SAKURA Law Office | Legal Update by Managing Partner Kenshiro Michishita
October 22, 2026 | Original research cut-off: October 9, 2026 | Additional official materials reviewed: October 22, 2026
SAKURA Law Office | Managing Partner Kenshiro Michishita
Advertising is not merely a means of describing a product. It helps determine the terms on which customers transact, forms expectations about performance and value, and often underpins the growth assumptions on which a company is financed or acquired. The path by which an advertisement now reaches consumers is rarely confined to a brand website or conventional media: search advertising, social networks, short-form video, comparison platforms, affiliates, influencer content, curated reviews and e-commerce systems with frequently changing prices are all part of the same commercial ecosystem. Outsourcing the production or distribution of that content does not, by itself, extinguish the legal responsibility of the business supplying the goods or services.
For a business operating in Japan, the central legislation is the Act against Unjustifiable Premiums and Misleading Representations (Act No. 134 of 1962), often called the Premiums and Representations Act or Keihin Hyōji Hō. The governing question is not exhausted by whether marketing personnel knowingly wrote something false. It is what the ordinary consumer is likely to understand from the representation as a whole, whether the company can substantiate the apparent promise, and which business actually determined or adopted the representation in promoting its own offering. A certificate supporting a 'No. 1 customer satisfaction' claim, the absence of a cash payment to an influencer, or the presence of a 'regular price' in an internal database does not alone determine compliance.
The enforcement consequences also demand more careful classification. Principal provisions of the 2023 amending Act took effect on October 1, 2024, introducing a commitment procedure, changing aspects of administrative surcharges and adding direct criminal penalties for specified misleading representations. The Consumer Affairs Agency (CAA) reported thirteen administrative orders, eight approvals of commitment plans and ten surcharge payment orders for fiscal year 2025. In June and August 2026, it also announced orders concerning disguised advertising through third-party social-media content. An administrative order, approval of a voluntary commitment plan and surcharge payment order have distinct legal bases and should never be collapsed into a single undifferentiated claim that a company has been found guilty of misconduct. On October 20, 2026, the CAA also issued an Article 7 order concerning representations for products supplied by giobai Inc., identifying conduct falling within the Article 5(1) superiority prohibition or the Article 5(3) stealth-marketing designation. The announcement illustrates how different representation categories may arise in the same advertising programme; it must be distinguished from approval of a commitment plan.
This Legal Update examines the regulation of representations through the decisions a company actually has to make: identifying the responsible advertiser, testing 'No. 1' and performance claims, aligning promotional prices with transaction systems, governing endorsements and reviews, managing agencies and prizes, responding to investigations, and evaluating historic advertising exposure in M&A. For an overseas headquarters, a Japanese subsidiary, a General Counsel or an investment committee, the practical objective is not merely to edit problematic copy. It is to design a reliable connection between what a company promises, what it can prove, what it charges and what its board is able to supervise.
Executive Summary
Japan's Premiums and Representations Act protects the independent and rational choices of ordinary consumers by prohibiting defined misleading representations and regulating certain promotional premiums. Article 5 distinguishes representations that misleadingly suggest superior quality, standards or performance; representations that misleadingly suggest more advantageous prices or transaction terms; and additional categories specifically designated under Article 5(3). Legal assessment concerns the overall impression of words, photographs, diagrams, videos, qualifying statements and purchasing journeys. The law should not be assumed to apply identically to every business-to-business document; both the intended audience and the relevant supplying enterprise require examination.
A 'No. 1' label or expert endorsement is not validated merely by obtaining a survey provider's certificate. The CAA's September 2024 report and official Q&A emphasise the selection of comparable goods or services, the respondents' attributes and actual experience, survey neutrality and the correspondence between the data and the advertised claim. For asserted effects or performance, Article 7(2) enables the authority to require substantiating material, normally within a short period of fifteen days. Failure to produce material accepted as reasonable substantiation has different statutory effects: the representation is deemed misleading for the purposes of an administrative order under Article 7(2), whereas Article 8(3) provides a presumption for the surcharge regime. This distinction should be maintained rather than presented as an automatic criminal finding.
Since October 1, 2023, a designation under Article 5(3) has covered certain representations made by a business that ordinary consumers cannot readily recognise as originating from that business. This is the Japanese framework concerning stealth marketing. A marketer's involvement in selecting or controlling social-media content is central; the existence or absence of a fee is not a conclusive test. A breach of this designation alone is not an Article 8 surcharge case, although content that also independently misrepresents quality or transaction terms may engage those provisions. Advertisers should be able to direct compliant disclosure, preserve actual posts and their context, and require timely correction across platforms.
Following the October 2024 reforms, certain suspected infringements may be addressed through CAA approval of a commitment plan, subject to statutory requirements and the authority's determination that the procedure is suitable. That approval is not a legal finding that the suspected infringement occurred; equally, it is not a general settlement mechanism available as of right. Other enforcement routes include Article 7 administrative orders, Article 8 surcharges ordinarily calculated by reference to three per cent of relevant sales, and the direct criminal offence concerning specified superior-quality and advantageous-terms misrepresentations. The response of the board must integrate evidence preservation, continuing advertising controls, third-party contractual arrangements, possible customer redress and a careful analysis of the transaction structures through which historic exposure may affect an acquirer.
