What is the Act on Specified Commercial Transactions (also known as the Specified Commercial Transactions Act)? The Japanese government passed this law to protect consumers from malicious transactions, which seem to increase yearly. It is very important for EC (ecommerce) site operators to properly understand this Act and the required notations based on it to increase customer satisfaction and prevent problems between businesses and consumers. This article will explain in detail the Act on Specified Commercial Transactions and what to write in these disclosures, one by one, with specific examples.

What’s in this article?

• What is the Act on Specified Commercial Transactions?
  
• What types of transactions does the Act on Specified Commercial Transactions cover?
  
• What is a notation based on the Act on Specified Commercial Transactions?
  
• Template for notation based on the Act on Specified Commercial Transactions
  
• What if there is no notation based on the Act on Specified Commercial Transactions?
  

What is the Act on Specified Commercial Transactions?

The Act on Specified Commercial Transactions is “a law to protect the interests of consumers.” To safeguard customers from unfair solicitation or contracts, the Act establishes policies for certain transaction types (administrative regulations) and rules, such as a cooling-off period (civil rules 6).

Please note that the Act applies to business-to-consumer (B2C) transactions but not to business-to-business (B2B) transactions.

Administrative regulations

The Act on Specified Commercial Transactions establishes the following regulations for businesses to ensure consumers receive appropriate information. Those that violate this law are subject not only to administrative dispositions, such as an order to improve business or suspend or prohibit operations, but could also be subject to penalties.

• Obligation to clearly state name, etc.: This law requires businesses to tell customers in advance their name and that it is for solicitation.
  
• Prohibition of unfair solicitation: Prohibits false explanations of prices and payment terms and acts to intimidate and confuse consumers.
  
• Advertising regulations: Requires businesses to indicate important information and prohibits false or exaggerated advertising.
  
• Obligation to deliver a written document: At the contract’s conclusion, the operator must provide a written document describing key matters.
  

Civil rules

These rules minimize subsequent problems between consumers and businesses:

• Cooling-off period (not applicable to mail-order sales): The customer or business can terminate a contract unconditionally within eight days of the application for a contract for door-to-door and telemarketing sales, Specified Continuous Service Offers, and door-to-door purchases and within 20 days for Chain Referral Transactions and Business Opportunity Sales Transactions. There is no cooling-off provision for mail-order sales.
  
• Rescission of declaration of intent: If a customer has made a purchase or contract due to misinformation or willful misrepresentation by a business, they might rescind the declaration of intent.
  
• Limitation on damages: This determines the maximum damages a business can claim if a consumer cancels the contract midcourse.
  

Note: The above administrative regulations and civil rules are representative items. Various other guidelines and rules also exist, which differ slightly depending on the type of transaction described below.

What types of transactions does the Act on Specified Commercial Transactions cover?

The Act does not apply to all businesses. The following are the types of transactions subject to regulation under this law:

• Visit sales
  
• Mail order
  
• Telemarketing
  
• Chain Referral Transactions
  
• Specified Continuous Service Offering
  
• Business Opportunity Sales Transactions
  
• Visit sales
  

Visit sales

Visit sales are when a business visits a consumer’s residence to sell products or make a contract. Other visit sales include purchases and contracts at places that do not qualify as stores, such as community centers, coffee shops, and streets, as well as catch and appointment orders.

Mail order

The tax authority considers the following sales to be mail orders: transactions advertised on EC websites, television, newspapers, magazines, etc., whereby consumers who see the advertisement apply for purchase by mail, telephone, fax, internet, etc. Businesses operating EC websites must include a statement based on the Act on Specified Commercial Transactions.

Telemarketing

When a business calls a consumer and solicits them to purchase a product or apply for a contract, that is telemarketing sales. If they hang up the phone initially and apply for it at a later date, it is still the case if they decide to buy the product through this method. When they use social networking sites, mail, letter service, faxes, leaflets, pamphlets, etc., to induce customers to call and apply for goods or contracts, that is also telemarketing sales.

Chain referral transactions

Chain referral transactions (“pyramid selling” or “multi-level marketing”) are structured so that the business recruits individuals, who then recruit new salespeople, thereby expanding the sales organization up the chain. The recruiters profit from, for example, an introduction fee when they recruit others to join.

Specified Continuous Service Offering

This means the provision of services for a period of time, exceeding a certain period of time, and for a consideration in excess of a certain amount. See the table below for details.

