|Consumer Policy Regime in Japan
International Affairs Office
Quality-of-Life Policy Bureau
I. History of Consumer Policy
1. History of Consumer Policy
(1) Introduction of Consumer Policy Regime
During the expansion of mass production and the rapid industrial development of the high economic growth era from the mid-1950s and 1960s, many incidents occurred that hurt consumers due to defective products and false labeling. Public interest in product safety increased markedly, and consumer awareness also grew.
Against this background, the Japanese government's structure of consumer policy regime was established for the first time in the mid-1960s, and has continued to develop ever since. For example, the Quality-of-Life Policy Bureau was established within the Economic Planning Agency in 1965, and consumer affairs divisions were set up in the Ministry of International Trade and Industry and in the Ministry of Agriculture, Forestry and Fisheries in 1964. In addition, in May 1968, the Consumer Protection Fundamental Act was established as the basic framework for consumer policies.
(2) Consumer Affairs of the 1970s
In the 1970s, product safety became more important. During that time, multilevel marketing and other developments affecting consumer affairs also emerged. In such circumstances, sales methods for products and sales contracts became more important sources of consumer problems than did the quality, performance, and safety of products.
(3) Consumer Affairs of the 1980s
In the 1980s and thereafter, the nature of consumer affairs changed―they became more complex. Problems related to multiple debts and asset-building transactions, to take just two examples, increased.
To address these new issues, measures to rationalize consumer credit transactions and consumer contracts were taken. Also, laws and ordinances corresponding to problems involving asset-building transactions were established.
(4) Consumer Affairs of the 1990s and Onward
In the 1990s and onward, some general civil rules for relations between consumers and business enterprises were established (e.g., the Product Liability Act and the Consumer Contract Act). In the area of consumer education, as a result of the revision of the Course of Study, education concerning consumers' lives, such as contractual matters, was launched actively in schools.
2. Development of New Consumer Policy
In recent years, consumer-related problems have rapidly increased, and frequent business misconduct has greatly damaged consumer trust in business. Under these circumstances, to effectively respond to these transformations in the economy and society, implementation of new consumer policies is necessary.
(1) Background of Introduction of New Consumer Policies
(a) Change in Environment Surrounding Consumers
The expansion of the market economy, the promotion of globalization, and the rapid growth of Internet transactions have caused major changes for consumers, compared with the environment that surrounded consumers in 1968, when the Consumer Protection Fundamental Act was enacted. Because transactions systems and resolution methods have become more diversified and complicated, the imbalance regarding the abilities to obtain information and enter into negotiations between consumers and businesses has widened.
(b) Diversification and Complication of Consumer Problems
Problems facing consumers have diversified; they have shifted from simple problems such as price, quality, and quantity of products to complicated problems such as dissolution and cancellation of services and contracts.
(c) Change in Environment Surrounding Consumer Policies
In the 1990s and afterward, in response to the expansion of areas in which the market mechanism works well, government measures have shifted away from regulation-based actions to after-the-fact, check-based actions operating under market rules. In the area of consumer policies, responses to the shift of overall government measures are also expected.
(2) Studies of 21st Century Consumer Policies
In April 2002, the Consumer Policy Committee of the Quality-of-life Policy Council announced an interim report titled, "Building up Consumer Confidence in Business: Guidelines for Corporate Codes of Conduct." The report claimed that the government should recognize that it is time to establish new consumer policies for the 21st century, including revising the Consumer Protection Fundamental Act. The report also claimed that the government should begin studying ways to establish new consumer policies as soon as possible.
Following the announcement of this report, in July 2002 the Consumer Policy Committee began conducting overall studies of consumer policies, including revising the Consumer Protection Fundamental Act, and in May 2003 put together a final report on the "Ideal Consumer Policy for the 21st Century." The report claimed that consumers should be recognized as "independent entities" instead of as "those who are protected." The report also claimed that rights to ask for ensuring safety of products and to obtain necessary information under the label "consumer rights" belong to consumers. To achieve these goals, the report claimed that consumer policies should be strongly promoted.
The report also suggested the basic direction of policies and measures for ensuring effectiveness, such as ensuring the safety of consumers, rationalizing consumer contracts, and other measures.