1. The legal starting point: consumer understanding and attribution of representations
The purpose of the Premiums and Representations Act is not to suppress competitive advertising but to preserve the information on which ordinary consumers decide between competing goods and services. Article 5 addresses misleading claims concerning the substance of an offering, misleading claims concerning its price or other terms, and separately designated forms of representation. An advertiser's subjective intention is not the sole or decisive test. The inquiry is the understanding conveyed to ordinary consumers, assessed in the context in which the material is encountered. Sales enthusiasm, exaggeration and promotional rhetoric are not prohibited as such; the legal issue arises where an apparent material superiority or advantage is sufficiently removed from reality to impair rational consumer choice.
That inquiry must extend beyond isolated sentences. A prominently displayed promise, a photograph implying a result, the architecture of a comparison table, the placement of qualifications and the sequence of a mobile purchasing journey can combine to create an impression that qualifications technically appearing elsewhere do not cure. A headline suggesting an unconditional refund, for example, may not cease to mislead simply because multiple exclusions appear deep in separately linked terms. For a legal review, a word-processing copy of the headline is not a faithful reproduction of the consumer experience. The actual mobile display, advertising placement, destination page, call-to-action, subscription sign-up and any conditions presented only after scrolling should be assessed together.
The identity of the responsible advertiser is equally important. The regulated representation need not have been physically written by the company's employees. A creative agency may draft it, an affiliate may disseminate it, or an influencer may place it on an individual account; the legal analysis concerns the business supplying the relevant goods or services and the extent to which it determined or adopted the content. An advertiser does not transfer its regulatory exposure merely by inserting a clause stating that an agency alone is responsible for legality. Conversely, operation of a digital platform does not by itself make that platform the legal author of every third-party representation hosted on it. Product supply, instructions, approvals, editing, reposting and actual control must be examined rather than replaced with broad labels.
This distinction becomes especially significant in group structures and franchises. A brand owner, manufacturer, distributor and retailer may possess different information about product performance, commercial pricing and promotional conditions. One party may supply the goods while another develops the creative material or controls the advertised discount. A franchise head office's model advertisement may be factually inaccurate for a location whose prices differ, while a franchisee's independent promotion does not automatically make the head office responsible in every case. The contractual allocation of content approval should therefore reflect the actual supply and decision-making structure. Contractual indemnities allocate exposure between parties; they do not bind the CAA when it identifies the party to which public-law requirements apply.
The relevant legal regime may also extend beyond the Premiums and Representations Act. Depending on the product and representation, foods, health-related products, medical services and cosmetics may engage the Pharmaceuticals and Medical Devices Act, the Health Promotion Act or rules on medical advertising. A continuing-payment or mail-order journey may separately involve the Act on Specified Commercial Transactions. Financial instruments, digital assets and regulated services can carry additional sector-specific advertising obligations. These laws should be evaluated in their respective terms, not treated as fully discharged by an approval under the general consumer-representation framework. Equally, communications confined to genuine commercial counterparties require a specific analysis of their audience and function rather than a mechanical assumption that the Act governs all B2B sales presentations in the same way.
A reliable clearance process consequently begins before the final artwork is circulated to counsel. At planning stage, the business must identify which representations are factual claims and who can substantiate them. At production stage, legal review must test the relationship between the proof and the impression created. At distribution stage, the review must account for display conditions on each medium. Once the campaign is live, changes to a product, price, platform or contract may invalidate a previously sound representation. This turns advertising law from a last-minute veto into a coherent system for understanding and controlling the commercial promises being made in the company's name.
2. Superiority claims, No. 1 rankings and the duty to substantiate
Claims concerning quality, composition, efficacy, technical capability, safety or service standards principally raise Article 5(1), which prohibits representations that cause a materially misleading impression of superiority. Language such as 'guaranteed improvement', 'the highest industry standard', 'recommended by specialists' or 'No. 1 in customer satisfaction' may convey an objective promise depending on its context. A business cannot validate a claim simply by showing that it holds some form of report. It must ask whether the population, product version, conditions, endpoints and time period covered by the underlying evidence genuinely correspond to what ordinary consumers would understand from the advertisement. A result achieved under narrow laboratory conditions cannot automatically be generalised into a guarantee of real-world performance.
The evidential consequences of making an efficacy or performance claim become particularly acute during an investigation. Under Article 7(2), the CAA may, where necessary for its assessment, require submission within a specified period of documents that constitute reasonable grounds for the representation. Failure to submit within the required period, or submission of materials not accepted as reasonable substantiation, leads to the statutory deeming effect for an Article 7 administrative order. Article 8(3), addressing the surcharge system, establishes a presumption in the comparable evidential setting. The agency's published Q&A and guidance generally describe a fifteen-day submission period after delivery of the request. A company that decides to commission the essential experiment only after receipt of such a request may simply be unable to produce the required evidence in time.
The CAA's September 26, 2024, fact-finding report on No. 1 representations illustrates why superficial substantiation can be misleading in itself. A claim to rank first in customer satisfaction is apt to suggest comparative experience of the actual services. A survey inviting respondents who have never used the offerings to select the brand whose promotional image appeals most may not measure what a consumer is led to believe. Similar concerns arise where major competitors are omitted without adequate justification, respondents are selectively drawn from the advertiser's own satisfied customers, questions are leading, or the survey has a superficial appearance of independence but no credible design. The company's use of an external research provider does not eliminate its duty to examine what the study really establishes.
