Cosmetic Fair Trade Council Japan

I. Purpose and Effect of the Codes of the Fair Competition

<Q&A>

Q1:

What are the Codes on the Fair Competition? And what is the reason that such rules were laid down?

The Codes on the Fair Competition are the Codes of the industry concerned that the entrepreneur or trade associations lay down independently about the description regarding the restrictions on the offering premiums and proper handling of representations in order to maintain a fair competition and proper selection of products by general consumers after obtaining approval of the Fair Trade Commission in accordance with the provisions of Section 12 of the Act Against Unjustifiable Premiums and Misleading Representations (hereinafter referred as Act).
Sales competition, in principle, should be made based on the quality and price. When the competition becomes severe, however, the entrepreneurs are liable to fall into competition of the amount of premiums or exaggerated advertisement or publicity. Moreover, this sort of competition is markedly extensive and repetitive; therefore, by nature it tends to escalate without limit.
The purpose of the Codes of Fair Competition (hereinafter referred as Codes)is to remove useless rivalry between entrepreneurs which is the major cause of excessive premiums and misleading representations and to lay down the good sense of the majority of the industry concerned as a "commercial practice", thereby preventing in advance excessive premiums and misleading representations that are liable to escalate under the guarantee that the entrepreneurs observe this "normal commercial practice" with one another and helping consumers select products properly.

< Related laws >

Section 12, Clauses 1 and 2 of the Act (Law No.134 May 15, 1962)

Sec. 12 [Fair Competition Codes]

Entrepreneurs or a trade association may, upon obtaining authorization from the Fair Trade Commission in accordance with the Rules of the Fair Trade Commission, with respect to the description relating to premiums or representations, conclude or establish an agreement or a code, aiming at prevention of unjust inducement of customers and maintaining fair competition. The same shall apply in the event alterations there are attempted.
The Fair Trade Commission, unless it finds that an agreement or a code under the preceding subsection (hereinafter referred to as "fair competition code") meets each of the following Clauses, shall not grant authorization under the preceding subsection:
1. That it is appropriate to prevent unjust inducement of customers and to maintain fair competition;
2. That it is not likely unreasonably to impede the interests of consumers in general or the related entrepreneurs;
3. That it is not unjustly discriminatory; and
4. That it does not restrict unreasonably the participation in or withdrawal from the fair competition code.

Q2:

What is the merit of joining the Codes?

The following may be mentioned as the merits of the entrepreneurs joining the Codes.

Since the Codes are the one which the Fair Trade Commission authorizes after obtaining mutual agreement of general consumers and related entrepreneurs, the industry's laying down Codes in itself enhances the trust of consumers toward the industry, thus leading to the enhancement of the trust of consumers toward the entrepreneurs joining it as well.
As long as entrepreneurs participating to the Code keep the content of the Code, they can engage in the sales activities without anxiety for being charged by the Fair Trade Commission with violation of the Law as excessive premiums or misleading representations
When the entrepreneurs participating in the Codes have violated the rules, the Cosmetic Fair Trade Council investigates the offense and handles it in accordance with the rules. The Cosmetic Fair Trade Council shall perform the regulatory control practically. The Fair Trade Commission shall not take immediate actions unless the case is a malicious disciplinary violation.

Q3:

Are the Codes effective to outsiders?

Codes shall be applied only to the entrepreneurs who participate at their own will. The outsiders are not applicable. Regarding the excessive premiums or misleading representations used by the outsiders, the Fair Trade Commission investigates them directly pursuant to Act, and takes action according to the same law.
In this case, the Fair Trade Commission applies the law in consideration of the normal commercial practices in the industry concerned. Therefore, if the content of the Codes is recognized as being set up as the rules of the industry, it is taken into consideration as the standard for judgment when the law is applied. From this viewpoint, it follows that the Codes are effective for the entire industry including the outsiders, although they are voluntary rules laid down by the participating entrepreneurs.

< Related laws >

Sec. 6 [Cease and desist order]

The Fair Trade Commission may, in the event there is an act violating the restriction or prohibition under the provisions of Section 3 [restriction or prohibition of premiums] or violating the provisions of Section 4 (1) [prohibition of misleading representations], order the entrepreneur concerned to cease such an act, or to take the measures necessary to prevent the resurgence of the said act, or to take any other necessary measures including publicizing the description relating to the implementation of such measures. Such an order (hereinafter referred to as "cease and desist order") may be issued even when the said violation has already ceased to occur.

The Fair Trade Commission measures :

Cease and Desist order according to Article 6 of the law (correction advertisement in newspapers, etc)
Warning: As to the offence or action liable to violate the law, measures to guide the proprietor concerned so that corrective measures be taken
Calling attention :As to the action liable to lead to an offense, measures to be taken where there is need to call attention of the entrepreneur

Q4:

In how many cases are the Codes on Fair Competition authorized?

The role of the Codes is rated high. As of April 1, 2005, 105 cases are authorized. Of them, 40 cases restrict offering of premiums and 65 codes concern representations (2 with foodstuff, 39 with liquors, 26 with other durable consumer goods).
In the industry related to cosmetics, the Codes concerning 4 representations are authorized as follows.

The Codes on Fair Competition regarding representations of cosmetics (authorized on October 22, 1971)
Codes on Fair Competition regarding representations of toilet soaps (authorized on December 1, 1971)
Codes on Fair Competition regarding representations of dentifrice (September 3, 1975)
Codes on Fair Competition regarding representations of household synthetic detergents and household soaps (May 15, 1984)

Q5:

What is the background of the Codes having been set up in cosmetics?

In 1967, a misleading representation used by synthetic lemon juice industry such as Pokka Lemon became a big social issue. The incident became a cue for the industry concerned to think about the imprudent use of juice names as the trade name regardless of presence of fruit juice in the product.
Cosmetics having product names such as "lemon milk lotion" or "lemon cream" were also rampant in the market with pictures showing sliced lemons or dripping juice of raw lemon together with an explanatory note saying "abundantly mixed with fresh natural lemon juice" and an advertisement texts touting the beauty effect by "mixing an active lemon with a whitening effect".
The representations "lemon" with cosmetics was taken up in the Diet (December, 1967, the Commerce and Industry Committee, the House of Representatives). Subsequently, the Ministry of Health and Welfare took measures including the withdrawal of products on the ground that natural lemon was not mixed, but lemon oil and extract were present in a small quantity as perfume without having beauty effect. Thus, this problem was resolved.
The background being as such, the Japan Federation of Cosmetic Industry Associations started the study of codes on fair competition regarding the representations of cosmetics under the guidance of the Fair Trade Commission on the basis of the idea that proper cosmetic representations is the best way to restore the trust of consumers.

< Note>

The product with "lemon juice" was called "Pokka Lemon". It carried photos showing fruits and slices of lemon with a representations "this is a product in which a fresh lemon aroma and ingredients are bottled". However, it was a drink in which citric acid, perfumes, vitamin C, a small The quantity of fruit juice and coloring agent were mixed with or added to water. It contained only an extremely small quantity of lemon fruit juice. (Retraction case No.8 1967:Case of Pokka Lemon Co. Ltd.and others)