Japan Business Law: Properly deal with notices from consumer groups without neglecting them.

In recent years, consumers have encountered plenty of trouble due to problems such as unjust solicitation and deceptive advertising.

However, consumers tend to believe there is only a small chance of obtaining a refund and so give up pursuing that option.

In order to prevent such consumer troubles and to restore damages to such individuals, there is a system which allows consumer groups to file lawsuits and injunctions against unjust claims (The Consumer Organization Litigation System) on behalf of consumers.

Now let’s introduce a few examples of lawsuits against companies through the Consumer Organization Litigation System.

The Danger of Neglecting Notices from Consumer Groups

Three years ago, Company A developed a health product which contained double the amount of anti-aging ingredients as other companies. Using their slogan, “Containing double the amount as other companies,” they proceeded with selling their product.

However, Company B began selling their product which also contained almost the same amount of anti-aging ingredients as Company A.

Company A continued selling their product while still asserting that their product contained twice as many ingredients as other companies.

Because of this, a certain consumer group sent out a notice with this explanation; “Because it is not true that your company carries twice the amount of other companies and this is misleading to consumers, please remove this representation. If this does not cease, we will take action and file a lawsuit.

The company president deemed that as a third party, the consumer group had no right to sue and ended up ignoring their request. After deciding to neglect their warning, Company A was presented with an injunction.

Before being sued by a consumer group

In civil lawsuits, it is principle that “plaintiffs” who assert their rights file a lawsuit.

So, with regard to litigation cases, only a consumer who purchased the product can be a plaintiff and sue the company which sold the product.

However, there is a huge gap in the quality and amount of information and bargaining power between the consumers and companies. In order to correct these disparities between the two, consumer groups who have been approved by the Prime Minister (Specified Qualified Consumer Organizations) have been authorized to carry out the two following powers, which are collectively known as the “Consumer Organization Litigation System.”

（１）A Specified Qualified Consumer Organization may request an injunction in order to defend the interests of an unspecified large number of consumers against unfair business practices. (Injunction Request)

（２）If there is several tens of consumers who have incurred damages due to unfair business practices, a “Specified Qualified Consumer Organization” may sue on behalf of consumers in order to seek recovery of financial damages. (Damage Recovery)

The “Consumer Organization Litigation System” was stipulated in the “The Consumer Contract Act” that took effect in 2001.  The “Act Against Unjustifiable Premiums and Misleading Representations” and the “Specified Commercial Transaction Act” were also introduced to the Consumer Organization Litigation System in 2008.

If companies like Company A choose to ignore notices from consumer groups, it could ruin their image as well as drastically reduce sales.

If a notice demanding the correction of violations is sent, please consult with a lawyer regarding setting up sincere discussions with consumer groups before irreparable damages occur such as a customer defection.