The commercial meaning of 'No. 1' must therefore be translated back into methodological criteria. Counsel should examine the market definition, product category, geographic scope, comparator set, respondent population, actual user experience, relevant survey questions, sampling procedure, data treatment, ties and the interval between fieldwork and publication. A ranking among a subset of providers in one city does not establish nationwide superiority across the entire industry. The legally useful document is not simply a certificate bearing a survey firm's seal but a record identifying which question and result support which words on the advertised page. The CAA's Q&A expressly warns advertisers against treating a research company's opinion of legality, or its work for other businesses, as a substitute for independent scrutiny.
Testimonials and professional recommendations deserve the same discipline. A customer's experience may be genuine yet misleading if its extraordinary outcome is presented as the normal or expected result. A purported recommendation by doctors, pharmacists or researchers should be examined for the identity and expertise of the endorsers, the exact product or service evaluated, the evidence they actually reviewed, their incentives and the integrity of the quoted statement. Permissions to use a person's name or image do not establish the truth of the associated commercial claim. Truncating a balanced evaluation to preserve only the flattering conclusion can distort the representation even where the original document is authentic.
Artificial intelligence and automated creative production increase the scale, rather than change the legal nature, of the problem. An AI-generated script or comparison article is not prohibited merely because a generative model helped draft it. But fabricated survey figures, fictitious customer histories and non-existent clinical or technical tests cannot be presented as real substantiation. Rapid A/B testing, dynamically generated headlines and search-keyword-specific landing pages can produce dozens of unreviewed variants beyond the scope of the evidence originally approved. A defensible process maps every material factual claim to a source, product version, approval owner and permitted scope of use, with a mechanism for stopping derivative content that makes a new or materially stronger promise.
Evidence governance is thus a commercial as well as regulatory discipline. Knowing the limits of a test or survey enables an advertiser to make an accurate, specific and persuasive claim instead of an unsupportable absolute promise. Over time, a brand's real differentiation should rest on characteristics that can be demonstrated and maintained, not a sequence of temporary superlatives that collapse when the CAA asks what consumers were actually promised and how that promise was verified.
3. Price and promotional claims: aligning the advertisement with the transaction system
Article 5(2) addresses representations that create a materially misleading impression that the transaction terms are more favourable than they actually are. Consumer decisions are shaped by reference prices, discount percentages, limited-time offers, complimentary periods, loyalty points, cancellation conditions and promised refunds. A product may be excellent and still be promoted unlawfully if the apparent price advantage is fictitious or materially misstated. This is often the result of organisational separation: marketing teams approve the advertised story, while finance, sales operations and software systems determine what customers in fact pay.
Comparative pricing requires particular attention to the identity and history of the benchmark. The CAA's guidance on misleading price representations examines whether a previously charged price was genuinely used for the same product over a sufficiently recent and meaningful period. Recording a 'standard price' in a merchandise database or offering an inflated price briefly does not necessarily establish that a genuine ordinary selling price ever existed. Past selling prices, manufacturers' recommended prices, competitors' prices and intended future prices rest on different premises. The advertisement must make the nature of the comparison intelligible, and its credibility must be checked against actual price histories, products, sale periods and conditions rather than a convenient list-price field.
Urgency claims are similarly dependent on reality. A banner promising 'today only' or 'half-price until midnight' may materially overstate the scarcity of the opportunity if equivalent terms routinely remain available the next day, a countdown restarts on each visit, or the allegedly expired offer is the standard commercial proposition. The CAA's March 2026 approval of a commitment plan in a matter involving a beauty-treatment provider and time-limited coupon representations is a pertinent example of the issues that can be examined. Critically, however, approval of that plan was not an administrative order conclusively finding that the suspected representations infringed the Act. The legal significance of the published outcome must be described accurately.
Subscription models make the problem harder because the financial substance extends beyond the initial payment. Introductory prices, later billing cycles, minimum commitments, cancellation cut-offs, add-on charges, refund restrictions and eligibility for loyalty credits may together define the bargain. A claim that a service is 'effectively free' can be deceptive if it omits material redemption conditions, expiry dates or compulsory fees. Obligations concerning the final confirmation screen and other aspects of remote selling under the Act on Specified Commercial Transactions require separate consideration. Compliance with those formal requirements is not, by itself, a complete answer to whether upstream acquisition advertising has created a misleading impression of advantage.
Dynamic offers deserve controls designed for their actual technical operation. Prices and incentives may vary by customer segment, location, previous visits, stock, referral route or advertising channel. Differentiated pricing is not inherently prohibited by the Premiums and Representations Act. The legal risk arises where consumers are led to understand that an offer is generally available when it is not, or where material conditions are concealed or inconsistent between advertisement and checkout. For A/B tests, automated bidding and continuously rewritten landing pages, the company should be capable of reconstructing the version displayed at a given time, the relevant audience, the qualifying rules, the back-end price and the offer actually available. Without that information, the organisation may be unable to investigate or correct its own representation.
Enforcement is not limited to conventional retail discounts. On June 11, 2026, the CAA issued an Article 7 administrative order against GEO Store in relation to representations concerning its smartphone and tablet purchase service, identifying Article 5(2) misleading advantageousness. The case demonstrates that the claimed value of a transaction can be problematic whether the consumer pays a price or receives money for a product. It does not establish that every buyback promotion, point programme or campaign is unlawful. The proper lesson is the need to test claims of commercial advantage against the actual contractual, financial and operating conditions of the specific service.