(3) Promotion of New Consumer Policies
At the 35th Consumer Protection Council meeting, held on July 22, 2003, the basic direction of new consumer policies was determined based on the report made by the Consumer Policy Committee of the Quality-of-life Policy Council.
Among the various measures, revision of the Consumer Protection Fundamental Act, preparation of the system to protect whistleblowers, introduction of the system to enable consumer organizations to take legal proceedings, and reform of the Consumer Protection Council were determined to be the main measures.
Based on this, a bill to revise the Consumer Protection Fundamental Act was submitted to the Diet in 2004 and was enacted as the Consumer Basic Act in May 2004. A bill on the Whistleblower Protection Act, which was also submitted this year, was enacted by the Diet in June 2004.
II. Structure of Consumer Policy Regime (See Figure)
1. Consumer Policy Council
The Consumer Policy Council is a ministerial council chaired by the Prime Minister and based on the Consumer Basic Act. The council has two basic aims: the planned promotion of consumer policy, and the formulation of the draft of the Consumer Basic Plan. It promotes implementation of consumer policies and also verifies, evaluates, and supervises the implementation of consumer policies.
2. Quality-of-life Policy Council
The Quality-of-life Policy Council, an advisory body to the Prime Minister, was established within the Cabinet Office. The council consists of scholars, representatives of consumer organizations, representatives of major businesses, and other experts in this field. The council studies and deliberates on basic and important issues regarding consumer policies.
3. Cabinet Office and Other Ministries and Agencies
Each ministry and agency individually carries out consumer policies within its area of jurisdiction.
The Cabinet Office carries out general coordination of basic consumer policies among related ministries and agencies and serves as the liaison office for the Consumer Policy Council and the Quality-of-life Policy Council.
The Cabinet Office was established in January 2001 and is headed by the Prime Minister. Reinforcing the cabinet's function is a major pillar among the reforms of the central government ministries, agencies, and other institutions, which call for a renovation of an administrative system most appropriate for the 21st century.
The Cabinet Office performs such tasks as "helping the Cabinet, planning and drafting measures regarding the Cabinet's important polices, and carrying out general coordination" and "processing administrative work that should be handled by the Prime Minister." In areas concerning quality of life, the Cabinet Office carries out consumer policies, promotion of NPO activities, protection of personal data, and many other activities. The Prime Minister has recently designated a special Minister to oversee its competence for quality-of life policies, including consumer policy.
Major Ministries and Agencies Regarding Consumer Policy and Laws Under Their Jurisdiction
- Cabinet Office
Consumer Basic Act, Consumer Contract Act, Product Liability Act, among others
- Fair Trade Commission(JFTC)
Act Against Unjustifiable Premiums Misleading Representations, Act Concerning Prohibition of Private Monopolization and Maintenance of Fair Trade
- Ministry of Economy, Trade and Industry(METI)
Specified Commercial Transactions Act
- Ministry of Internal Affairs and Communications (MIC)
- Ministry of Justice(MOJ)
Act for Promotion of Use of Alternative Dispute Resolution
- Ministry of Health, Labor and Welfare(MHLW)
Pharmaceutical Affairs Act, Food Sanitation Act
- Ministry of Agriculture, Forestry and Fisheries(MAFF)
Act Concerning Standardization and Proper Labeling of Agricultural and Forestry Products
- National Police Agency(NPA)
- Financial Services Agency(FSA)
Act on Sales of Financial Products
- Ministry of Land, Infrastructure and Transport(MLIT)
Travel Agency Act
4. Local Governments
Local governments have set up special divisions for consumer policy in line with the central government's policies and based on their own policies. In addition, local governments are promoting the implementation of consumer policies as they draw up detailed measures in line with the actual local conditions by establishing consumer protection bylaws and ordinances.
To solve problems between consumers and business enterprises, local consumer centers and consultative services for consumers have been established; they offer, among other needed services, mediation regarding (and handling of) complaints.
524 local consumer centers have now been established around the nation (as of April 2005).
