New regulations on stealth marketing
On March 28, 2023, the Cabinet Office promulgated a new regulation prohibiting businesses from representing their products and services in ways that make it difficult for consumers to recognize their sponsored nature. This new regulation will be effective on October 1, 2023.
The Act against Unjustifiable Premiums and Misleading Representations (“APR”) prohibits certain advertising activities, such as excessive sweepstakes and deceptive representations. To date, the APR primarily restricts misleading representations on the nature of products and terms of sale where they unfairly induce consumers and interfere with their reasonable choices, for example, by exaggerating the efficacy of healthcare products or showing a discount from the standard price that has been never used. In this framework, product recommendations by social network influencers, without revealing that they are being paid for such recommendations, can slip through the restrictions because they may not necessarily include false or misleading representations of the quality or nature of the products, nor of the terms and conditions for sale. However, if consumers do not notice that what they see is sponsored content, they may misread its implication, failing to detect a bias for inducement, which could similarly hamper reasonable decisions of consumers.
In this viewpoint, the Consumer Affairs Agency has introduced additional regulations on stealth advertising. In September 2022, the Agency organized a study group, which recommended creating additional regulations in December 2022 to control stealth marketing. The Agency published draft regulations in January 2023 for public comments and then finalized them in March 2023.
This restriction is pursuant to the new Cabinet Office regulation called representations difficult for consumers to recognize as those of business operators (一般消費者が事業者の表示であることを判別することが困難である表示). This adds a new category in the APR in addition to traditional restrictions on misleading representations. Thus, this may apply even if paid content is not misleading or exaggerated if a third party makes representation on goods and services concealing its relationship with product sponsors.
In formalizing this regulation, the Agency made clear that this regulation is addressed to ad sponsors, not to third-party advertisers, and excludes representation made by ad sponsors themselves. It has also stated that third-party content subject to this regulation is content for which ad sponsors were involved in the creation process. For more details on the involvement of sponsors, the Agency has published the operating guidelines for this regulation (in Japanese).
If your business is in the manufacturing or distribution of consumer goods and services, this will certainly affect your marketing strategy in Japan. Product sponsors are expected to control and monitor the activities of their ad agencies and sponsored influencers for compliance. Otherwise, stealth marketing may eventually backfire on the sponsors.
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