A legal approval mark on static artwork cannot substitute for an operational connection between the advertised terms and the company systems implementing them. Reference-price histories should be retained with the approval file; a change to eligibility, dates, fees or renewal terms should trigger an update to the corresponding representation. Sales, finance, product management, customer service and legal personnel need an agreed owner for the live version of the offer. Reviewing the campaign before launch, during distribution and at close allows a business to preserve both commercial flexibility and the integrity of the promise made to customers.
4. Stealth marketing, influencers and reviews: when third-party speech becomes an advertiser’s claim
The CAA designation commonly called the stealth-marketing regulation has applied since October 1, 2023. Made under Article 5(3), it concerns representations that are, in substance, those of a business but which ordinary consumers find difficult to identify as business-originated advertising. The distinction matters because an independent customer's recommendation ordinarily carries a different evidential weight in the eyes of other consumers from a promotional message commissioned or influenced by the seller. A deceptive presentation of apparent independence can distort consumer choice even without separate proof that an express claim about quality or price was false. That is the distinct statutory rationale of this designated category.
The threshold is not mechanically crossed whenever a social-media post names a brand, a creator receives a sample, or the creator has previously worked with a supplier. The designation and its CAA operational standards require a fact-sensitive assessment of whether the business was involved in determining the substance of the representation, including the purpose and actual course of the relationship. Relevant circumstances may include fees or gifts, agreed posting conditions, creative instructions, pre-publication approvals, requests to remove negative commentary, ongoing commercial ties and other evidence of influence. A wholly independent review is not automatically transformed into the advertiser's representation merely because it concerns a product about which the business hopes customers will speak positively.
Once a post is properly characterised as the advertiser's representation, consumers must be able readily to recognise that character. Words such as 'advertisement', 'sponsored' or 'PR' can assist, but no single label operates as a universal statutory safe harbour without regard to placement or legibility. A disclosure hidden among numerous hashtags, presented in barely visible type, detached from the persuasive part of a video, or omitted from the content actually shared through another platform may fail to perform its function. Short-form video, mobile cropping, thumbnail previews and search-result snippets complicate the design. The business should review the real display in the consumer's viewing environment, rather than relying solely on an undertaking by the creator to 'comply with applicable advertising laws'.
Secondary use of reviews raises a related but distinct problem. A comment originally written spontaneously by a customer may become part of a representation determined by the business when the latter selects it, edits it, gives it a promotional headline or publishes it on the product's sales page. The existence of an authentic original review is not sufficient to verify the message conveyed by the advertiser's edited presentation. A business may need consent or a copyright licence to reuse the statement, yet such private-law permission does not answer whether an extracted quotation omits crucial qualifications, presents an exceptional outcome as typical, or implies customer experiences that never occurred. The inquiry concerns what was actually published in the new promotional context.
Recent CAA publications require precision about both facts and procedural outcomes. In September 2025, the agency approved commitment plans submitted by two businesses in a case concerning suspected stealth-marketing-related conduct involving frozen meal delivery and social-media content. That publication illustrates how commissioned posts and the re-use of social-media material may be examined, but approval of the plans was not a formal finding of infringement. In contrast, the CAA issued Article 7 orders on June 29, 2026, in relation to the promotion of certain food products by Takamitsu Seiyaku, and on August 6, 2026, against two businesses in relation to representations concerning the SNOW app. The agency expressly described the latter orders as findings under the Article 5(3) stealth-marketing designation. These different procedural outcomes should not be combined into an unsupported narrative that every identified marketing method was conclusively unlawful in every case.
On October 20, 2026, the CAA announced an Article 7(1) order against giobai Inc. concerning FLEURISTE products and associated representations, identifying practices within Article 5(1), concerning misleading superiority, or the Article 5(3) stealth-marketing designation. The case underscores that substantive product claims and the identification of business-directed third-party representations raise distinct statutory questions. It does not establish that comparable products or all influencer campaigns in the sector are unlawful.
Responsibility must also be allocated with care. In the CAA's stated framework, the principal subject of the designated prohibition is the business supplying the goods or services whose advertising is involved; the designation does not make an otherwise independent influencer the identical legal addressee merely because that individual published the post. This should not be misconstrued as immunity from other legal or contractual obligations applicable to the creator. Nor should the consequences of concealment be overstated: breach of the stealth-marketing designation by itself is not the basis for an Article 8 surcharge payment order. If the same content additionally meets the separate statutory requirements for a misleading quality or price representation, the surcharge question must be evaluated on that independent basis. Transparent identification of a post as paid advertising and substantive truthfulness of its claims are two different compliance questions.
An influencer agreement should therefore contain an executable publication protocol, not merely an expansive disclaimer of liability. The brief should define the promotional objective, acceptable claims and supporting materials, the extent of advertiser instructions and approval, the mode of sponsorship identification on each platform, and procedures for revisions, takedown and evidence retention. The contract should address posts modified after approval, changes in the product or offer after publication, unauthorised factual assertions by the creator, and the business's own subsequent use of the material. The legal value lies in a verifiable capacity to detect and correct a problematic representation, not an unsupported fiction that regulatory accountability disappears once a creator has accepted sole responsibility in private correspondence.
