Consumer Protection Administration, Product Safety Regulation and Contracts in Japan: Contemporary Comparisons with Australia and Beyond

Written by: Souichirou Kozuka and Luke Nottage (c) 2023

[On 19 January 2023 I interviewed Gakushuin University Professor Souchirou Kozuka about consumer law and policy developments in Japan (here on Youtube). He has been appointed to the Consumer Safety Investigation Commission within Japan’s Consumer Affairs Agency, and has co-authored papers with me on consumer credit regulation, Civil Code reform and corporate governance as well as sole-authoring several articles on consumer law in the Journal of Japanese Law, and serves as an ANJeL-in-Japan program convenor. We have summarised and expanded somewhat our conversation as below, aiming to develop a joint paper for a law journal (now in draft on SSRN).]

1. Consumer Administration
   • Since 2009: Consumer Commission (independent members) supervising Consumer Affairs Agency (law reform plus enforcement)
     • Cf Productivity Commission (occasionally requested by federal Treasurer, eg 2008 Inquiry Report recommending harmonisation through ACL from 2010; 2017 Inquiry Report into consumer admin and enforcement, parallel to first five-yearly review into other ACL operations), but mostly Ministers (federal Assistant Treasurer with Treasury officials and state/territory consumer affairs ministers) deciding policy and law reform) ostensibly separated from law enforcement (federal ACCC, plus state/territory consumer affairs regulators) …[1] but latter sometime develop reform proposals for ministers and staff sometimes seconded eg from ACCC to Treasury
     CCA subsumed enforcement of Unjustified Premiums and Misreps Act from JFTC competition regulator, but not enforcement of Anti-Monopoly Law unfair trade practices “abuse of superior market provision”
     • Latter has some similarities with ACL prohibition on unconscionable conduct, former with misleading conduct (and other specific unfair trade practices) prohibitions, all enforced instead by combined ACCC (combining competition and consumer law enforcement from its established in 1970s as Trade Practices Commission – inspired by US law) and state/territory consumer regulatorsPerhaps because JFTC older (Allied Occupation), wouldn’t want to merge with newer, less-resourced CCA?
     CCA and other govt departments: Shares with METI jurisdiction over law reform for Designated Commercial Transactions Act (door-stop selling, distance selling etc: cooling off rights etc), and [see 2. Below] METI retains primary jurisdiction to set mandatory safety standards for types of (industrial) consumer products – like MHW does for foods and medical devices/services, and Transport Ministry does for cars etc
     • Cf Australian consumer affairs ministers/regulators have sole jurisdiction over such unfair trade practices, and minimum safety standards as well as bans/recalls for foods etc although have MoU with sectoral regulators and usually defer to them (but eg no power until recently to order recalls of cars – amended after Takata airbag recall problem[2])Shared or primary jurisdiction for other ministries because they are even older, more resourced (and losing jurisdiction means losing budget!)? Similar to problems with newer regulators in most (SE)Asian countries?[3]
     CCA and other stakeholders: CCA cannot seek injunctions eg to stop misrepresentations or use of unfair terms by suppliers under the Consumer Contracts Act 2000, or bring representative actions (under Brazil inspired two-stage law 2013, amended 2022), instead those via govt certified consumer NGOs (German approach, Singapore too through CASE until injunction power shifted to competition regulator now with consumer protection aspects so renamed SCCC from 2018)
     • Cf ACCC and state/territory regulators have full jurisdiction / powers for injunctions, opt-in representative actions (where individual consumers consent to regulator lawsuit) for damages – but rare, etc. But they (or consumer NGOs) don’t bring opt-out US-style class actions – instead individual/representative plaintiffs, and active law firms including (since 2006) third party litigation funders.
   CCA separate from consumer financial services regulators

Also in Australia, but eg ACCC and federal ASIC (no state laws/regulators for securites/corp law, consumer credit under shared national scheme) exchange some personnel, have some similar substantive laws (eg against unconscionable conduct and unfair terms) and if one gets greater powers/sanctions then the other usually soon asks for them too!

2. Product Safety Regulation

• CPSA 1973 set limited pre-market controls (eg METI sets mandatory safety standards for manufactured products), but more expansive post-market controls (bans and – albeit like Australia rare – mandatory recalls) that can allow CCA to “encourage” line ministries to set mandatory safety standards.
  • ACCC and (temporarily) state/territory regulators can both ban and advise Minister to set mandatory safety performance or information/warning standards (hence covering more types of products than Japan? Although latter also encourages a voluntary product liability insurance scheme), including eg foods (konjac jelly stacks must not be smaller than 45mm in diameter, to reduce choking risks – no bans or standards set in Japan![4])Australia initiated a consultation on adding an EU-style General Safety Provision (as in EU, then Malaysia, HK, Macau and 2010 Canada, partially Singapore from 2011, and Thailand in 2019) but no progress; no discussion in Japan perhaps because CAA doesn’t even have yet powers to set mandatory safety standards for specific types of consumer goods?[5]
  CPSA amendment in 2006 (inspired by EU) requiring suppliers to report deaths or serious (hospitalised) injuries, as well as some risks (by Regulation: carbon monoxide emissions eg from gas fan heaters, and fires), to regulators; 2007 amendment also required notices to consumers to get some appliances (heaters) checked periodically
  • ACL introduced mandatory accident (but not risks) reporting in ACL 2010, but reports kept confidential to ACCC (and State/territory regulators)[6]

Consumer Safety Act 2009: channel accident reports (to local/central govt consumer centres, other depts, etc) to CAA, recalls etc if products found unsafe and not subject to other department laws (eg konjac jelly snacks!) but not to set mandatory safety standards (instead can eg urge other ministries to seek law changes to expand their jurisdiction and set standards). Also established Consumer Safety Investigation Commission under CAA, to (a) investigate causes of product-related injuries, (b) recommend actions (eg law reforms) but not liability (so like Japan Transport Safety Board)

Similarities of latter Commission with (ad hoc and semi-judicial) coronial inquiries in Australia (eg into Takata airbag deaths, op cit) or even (Royal) Commissions of Inquiry (under parliamentary supervision, so larger-scale problems)?

