The Consumer Affairs Agency issues first order to take action against stealth marketing ads on Instagram! What are the advertising regulations under the Act on Premiums and Representations?

Generally speaking, it refers to "advertising activities that are carried out in a way that consumers do not realize is taking place." A typical example would be a celebrity or influencer who receives payment from a company that wants to promote a product or service, but conceals this fact and recommends the product or service on social media as if they are genuinely a fan of that product or service.

There are many cases of online outrage over "stealth marketing" as people feel they have been deceived or betrayed. However, on the surface, this kind of "stealth marketing" looks no different from genuine word-of-mouth or reviews, making it difficult to distinguish, and so the reality is that it is still rampant on the Internet.

In this context, the Consumer Affairs Agency issued its first corrective order in November 3, stating that stealth marketing advertisements on Instagram violate the Act against Unjustifiable Premiums and Misleading Representations, and began taking steps to rectify the situation.

In this article, we will provide a clear explanation of the points that led to this corrective order, including why stealth marketing advertising was deemed to be "illegal."

What measures were ordered?

Background of the Order

Since around March 30, a company that designs and sells breast enhancement supplements (hereinafter referred to as "Company X") has been having Instagram users post images of the supplement's packaging along with comments such as "I'm worried about my small breasts so I'm aiming for a two cup size increase! I hope I can see visible results" and "#bustenhancingsupplement" in order to sell the supplements.

The Consumer Affairs Agency issued a corrective order to Company X, stating that these representations constituted “misleading representations of superiority” (to be explained later) under Article 5 of the Act against Unjustifiable Premiums and Misleading Representations and thus violated the Act.

What are the legal issues?

The Act against Unjustifiable Premiums and Misleading Representations is a law that regulates advertising and promotion by businesses to prevent them from falsely representing the quality, content, price, etc. of the products and services they offer (misrepresentation). Violation of this law may result in the issuance of corrective orders, as in this case.
However, in this case, the business was not promoting or advertising itself; rather, an "ordinary consumer" merely posted a product introduction on Instagram.
Even if such product introductions and word-of-mouth reviews are made by ordinary consumers, should businesses be held responsible for such misrepresentations under the Act on Specified Commercial Transactions and Trademarks?

Furthermore, this post merely states the poster's expectations, saying, "I'm worried about my small breasts, so my goal is to increase my cup size by two! I hope to see visible results," and does not seem to directly mention the effects or efficacy of the product, saying, "It can increase your cup size by two!"
Even if the content is like this, does it constitute a "misleading representation of superiority" under the Act against Unjustifiable Premiums and Misleading Representations?

In summary, the legal issues in this case are as follows:

So, let’s start by asking what the Premiums and Representations Act is.

What is the Premiums and Representations Act?

Regulations on the Act against Unjustifiable Premiums and Misleading Representations

The official name of the Act against Unfair Premiums and Misleading Representations is the Act against Unfair Premiums and Misleading Representations (Act No. 37 of 134).
This law regulates false representations of the quality, content, price, etc. of products and services (misrepresentation) in order to protect an environment in which we, the general public, can independently and rationally choose better products and services.

The Act against Unjustifiable Premiums and Representations prohibits businesses that provide goods or services from making unfair representations that are likely to mislead consumers, such as "misleading representations of quality," "misleading representations of advantages," or other representations that are likely to mislead consumers (Article 5 of the Act against Unjustifiable Premiums and Representations).

Overview and specific examples of misrepresentation

Let's take a look at the three types of misrepresentation and give some specific examples.

"Misleading representation of benefits" refers to advertising that represents the price of a product or service as being significantly more favorable to the trading partner than it actually is, or that is significantly more favorable than that of competitors, contrary to the fact. For example, this would apply if a company were to sell a product under a representation that a discount campaign would only be applied this month, when in fact the discount campaign had been in place for years.

In addition, any indication that may be misleading and that is individually designated by the Prime Minister is prohibited.
For example, in order to attract customers to the store, they may display products that are not actually for sale as if they were for sale (so-called "bait advertising").

Will posts by ordinary consumers also be subject to regulation?