5. Affiliates, advertising contractors and promotional premiums: governing outsourced growth
The greater the number of intermediaries involved in customer acquisition, the less likely a conventional single-stage copy approval is to reveal what consumers actually see. An affiliate programme may connect the supplier, an affiliate network, multiple creative agencies, publishers, influencers and lead generators through different incentive arrangements. Performance-based compensation is not itself prohibited by the Premiums and Representations Act. It can, however, encourage aggressive claims about efficacy, fictitious urgency or staged testimonials where the publisher is rewarded primarily for conversions and insufficiently monitored by the supplier. The business needs visibility into which websites carry its offer, who can alter the wording, how a conversion is attributed and what substantiation accompanies the claims made in its name.
The agency agreement should control the published life of a campaign, not merely the first manuscript. Search-triggered headlines, audience-specific copy, substituted landing pages, changed promotional prices, quoted reviews and syndicated material can depart from the creative materials originally approved. The advertiser should retain sufficient rights to inspect actual placements and require prior approval for material alterations. The contractor should preserve publication versions and placement logs and be obliged to stop dissemination promptly when a credible compliance concern arises while retaining the evidence necessary to investigate it. Where subcontracting is permitted, equivalent requirements should follow the content down the chain, with workable audit, reporting and correction rights flowing back to the supplier.
Allocating costs between the parties requires equal care. An indemnity may govern an agency's contractual responsibility for losses caused by unauthorised representations, but it does not displace the agency's or advertiser's actual position under public law. Clauses requiring immediate suspension of expenditure, content removal or termination can be valuable emergency controls. Yet provisions that make no distinction between a minor technical variance and serious deception may create avoidable disputes if exercised without transparent conditions. A carefully structured agreement should align notice of suspected misconduct, investigation and cooperation, emergency takedown rights, cure where appropriate, preservation of records, allocation of consumer-redress costs, audit and termination for material or repeated breaches with the realities of the campaign workflow.
The Act reaches beyond advertising words to certain promotional premiums. Where a business supplies an economic benefit as a means of attracting ordinary consumers and that benefit is connected with a transaction, the relevant classification may require examination of ordinary prize competitions, joint competitions and premiums provided without a prize draw, together with applicable limitations on value. Discounts, ordinary loyalty-point arrangements and genuinely independent open-entry prize competitions do not necessarily receive identical treatment under the statutory and notice framework. An incentive should be classified by its actual connection to a purchase or other transaction, the recipients and the economic benefit, rather than by marketing labels such as 'gift', 'bonus', 'campaign' or 'social-media giveaway'. A programme that combines misleading advertising and an excessive premium may require separate legal analyses of both dimensions.
Centralised brand management creates related responsibilities. A franchise head office that distributes standard advertising must establish whether advertised terms reflect the real offer at participating outlets. Equally, use of a shared trademark, website or reservation engine does not automatically resolve the statutory attribution of a franchisee's independent claim. A group-wide campaign, the transfer of a brand or a change in the distributing entity should prompt a reassessment of product supply, pricing authority, content approval and any continuing promises made to customers. The legal approach should follow the underlying activities rather than assume either that every group company is always liable or that a complex distribution chain absolves everyone of responsibility.
An effective programme must also join legal, marketing and operational expertise. Legal advisers need to explain the evidential basis required for a performance or comparative claim; marketing teams need to identify the representations driving conversion; finance and technology teams need to be able to establish the prices, eligibility and transaction conditions actually applied. When those functions share records and escalation routes, outsourcing can support responsible expansion. Where they do not, contractual language may produce the appearance of control while the live campaign remains effectively unaudited.
6. Administrative orders, surcharges, criminal penalties and the commitment procedure
The Japanese enforcement framework cannot be described accurately through a single term such as 'fine' or 'settlement'. Article 7(1) provides for an administrative order requiring measures to eliminate misleading consumer impressions and prevent recurrence, potentially including cessation and public notification. Orders may be available in prescribed circumstances even after the representation has ceased. Their consequences may therefore extend beyond the cost of withdrawing advertising: a supplier may need to correct public misunderstandings, alter distribution processes, implement preventive systems and respond to damage to commercial trust. Deleting a problematic online banner does not necessarily exhaust the company's regulatory responsibilities.
The Article 8 surcharge payment order is a different legal measure. For applicable misleading quality or advantageous-terms representations, the statutory starting rate is generally three per cent of the prescribed sales of the affected goods or services over the relevant period. It is not automatically three per cent of every yen of the enterprise's overall revenue. The statutory criteria governing the relevant representation, product scope, duration, calculation base and specified exclusions require separate analysis. The Act provides, among other matters, treatment for amounts below JPY 1.5 million and for a business that did not know the representation was misleading and was not found to have failed to exercise due care in that respect. In practice, a documented pre-publication substantiation process can be material to evaluating the company's conduct, while a search for evidence after an investigation begins may make its position more difficult to explain.
Reforms principally effective from October 1, 2024 strengthened these mechanisms in defined respects. The amended regime includes a means of estimating relevant sales where certain information necessary for calculating the surcharge cannot be established, as well as a prescribed surcharge increase in specified circumstances involving prior surcharge payment orders. Neither measure should be described as an automatic result of every earlier CAA inquiry. The amendments also introduced a direct criminal penalty for specified representations under Article 5(1) and (2), without requiring a prior breach of an administrative order; the CAA's statutory explanatory materials describe a fine of up to JPY 1 million. The legal elements, applicable dates, responsible parties and type of representation must be checked. The stealth-marketing designation, administrative surcharges and criminal provisions are not interchangeable categories.
