Careful with Giveaways: Premium Labelling Rules to Know When Planning a Campaign

A campaign does more than prompt people to buy a product or service; it is an important part of public relations, often run to build awareness of a brand or an item.

There are many kinds, referral schemes, gifts for visiting, prize draws, cashback, gifts for the first so many people, prize pools, but did you know that, depending on the prize and the terms, campaigns are regulated under the Act against Unjustifiable Premiums and Misleading Representations?

This article sets out the points to check under that Act when planning a campaign, with examples; do use it as a reference.

1. The basics of the Act

The Act against Unjustifiable Premiums and Misleading Representations is

formally titled the Act against Unjustifiable Premiums and Misleading Representations.
It regulates advertising aimed at consumers and the offering of premiums at the point of sale. It is one of the laws protecting an environment in which consumers can choose better goods and services freely and rationally, and businesses need to be careful of it.
What the Act is

Its purpose is to protect the interests of ordinary consumers, and it prohibits unfair inducement. Its regulation divides broadly into two: prohibiting misleading representations to consumers, and prohibiting excessive premiums in sales to consumers.

Here we explain, in plain terms, the second of those, which needs the most care in planning a campaign.

On the prohibition of excessive premiums

If consumers come to choose goods and services swayed by excessive extras or lavish prizes,
they may be led into buying something of poor quality for the price, or overpriced for what it is,
and competition through prizes may escalate, lowering the quality of the goods and services themselves.

(Restriction and prohibition of premiums)
Where the Prime Minister finds it necessary in order to prevent unfair inducement of customers and to secure free and rational choice by ordinary consumers, he may restrict the maximum value or total value of premiums, their kind, the manner of offering them and other matters relating to the offering of premiums, or may prohibit the offering of premiums.

Source:The Act against Unjustifiable Premiums and Misleading Representations

The Act therefore sets maximum and total values according to the nature of the premium,
regulating anything beyond a given limit, protecting consumers’ interests and preventing rational choice from being obstructed.

2. How far does a premium extend? What counts as a premium

Where something is held to be a premium as defined in the Act, the Act’s rules on premiums apply.
In ordinary use, a premium means a small gift, an extra or a prize.
Under the Act, a premium is defined as something meeting all three of the following conditions.

The conditions for a premium
1. Inducement: offered as a means of attracting customers
2. Attached to a transaction: offered by a business in connection with a transaction in goods or services it supplies
3. Economic benefit: goods, money or other economic benefit

Source:What counts as a premium

Note, however, that there are exceptions that do not count as premiums, such as discounts and after-sales service.

And beyond the general rules just described, four sectors need to check their own separate notices on premiums.

Sector-specific notices on premiums
Newspapers
Magazines
Real estate
Prescription medicines, medical devices and testing laboratories

3. The two kinds of prize scheme defined in the Act

Premiums under the Act divide first into two.

1. Open schemes
2. Closed schemes

An open scheme is a campaign anyone can enter, with no requirement to buy a product or visit a shop.

A closed scheme is a campaign that requires buying a product from, or using a service of, the company running it.

4. Open schemes, which the Act does not regulate

An open scheme is a campaign anyone can enter, with no requirement to buy a product or visit a shop.

An open scheme does not count as a premium under the Act and so is not regulated. Because it falls outside the Act, there is no cap on the value of the prize.

Examples of such campaigns include the following.

Examples
Follow and repost
Hashtag campaigns
Free registration
Signing up to a newsletter
Answering a survey
Adding a LINE account as a friend
Taking part in a quiz or a small game

5. Closed schemes, which the Act does regulate

A closed scheme is a campaign that requires buying a product from, or using a service of, the company running it. These divide further into three: premiums given to everyone, general prize schemes and joint prize schemes.

Premiums given to everyone

These are premiums given to every purchaser or every visitor, rather than awarded by chance through a draw or by merit in some activity.

Examples of such campaigns include the following.

Examples
An original item for the first so many visitors
A small gift for everyone who visits on opening day
A souvenir sent to everyone who applies
Item B given to everyone who buys item A

Where such a premium is offered to consumers, a limit applies according to the price of the product or service it is attached to.
Specifically, as in the table below.

Transaction value	Maximum value of the premium
Under 1,000 yen	200 yen
1,000 yen or more	Two tenths of the transaction value

General prize schemes

A general prize scheme is any scheme other than a joint one, that is, one a business runs on its own.
Examples of such campaigns include the following.

Examples
Win and get another one free
Travel vouchers for 1,000 purchasers drawn at random
50,000 yen in points back for first-time customers, drawn at random

The prizes offered in a general scheme are capped according to the transaction value (the price of the product or service itself).
Specifically, as in the table below.

Transaction value in the scheme	Maximum value	Total value
Under 5,000 yen	Twenty times the transaction value	2% of the expected total sales covered by the scheme
5,000 yen or more	100,000 yen	2% of the expected total sales covered by the scheme

Joint prize schemes

A joint prize scheme is one run by several businesses together. Because several take part, the sums and the scale are larger than in a general scheme.

Examples of such campaigns include the following.

Examples
A draw run by a shopping street
A raffle run jointly by several shops in a shopping centre

Unlike a general scheme, the prizes in a joint scheme are capped at a flat 300,000 yen, whatever the transaction value.
Specifically, as in the table below.

Maximum value	Total value
300,000 yen regardless of transaction value	3% of the expected total sales covered by the scheme

6. Breaching the Act brings strict orders

Where the Act is breached, the Consumer Affairs Agency may issue a cease-and-desist order or an order to pay a surcharge.

Continuing to run unlawful advertising after an order has become final carries up to two years’ imprisonment, a fine of up to three million yen, or both.

A company may face a fine of up to 300 million yen.

7. In closing

This article has set out the Act against Unjustifiable Premiums and Misleading Representations, which you should watch when planning a campaign.

Offering excessive premiums is prohibited under the Act.
When preparing prizes to attract customers or promote something, watch not only what the prize is but the caps on its maximum and total value.