5. The National Consumer Affairs Center of Japan
The National Consumer Affairs Center of Japan (hereinafter called NCAC), established by the government as a special-status organization based on special laws, became an independent administrative corporation based on the Law for the NCAC, Independent Administrative Corporation in October 2003. The Center supports the activities of consumer centers across the nation as the central organization for provision of information to consumers, complaint-handling, and product testing.
To deal promptly with consumer damages, a consumer information network system across the nation (PIO-NET), which connects the NCAC and consumer centers, was created. The NCAC gathers, analyzes, and evaluates information for consumers from the consumer center, and provides information to consumer centers around the nation.
III. Laws and Regulations
1. Consumer Basic Act
The Consumer Protection Fundamental Act, which was enacted in 1968, had functioned as the basic framework for Japan's consumer policies. But because the economic and social conditions surrounding consumers have changed drastically, a bill to revise the Consumer Protection Fundamental Act to meet current economic and social conditions was submitted to the Diet and enacted in May 2004. The name of the act was changed to the Consumer Basic Act.
The following items constitute the major revisions:
(i) Consumer rights are respected as the basic concept of consumer policies. Efforts to support consumers to become independent are regarded as the basis of consumer policies.
(ii) Business enterprises must furnish necessary information to consumers in a clear and plain manner, and should make efforts to establish voluntary codes of conduct.
(iii) A new provision to rationalize consumer contracts was established to strengthen and reinforce basic measures, and provisions for consumer education, among other measures, were enriched.
(iv) The existing Consumer Protection Council was renamed the Consumer Policy Council to strengthen the system to promote consumer policies.
(v) The Consumer Policy Council develops a regular draft of the Consumer Basic Plan, which the government then adopts.
2. Consumer Contract Act
The Consumer Contract Act was promulgated in May 2000, and enforced in April 2001, in light of the recent rapid increase of the number of such conflicts around the area of dissolution and cancellation of consumer contracts concluded between consumers and business. The Act sets out new civil rules to contribute to fair and smooth resolution of conflicts related to consumer contracts. The Act includes a rule to enable consumers to cancel contracts when they misunderstand or are confused about certain activities by business enterprises and a rule to enable consumers to nullify all or part of provisions of contracts that unfairly impair the interests of consumers.
Since the Consumer Contract Act was promulgated, in an effort to prevent consumers from suffering damages and to make the redress of damages more effective, the Cabinet Office carries out propagation and enlightenment activities and various related measures, including the collection and disclosure of information on precedent problem cases.
3. Product Liability Act
Japan's Product Liability Act took effect in July 1995. If life, body, or property of a consumer suffers damage caused by the defect of a product, the Act stipulates that the manufacturer must compensate the consumer for his or her loss.
Based on this, to create measures to prevent consumers from suffering damages and to make the redress of damages more effective, various measures such as those related to enriching and supporting alternative dispute resolution procedures outside the court system, improving the cause investigation system, strengthening the collection and provision of information―including information on product-related accidents―and enriching product safety education are being promoted.
4. Whistleblower Protection Act
Recently, a series of cases in which corporate misdeeds that betrayed consumer trust, such as the false labeling of food products and the automobile recall cover-up scandals, were revealed by information provided by concerned persons within corporations.
Based on these circumstances and studies at the Quality-of-Life Policy Council, detailed work to prepare a system to protect whistleblowers was undertaken, and a bill to protect whistleblowers for public interest reasons was submitted to the Diet. The bill was approved and enacted by the Diet in June 2004 (and shall be set within a two-year period starting from the promulgation date of this Act).
The following are the major points of the Whistleblower Protection Act:
(i) Workers are protected from suffering from disadvantages, such as dismissal for disclosing information for public interest reasons.
(ii) The range of information to be provided by whistle-blowers covers criminal and illegal acts in violation of the provisions of the laws related to the people's lives, bodies, and property.
(iii) Whistleblowers who report information to "in-house bodies of corporations," "administrative institutions," and "other institutions outside corporations" are protected. Conditions to protect whistleblowers are set for each institution to which information is reported.
IV. Enrichment of Provision of Information to Consumers and Consumer Education
As the economy and society become increasingly sophisticated and diversified, it is increasingly necessary to enrich the provision of information to consumers and consumer education so that consumers can independently make decisions using their own judgment.