The commitment procedure introduced as part of the 2024 reforms is designed to facilitate prompt and effective correction of certain suspected infringements. Where the CAA considers it appropriate to use the procedure, it issues the relevant notice; a business may submit a plan of corrective measures, and the authority may approve it if the statutory requirements of sufficiency and reliable implementation are met. Prescribed administrative-order and surcharge provisions do not apply to the conduct covered by an approved plan, subject to the applicable law and the continuing status of that approval. This is not a right to compel a negotiated settlement merely by volunteering to amend a website. The CAA's operational standards indicate circumstances, including specified enforcement histories and serious or malicious conduct, in which the mechanism is regarded as unsuitable.
The legal meaning of approval deserves particular emphasis in transactions and public communications. An approved commitment plan is not, by that approval alone, a finding that the suspected conduct violated the Act. Nor does the absence of such a finding mean that performance of the approved remedial measures is optional or that the public communication risk has vanished. Commitments may address withdrawal of content, corrective notices, customer-facing measures, corporate decision-making, prevention procedures and reporting. The CAA publishes information about approved plans and the suspected conduct. A board should therefore be able to explain what has changed and why the solution is credible, rather than characterising regulatory cooperation as a complete exoneration.
The CAA's May 28, 2026, report on fiscal year 2025 gives a measured view of enforcement. It reported thirteen administrative orders, eight approvals of commitment plans, ten surcharge payment orders totalling JPY 339.4 million, and 388 instances of administrative guidance. Each figure counts a particular type of action and should not be summed indiscriminately to produce a supposed number of companies conclusively found to have violated the Act. Nor should the June and August 2026 orders be folded into fiscal 2025 statistics. The report demonstrates the importance of distinguishing procedures and outcomes; it does not support a numerical prediction that a given campaign is likely to be sanctioned.
When a credible concern is identified, the first practical requirement is to preserve evidence while preventing further consumer harm. Automatically removing every copy of a campaign, including agency logs, A/B-test histories and sales data, may destroy information essential to assessing what happened, cooperating with authorities, correcting affected claims or pursuing contractual rights against service providers. Conversely, continuing publication of a dubious representation while an unstructured internal discussion proceeds can enlarge exposure. Legal, information technology, finance, sales and senior management should agree who can suspend content, what records must be secured, which representations require correction and who is authorised to communicate with the CAA and consumers. Voluntary changes, potential refunds, commitment procedures, explanations to the authority and public statements require separate legal judgments, made with particular attention to timing and preservation duties.
7. Board supervision and M&A: converting advertising integrity into durable enterprise value
The governance task cannot be reduced to requiring legal personnel to stamp every individual advertisement. Article 22(1) of the Premiums and Representations Act requires businesses to take necessary measures for the proper management of premiums and representations, while the CAA's guidelines provide a framework concerning the clarification of responsible persons, verification and sharing of information, designation of personnel with relevant functions, training, retention of substantiating material and responses to improper representations. The examples in the guidelines must be applied in light of the business's actual scale, offerings, advertising channels and contractor network rather than indiscriminately replicated as an identical organisational chart for every enterprise. What matters is whether decisions about advertising claims can be traced to reliable evidence and accountable managers.
The first operational question is which part of the organisation can substantiate each material promise. A performance claim may require evidence from product development or quality assurance; a discount may require records from finance and the transaction system; a comparative ranking requires access to the underlying research; an influencer endorsement depends on marketing instructions, contracts and the published post. These sources of truth should be linked to an identified approval owner. If a proposed claim cannot be verified, management should evaluate additional testing, a narrower and more precise statement, a revised promotional structure or abandonment of that claim before launch. The aim is not to multiply tiny disclaimers until the creative design becomes unreadable, but to identify the precise commercial facts that the business intends to stand behind.
Secondly, the representation and its substantiation should be subject to meaningful version control. Digital campaigns are frequently revised in response to real-time performance data, algorithmic optimisation, new product specifications, pricing changes or third-party reviews. The ad that a regulator or consumer encounters next month may not match the PDF approved at inception. A defensible audit trail links the released wording and visual treatment with the date, platform, target audience, price and conditions in force, supporting materials, approval history and any subsequent suspension or correction instruction. Retention must be consistent with privacy obligations, confidentiality and relevant retention requirements. Indiscriminate accumulation of customer data is not the point; the company should be able to reconstruct the relevant representation and the basis on which it was approved.
Thirdly, escalation must work even where correction threatens significant revenue. A policy that prohibits misleading claims is ineffective if the commercial department responsible for a major acquisition campaign has exclusive control of whether to stop it. The organisation should identify triggers for urgent involvement of legal and compliance, appropriate independent support, preservation of records, communication with authorities and reporting to the board. The information given to directors should not be an unfiltered archive of every banner and social-media post. It should make clear the affected products and consumer populations, commercial consequences, strength of substantiation, possible legal procedures, mitigation decisions and whether corrective measures have actually been implemented.
Advertising risk is also a substantive due-diligence subject in corporate acquisitions and business transfers. A target may report exceptionally attractive customer-acquisition economics that depend in part on unsupported No. 1 rankings, improbable time-limited discounts or unreviewed affiliate channels. Eliminating the questionable practices after closing could reduce revenue or increase acquisition costs, even before any administrative financial measure arises. Buy-side legal diligence should therefore consider the principal advertising claims and evidence, survey provider agreements, historical advertising versions, affiliate contracts, consumer complaints, CAA correspondence, voluntary refunds and corrections, and whether the seller possesses rights to obtain records or stop misleading placements at third-party platforms.