Word of mouth information and the Premiums and Representations Act

The "representation" in the Act on Unjustifiable Premiums and Representations means advertisements and other displays made by business operators regarding the content and terms of trade of the goods or services they supply as a means of attracting customers (Article 2, Paragraph 4 of the Act on Unjustifiable Premiums and Representations).

Based on this premise, since general consumers do not supply goods or services themselves and do not fall under the above definition, it can be said that, in principle, product introductions, reviews, etc. posted by general consumers do not give rise to problems under the Premiums and Representations Act.

However, considering that product introductions and word-of-mouth information posted on the Internet by ordinary consumers, especially those posted by celebrities and influencers, have a great influence as information that we refer to every day when selecting products and services, it would not be appropriate to exempt all of them from the Act on Premiums and Representations.

Therefore, the Consumer Affairs Agency has the following to consider the relationship between the Act against Unjustifiable Premiums and Misleading Representations and word-of-mouth information:Even if the information is posted by a general consumer, if it is posted at the request of a business supplying a product or service as a means of attracting customers, and if it constitutes a "misleading representation of superiority" or "misleading representation of advantage," it will be problematic as an "unfair representation" under the Premiums and Representations Act., which is the interpretation given.

(Reference) Consumer Affairs Agency"Problems and points of consideration regarding the Act against Unjustifiable Premiums and Misleading Representations in Advertising Representations in Internet Consumer Transactions"

Relationship to this case

In this case, the problem was with posts made by Instagram users on Instagram.
Regarding these posts, it was alleged that Company X, a seller of supplements, had given specific instructions to Instagram users about what to post and had decided on the content to be displayed themselves.
For these reasons, even though these posts were made by ordinary consumers, they were deemed to have been posted at the request of Company X, a business operator, and thus Company X was in violation of the Act against Unjustifiable Premiums and Misleading Representations.

Does a subjective statement constitute a "misleading representation of quality"?

Subjective Content and the Premiums and Representations Act

If a business asks a third party to post word-of-mouth information, etc., the business may be held responsible, but as long as the content does not constitute a "misleading representation of quality" or the like, no particular problems will arise.

So, do posts with subjective content such as "This product is great!" or "This is my favorite!" constitute "misleading representations of quality"?

Indeed, since there is no reference to the goods or services themselves, it does not seem to be the case that there is a risk that the quality or content of the goods or services may be mistakenly believed to be significantly better than they actually are.

However, the quality and content of the products and services that are the subject of "misleading representations of superiority" are generally interpreted broadly to include what others think of the products and services and what type of people use them.

(Reference) Koichi Nishikawa, "The Act against Unjustifiable Premiums and Misleading Representations [2021th Edition]" (Shojihomu, 84), pp. 85-XNUMX 　

Therefore,Even if a favorable review is given without any reference to the quality or content of the product or service itself, it may be considered a misleading representation of quality in the sense that it misleads people into thinking that there is a favorable review, when in fact there is no such review.It will be.

Relationship to this case

In this case, the issue is whether claims made by Company X, a company that sells supplements, such as "I'm worried about my small breasts, so I'm aiming to increase my cup size by two! I hope I can see visible results," which were posted by Instagram users, constitute "misleading representations."

The content displayed in these posts does not refer to the effectiveness of the supplement itself.
However, while it is presented as if there was evidence that women who were concerned about having small breasts had left positive reviews of their own volition, in reality these were posted merely at the instruction of Company X and others, and this evidence is not true.

For these reasons, it is believed that these posts were deemed to constitute "misleading representations of quality," even though they were subjective.

Summary

Using the case of the Consumer Affairs Agency issuing a corrective order regarding stealth marketing advertising on Instagram as a topic, we explained the key points of the case, including an overview of the advertising regulations under the Act against Unjustifiable Premiums and Misleading Representations, and the reasons why stealth marketing advertising was deemed to be "illegal."

As a result of this first corrective order being issued, it is expected that regulations and administrative penalties against stealth marketing will become increasingly strict in the future. Therefore, we recommend that you take another look at your company's advertising and promotion practices, and if you have any concerns or worries, consult with an expert as soon as possible.