1. Consumer Education
The Cabinet Office has implemented a program to dispatch experts in consumer education to various locations as lecturers for training and other sessions, mainly for school teachers. The Cabinet Office also holds explanatory and consultation sessions on the various problems suffered by consumers, especially elderly consumers.
In addition, the National Institute of Consumer Education―to support consumer education in cooperation with scholars, consumer organizations, voluntary corporations, and others―carries out research related to consumer education, holds studies and training sessions, symposiums, and other meetings, creates teacher manuals and textbooks, builds domestic and overseas information networks, and plans and carries out other operations.
2. Provision of Information to Consumers
Following the 20th anniversary of the enactment of the Consumer Protection Fundamental Act in 1988, the government designated May as "Consumer Month" to enthusiastically promote consumer enlightenment. Following this, the Cabinet Office intensively carries out programs under a unified theme every May, such as holding the meeting of the National Assembly of Consumer Affairs, creating posters, and conducting propagation and enlightenment activities.
V. Guidelines for Corporate Codes of Conduct
The Committee on Corporate Codes of Conduct, which is under the Consumer Policy Committee of the Quality-of-Life Policy Council, put together a report with the title, "Building up Consumer Confidence in Business: Guidelines for Corporate Codes of Conduct" in December 2002. The report laid out guidelines to create and operate corporate codes of conduct. The report also outlined some key points to promote the creation of corporate codes of conduct and to ensure the effectiveness of such codes of conduct.
VI. Formulating the Consumer Basic Plan and Its Review
Following the enactment of the Consumer Basic Act, which took effect in June 2004, works for formulating a draft have continued. Consequently, the Consumer Policy Council drafted the Consumer Basic Plan in April 2005, which the government then adopted. To ensure the effectiveness of the plan, the Consumer Policy Council is to examine, evaluate, and observe the actual state of implementation of the plan considering the opinions from the Quality-of-Life Council and, based on the result, to make necessary amendments to the plan. .
Thus, the Quality-of-Life Council had focused on important policy measures deemed to be implemented within the fiscal year 2005 as the first plan year. It also heard from the relevant ministries and departments and compiled its opinions in July 2006. Taking account of these opinions, the Consumer Policy Council put the state of implementation of the plan in order and added many important initiatives to be implemented to the plan on July 26, 2006.
VII. Enabling Injunction by Consumer Associations
In Japan, it has been pointed out for many years that the need exists to introduce a system that enables consumer associations to file injunctions against inadequate business performances.
The Quality-of-Life Council engaged in deliberations regarding how to construct the new system from April 2004 for more than a year, taking into consideration additional resolutions at the enactment of the Consumer Contract Act and the Judicial Reform Promotion Plan. Based on the Council's report, the Cabinet Office advanced the work of drafting a law. As a result, the "Act Revising the Consumer Contract Act" for the purpose of introducing injunctions by consumer associations was enacted and accordingly promulgated on June 7, 2006, which will come into force on June 7, 2007.
VIII. International Cooperation
1. OECD Committee on Consumer Policy (CCP)
The OECD Committee on Consumer Policy (CCP) makes decisions on guidelines for measures that should be adopted by the member countries regarding the exchange of information about consumer policies and important consumer problems. The CCP put together the Guidelines for Consumer Protection in the Context of Electronic Commerce in December 1999 and the Guidelines for Protecting Consumers from Fraudulent and Deceptive Commercial Practices Across Borders in June 2003. Both guidelines were adopted as recommendations of the OECD Council. Currently, OECD member countries are studying and carrying out measures to comply with the two guidelines, such as establishing a framework to redress damages suffered by consumers in cross-border commercial transactions. Japan, with the Cabinet Office playing the central role, is enthusiastically participating in such activities.
2. Other Cooperation with Various Countries in the Field of Consumer Policy
As one part of efforts to strengthen international cooperation in the field of consumer policy, the Cabinet Office sometimes holds meetings with related countries to exchange information and opinions about consumer policies. Moreover, Japan is joining the projects of International Consumer Protection and Enforcement Network (ICPEN) such as "econsumer.gov."