Transaction documentation should reflect the resulting uncertainty without purporting to bind public authorities. Depending on the findings, representations and warranties may address known inquiries, compliance with applicable advertising regulation, available substantiation and material promotional practices. Signing-to-closing covenants may govern significant changes to the acquired marketing model, the preservation of campaign records and consultation on pending communications. Indemnities, disclosure schedules, price adjustments and post-closing remediation plans may address defined exposures and the effect of discontinuing high-risk advertisements. A broadly drafted covenant that the seller 'shall ensure no advertising risk exists' is not a substitute for analysing what is knowable, what has to be changed and the actual impact on the transaction's value.
Corporate succession adds a further statutory layer. Article 7 contains provisions under which, in specified circumstances, an administrative order may be directed at a successor following a merger, a company succeeding to a business through a division, or a transferee of an undertaking associated with the conduct at issue. The purpose is not to permit a change in legal form to defeat corrective obligations. But it would be an error to extrapolate that every historical monetary exposure automatically passes to every purchaser in precisely the same way. The type and timing of the conduct, legal form of succession, nature of the contemplated order and relevant statutory provision must be examined. For a buyer, the greater commercial question may be whether the acquired goodwill and forecasts can survive a legally necessary change in the way customers are attracted.
Published enforcement in 2026 reinforces the breadth of this management issue. The CAA's public record encompasses representations about product benefits, the financial terms of services, social-media content and consumer applications. Each matter must be understood on its stated facts and procedural status. The governance lesson is nevertheless consistent: claims must remain accurate not only on the day an advertisement is approved but when the product, transaction conditions, endorsements or distribution network change. Directors should ask not simply how many compliance seminars were delivered, but who owns the substantiation of the company's principal marketing claims, how changes are detected and who has the authority to stop dissemination when the evidence no longer supports the promise.
A representation is the beginning of the consumer's bargain. If it creates expectations that the underlying offer cannot sustain, the regulatory and financial consequences may rise with the volume of sales the campaign generates. Effective control should not suppress legitimate competition or innovation. It should enable businesses to state their genuine strengths clearly, support comparative claims with credible evidence, disclose their influence over endorsements and intervene early when the facts diverge from what the market has been told. SAKURA Law Office approaches this field as part of integrated corporate legal practice: a connection between advertising, the real terms of sale, third-party contracts, governance, transaction risk and the long-term value of consumer trust.
Frequently Asked Questions
Q. Does Japan’s Premiums and Representations Act automatically govern all B2B marketing and advertising targeted overseas?
No. Its central function is to protect ordinary consumers making independent and rational purchasing decisions. Purely inter-business materials are not automatically subject to the same analysis; the audience, transaction and entity responsible for the representation must be examined. Advertising aimed at consumers in another country also requires separate consideration of the consumer-protection laws applicable there.
Q. Can an advertiser use a No. 1 ranking if an independent survey company has issued a certificate?
Not on that fact alone. The advertiser should assess the relevant market and comparators, respondent selection and actual experience, survey questions and neutrality, data period and calculation methods, and whether the advertised words match the survey’s actual conclusions. A third-party certificate does not transfer statutory responsibility away from the advertiser.
Q. May an advertiser obtain performance-testing evidence only after the CAA begins an inquiry?
That would be high risk. Articles 7(2) and 8(3) provide consequences for failure to submit reasonable supporting material within a prescribed period, normally described by the CAA as fifteen days. The company should hold appropriately relevant evidence before publication and maintain records linking the evidence to the exact claim.
Q. Are market share, customer satisfaction and endorsements by physicians all evaluated in the same way?
All require a credible connection between the representation and its evidence, but the appropriate method differs. Objective sales data are not identical to subjective satisfaction research; a satisfaction claim may not be substantiated by impressions from persons who have never used the service. Expert endorsements require verification of the expertise, evaluation and actual object of the recommendation.
Q. What must be retained to advertise a 50 per cent discount from a regular price?
A business should retain the nature and history of the reference price, actual sales periods and prices for the identical product, conditions of the offer, start and end dates, and the versions displayed. An internal reference-price field or an unsupported brief period of high pricing may not establish a valid comparison.
Q. Does providing a free sample to an influencer always breach Japan’s stealth-marketing designation?
No. The company’s involvement in determining the content and whether ordinary consumers can identify it as the company’s representation must be assessed in context. Payment is not the sole determinant. The instructions, approvals, gifts, commercial relationship and presentation of sponsorship are relevant.
Q. Does adding “PR” or “sponsored” make exaggerated product claims lawful?
No. An adequate disclosure may address whether consumers recognise a post as advertising, but the substantive claims about quality, performance and price must still be truthful and legally supportable. Attribution and accuracy are separate compliance assessments.
Q. Can a breach of the stealth-marketing designation alone lead to an Article 8 surcharge?
Not on that basis alone. Article 8 surcharges concern applicable misleading quality or advantageous-terms representations. If the same post also independently falls within those categories, the additional requirements must be considered. Article 7 administrative orders may still be available for the stealth-marketing infringement.
Q. What changed when the principal 2023 amendments took effect in October 2024?
The reforms introduced a commitment procedure, revised specified surcharge-calculation rules including estimation and increases for qualifying repeat cases, and established a direct criminal penalty for prescribed quality and advantageous-terms misrepresentations. Different forms of conduct do not automatically receive the same sanction.