3. Consumer Contracts

Consumer Contracts Act 2000 inspired by EU: (a) pre-contract rules allowing broader termination rights than under the Civil Code (cf what became the 2005 EU Unfair Commercial Practices Directive – NB includes black list of worse practices), (b) regulations voiding unfair terms – some exclusion clauses, otherwise one-sided contrary to good faith principle (cf 1993 EU Unfair Terms Directive, but that has grey list of possibly unfair terms, unlike 2000 Act). Interestingly, several amendments re (a) specifying quite detailed types of transactions of concern (eg salespeople trying to use romantic infatuations or scaremongering about religion to secure contracts), but not re (b) where statute remains broad. Former maybe because higher profile and obvious or bigger problems (infecting entire contracts), making it easier for consumers / groups / CAA to mobilise, while (especially majority good) businesses prefer clarity.

• Former NSW CJ Bathurst extra-judicially also noted that having some such guidance re (a) from legislators may also make it easier for courts to intervene to set aside contracts.[7]
  • But instead quite a push to add a new ACL prohibition on unfair practices generally (potentially wider than unconscionable or misleading conduct prohibitions)! Triggered partly by growth of e-commerce and use of “dark patterns” etc digitally[8]

Australian legislators (starting initially with Digital Services inquiries by PC etc) have enacted in 2022 comparatively unique powers of regulators to issue infringement notices and (larger) civil penalties if they think terms are unfair (and extended further 2016 amendment making terms unfair in many B2B transactions) and are consulting now about doing the same for mandatory performance standards in consumer contracts (also applicable to many B2B transactions, perhaps for political reasons), as relying on consumers enforcing ACL rights seems to have been insufficient.

• Also likely to enact a super-complaints mechanism allowing certified consumer groups to get nominated regulators (eg ACCC, maybe also ASIC) to respond to evidence of serious / emerging consumer problems.[9]
  • Unlikely in Japan as consumer groups mostly smaller / less resources and regulators (even CAA) stronger even than in Australia in maintaining discretion, including over budget / resourcing?

ACCC latest report on digital platforms recommends they be required to have an external Ombudsman scheme free to consumers but with determinations only binding on the seller and platform[10] (like Banking and financial services or telecoms schemes, cf weaker scheme introduced more recently in Japan) which could also improve internal DR between users and the platforms

Unlikely in Japan but it has meanwhile new laws regulating some aspects of relationship between platforms and retailers, and requiring big platforms to take down products considered unsafe (inspired by laws on liability of platforms for defamation etc, and maybe new EU laws)

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[1] https://consumer.gov.au/australian-consumer-law/consumer-policy-australia

[2] https://japaneselaw.sydney.edu.au/2022/05/the-interface-of-inquests-and-consumer-law-and-policy/

[3] Nottage, Luke R., ASEAN Consumer Product Safety Law: Fragmented Regulation and Emergent Product Liability Regimes in Southeast Asia (March 10, 2020). “ASEAN Consumer Law Harmonisation and Cooperation: Achievements and Challenges”, Cambridge University Press (2019), Sydney Law School Research Paper No. 20/13, Available at SSRN: https://ssrn.com/abstract=3551793

[4] Kawawa, Noriko, Jelly Mini-Cups Containing Konjac: Is a Warning Enough to Protect Vulnerable Consumers? (March 4, 2013). Australian Journal of Asian Law, 2013, Vol 13 No 2, Article 2: 135-152, Available at SSRN: https://ssrn.com/abstract=2228461

[5] Nottage, Luke R., Improving the Effectiveness of the Consumer Product Safety System: Australian Law Reform in Asia-Pacific Context (February 3, 2020). Journal of Consumer Policy (2020) 43:829-850, Sydney Law School Research Paper No. 20/05, Available at SSRN: https://ssrn.com/abstract=3530671

[6] Nottage, Luke R., Suppliers’ Duties to Report Product-Related Accidents under the New ‘Australian Consumer Law’: A Comparative Critique (May 4, 2010). Commercial Law Quarterly, Vol. 25, No. 2, pp. 3-14, 2011, Sydney Law School Research Paper No. 10/41, Available at SSRN: https://ssrn.com/abstract=1600502

[7] https://japaneselaw.sydney.edu.au/2019/11/guest-blog-launch-by-bathurst-cj-of-asian-law-books/

[8] See https://www.accc.gov.au/publications/serial-publications/digital-platform-services-inquiry-2020-2025/digital-platform-services-inquiry-september-2022-interim-report-regulatory-reform

[9] https://medium.com/@PhilipCullum/up-up-and-away-what-australia-can-learn-from-two-decades-of-uk-super-complaints-848e4469a748

[10] Ibid at https://www.accc.gov.au/publications/serial-publications/digital-platform-services-inquiry-2020-2025/digital-platform-services-inquiry-september-2022-interim-report-regulatory-reform