legal system just hasn’t been able to provide an adequate response.
2000 was the year that started off a seemingly never-ending string of scandals in the food and product safety area, involving very famous Japanese companies. I think it was the food scandals which particularly angered the Japanese, for two reasons. Firstly, because we all have to eat, and therefore are all potential victims of any one of the frequently occurring scandals. Secondly, the companies did what they did purely for profit-making reasons, which the Japanese see as is a complete betrayal of their obligations to society.
As a result of these scandals, which couldn’t be prevented and couldn’t be adequately dealt with afterwards, Japanese consumers have been feeling very “insecure” and distrustful of companies. This is not a good way to feel in general, and in the Japanese context it tends to cause people to react very negatively or cynically to company’s behaviour – be it good behaviour or otherwise.
One important effect of this general lack of trust in companies has been an enormous increase in the number of complaints that Japanese companies receive, and also an increase in the number of difficult complaints they receive. Especially since 2000, when there was a huge scandal involving out-of-date milk being taken back to the manufacturer (Snow Brand) and resterilized for re-sale. Unfortunately, the milk got contaminated in the process and about 10,000 people who drank Snow Brand milk got food poisoning.
One important role for the new Consumer Agency will be to ensure compliance with the law to restore consumer trust in companies and thus ensure the “safety” and “security” of Japanese consumers (Expressed as a single indivisible concept, “Anzen, Anshin” in Japanese. This expression is used frequently these days by all stakeholders.)
The Fundamental Act on Consumers, as amended a few years ago, now states that companies have a duty to respond to complaints in an appropriate and timely fashion. And this means that complaints handling and what’s called the “voice of the consumer” are considered, at the policy level, to be extremely important. Self-regulatory or soft law tools such as standards and codes of conduct are becoming increasingly important for Japanese companies as a way of ensuring that companies do respond to the consumer voice.
Michelle Tan comes from Brisbane and has lived in Japan for more than 20 years. She lives in Kobe and teaches at Tezukayama University in Nara. Michelle studied law at Queensland University before leaving for Japan where she obtained a PhD in Economic Law from Osaka University. Michelle has been teaching consumer protection policy and law at Tezukayama University since 1997. With Luke Nottage she co-teaches a “Consumers and Law” module in the Kyoto Seminar course in Japanese Law accredited for Sydney Law School and taught intensively each February at Ritsumeikan Law School in collaboration with the Australian Network for Japanese Law.
In recent years her research has focused on the role of soft law mechanisms such as internal/ external complaints handling, codes of conduct and standards in strengthening compliance and promoting consumer protection. Michelle has advised many governmental bodies, companies and consumers associations on consumer issues.

Author: Luke Nottage

Prof Luke Nottage (BCA, LLB, PhD VUW, LLM LLD Kyoto) is founding co-director of the Australian Network for Japanese Law (ANJeL), Associate Director (Japan) of the Centre for Asian and Pacific Law at the University of Sydney (CAPLUS), and Professor of Comparative and Transnational Business Law at Sydney Law School. He specialises in international dispute resolution, foreign investment law, contract and consumer (product safety) law.

One thought on “Lessons for Australia – How (Japan and) other countries are dealing with current consumer issues”

  1. From http://search.japantimes.co.jp/mail/nn20091010a4.html
    Saturday, Oct. 10, 2009
    Kao withdraws ‘healthy’ food labeling from Econa products
    Kyodo News
    Kao Corp. has stopped labeling its Econa line of cooking oils and dressings as “healthy” and “functional” due to concerns that an ingredient could metabolize into a carcinogen, according to company officials.
    Econa cooking oils have been found to contain glycidol fatty acid esters, which could be converted into the carcinogenic compound glycidol in the human body, prompting the Food Safety Commission to conduct assessments of the product.
    The Tokyo-based maker of detergents, toiletries, cosmetics and foods suspended shipments of the Econa series in mid-September, saying it had found its cooking oils to contain glycidol fatty acid esters at levels 10 to 182 times those found in non-Econa edible oils.
    On Thursday, a public health center accepted Kao’s application to withdraw authorization for the labeling.
    Kao said it plans to produce an improved series of Econa products and reapply for authorization.
    If Kao had not taken the voluntary action, the Consumer Affairs Agency would have revoked government authorization for the labeling.

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