Q. Does approval of a commitment plan mean that the advertiser has admitted an infringement?
No. The CAA’s approval is a statutory decision on the adequacy and reliable performance of proposed measures in respect of suspected conduct; it is not itself a final finding that the conduct violated the Act. The approved commitments must nonetheless be implemented, monitored and documented, and related information may be publicly disclosed.
Q. Does a contract assigning all advertising responsibility to an agency protect the advertiser?
Not necessarily. Private allocation of losses differs from the statutory identification of a business responsible for representations concerning its own goods or services. The advertiser should have practical rights of approval, inspection, suspension, correction, audit and preservation of the actual published content.
Q. What advertising-related matters should an M&A buyer include in Japanese legal due diligence?
The buyer should review principal marketing claims and substantiation, survey and advertising contracts, comparative-price histories, affiliate and influencer controls, campaign archives, consumer complaints, CAA inquiries and any refunds or corrections. It should assess how reforming the claims would affect revenue and address specific risks through disclosures, representations, covenants, indemnities and a post-closing control plan.
About the Legal Update Series
SAKURA Law Office and Managing Partner Kenshiro Michishita publish the Legal Update series as practical analysis of legal developments affecting corporate decisions in Japan and across borders. Its subject matter includes corporate and M&A transactions, private equity, international business and disputes, financial regulation, corporate governance, crisis management, technology and AI, data protection, intellectual property, advertising and consumer protection. Each edition aims to distinguish binding statutes and implementing instruments from administrative notices, interpretive guidance and enforcement outcomes, and to connect primary materials with real questions of contracting, internal control, transaction execution and dispute management. Information about the firm and author is available on the official website and professional profile.
Related resources: SAKURA Law Office Official Website | Managing Partner Kenshiro Michishita — Professional Profile
How SAKURA Law Office Can Assist
SAKURA Law Office advises Japanese and international businesses on the legal review and substantiation of advertising under the Premiums and Representations Act, including No. 1 and comparative claims, product efficacy representations, influencer and affiliate campaigns, comparative pricing, subscription and promotional terms, and compliance with the rules concerning promotional premiums. The firm can assist with drafting advertising-agency, creator and sales-partner agreements; building internal review and record-retention frameworks; assessing CAA inquiries and possible corrective or commitment procedures; conducting advertising-focused investigations; and analysing enforcement and commercial risks in M&A due diligence, transactional warranties and post-closing integration. Where other regulated sectors or foreign consumer-protection law are implicated, coordinated advice from appropriately qualified specialists may be required. Individual outcomes, approval of a commitment plan or the absence of administrative measures cannot be guaranteed.
Contact
SAKURA Law Office
Ark Hills South Tower 4F, 1-4-5 Roppongi, Minato-ku, Tokyo 106-0032, Japan
Managing Partner Kenshiro Michishita
Principal References
3. CAA, overview of the 2023 amendments effective principally October 1, 2024 (Japanese)
4. CAA, Japanese statutory framework, notices, rules and guidance portal
5. CAA, operational guidelines on requests for reasonable substantiation under Article 7(2) (Japanese)
6. CAA, official Q&A on representations, attribution, substantiation and No. 1 claims (Japanese)
7. CAA, Fact-Finding Report on No. 1 Representations (September 26, 2024; Japanese)
8. CAA, legal approach to misleading price representations, including reference prices (Japanese)
9. CAA, enforcement policy on dual-price representations using future selling prices (Japanese)
10. CAA, issues and guidance concerning representations in internet consumer transactions (Japanese)
12. CAA, operational standards for the stealth-marketing designation (March 28, 2023; Japanese)
13. CAA, official Q&A on stealth marketing (Japanese)
15. CAA, official Q&A concerning management measures for representations and premiums (Japanese)
16. CAA, notice restricting the provision of premiums to ordinary consumers (Japanese)
17. CAA, notice restricting premiums provided through prize competitions (Japanese)
18. CAA, guidance on online prize competitions and the Act (Japanese)
20. CAA, operational standards on the commitment procedure (April 18, 2024; Japanese)
23. CAA, approval of a commitment plan submitted by Socie World (March 3, 2026; Japanese)
Disclaimer
This Legal Update is based on publicly available primary materials reviewed through October 22, 2026, including the Japanese text of the Act against Unjustifiable Premiums and Misleading Representations, implementing rules and designated notices, CAA guidelines and Q&A, its 2024 No. 1 report, fiscal year 2025 enforcement statistics, and published decisions in 2025 and 2026. It is general legal information, not advice or a formal legal opinion concerning any particular advertisement, contract, transaction, investigation or company. The Japanese statutory text and applicable implementing instruments control in case of a discrepancy with explanatory English terminology. Japanese notices, administrative guidance, commitment approvals, administrative orders and criminal-law provisions have different legal status and consequences.
The legality of a representation, the identity of the legally responsible business, the adequacy of substantiation, eligibility for a commitment procedure, the calculation of a surcharge, available defences, criminal responsibility and the effect of a corporate reorganisation depend on the precise facts and law applicable at the relevant time. Published enforcement figures describe the stated reporting period and cannot be used to infer a particular company's position. Before launching or amending material consumer advertising, restructuring a distribution arrangement, making a voluntary disclosure or completing an acquisition where historical advertising practice is material, businesses should confirm the latest official sources and obtain advice tailored to the circumstances.