Currently, the following seven services are designated as Specified Continuous Services:

Business Opportunity Sales Transactions

These are transactions in which the business invites the consumer to provide work, and then forces the consumer to purchase goods or services. Consumers may know this as an “inside job” or “monitor” business, in which a business forces a person to buy a computer, software, or other items for work-at-home purposes.

Visit sales

This is a transaction where a business visits a consumer’s home or workplace to purchase goods. In recent years, there have been cases of “forced purchases,” such as when they force a customer to buy precious metals or other items despite having already stated that they do not want to.

Depending on their nature, these transactions could violate the Act on Specified Commercial Transactions.

What is a notation based on the Act on Specified Commercial Transactions?

Advertisements are required in administrative regulations for mail-order sales. Article 11 of the Law states that a business must always clearly display various advertising items as notations.

A notation based on the Act on Specified Commercial Transactions is an easy-to-understand summary of information a business must disclose to consumers when selling products or services.

Mail-order sales require this specific disclosure because customers can only check the terms and conditions of sale or contract through advertisements when purchasing goods or services.

But if you are not advertising, don’t you need a notation based on the Act on Specified Commercial Transactions? Some might think so. Still, “advertising” here differs slightly from the general concept, such as PR pages and banners on the internet or newspaper advertisements. As stated by the Consumer Affairs Agency (CAA), an ad is a notice or announcement “in which the business’s intention to accept an offer to enter into a contract is clear on the website and the customer is able to make an offer to enter into a contract through such representation.” In other words, product and application pages on ecommerce sites also fall under the category of ads, so they must label them with a statement based on the Act. Companies must include this information regardless of the type of business, such as individual or corporate, or the size of the EC site, so be sure to correctly describe and disclose the information per the Act on Specified Commercial Transactions guidelines.

Now, let’s dig deeper into what you need to write as a notation based on the Act.

Since advertisements come in various formats and styles, and the space used varies, displaying all items required by the Act on Specified Commercial Transactions might be difficult.

Therefore, if you meet the conditions, you can omit some labeling of goods. Please refer to the table below for items that you can exclude.

If you are a sole proprietor using your home as an office and are not comfortable displaying your address and phone number on your website, please consult with the CAA to see if you can leave them out if you meet the conditions listed above.

That said, there is a condition for omitting this requirement: “The site must indicate in the advertisement that it will provide without delay a document describing these matters (in the case of an EC site, email is also acceptable) upon request from the customer, and that it will provide without delay such documents upon actual request.” For this reason, confirming whether your site meets these conditions is necessary.

If meeting the requirements is difficult due to the nature of your business, consider using a virtual office address and phone number as another option.

For details regarding mail-order advertising display matters, please refer to the CAA’s “Act on Specified Commercial Transactions Guide, Mail Order Advertising Q&A.” The page presents various cases.

Template for notation based on the Act on Specified Commercial Transactions

Please refer to the template below and the display items of the advertisement above, and create a “Notation based on the Act on Specified Commercial Transactions” using your company’s service content.

What if there is no notation based on the Act on Specified Commercial Transactions?

Some businesses have experienced consequences for failing to display a notation based on the Act on Specified Commercial Transactions.

For example, in the case of mail-order sales, say the business cannot qualify for a cooling-off period. Still, due to the extremely high number of problems related to returns, you need to make a disclosure based on the Act regarding returns. If you fail to make a notation about this, you must unconditionally accept consumer returns.

Similarly, suppose the display of a specific application (e.g., the final confirmation screen of an order on an EC site) is incomplete or false. In that case, you will have to cancel a transaction or issue a refund, which will, in effect, place a heavy burden on your business.

Be sure to follow the guidelines and clearly state the specifics to ensure a smooth transaction.

This article has explained in detail the Act on Specified Commercial Transactions and how to include a statement based on it. For businesses operating EC sites, this law is fundamental not only to prevent problems with consumers but also to build a relationship of trust.

The government updated the Act on Specified Commercial Transactions on June 1, 2022 (revised special Commercial Code). Displaying certain new items on the “final confirmation screen” for customers has been mandatory after that date.

Stripe’s How to create and display a “Commerce Disclosure” page and Guidelines under the revised Specified Commercial Transaction Act support pages describe in detail the new products you must address. We recommend that new Stripe account holders and those using Stripe accounts since before the law revision review the necessary information again by referring to the same page.