Deregulation, as Deputy U.S. Trade Representative Richard Fisher emphasized anew during his trip here last week, may help the ailing Japanese economy shift toward a sound market mechanism with a government that intrudes less into the people’s lives and business activities.
However, are Japanese consumers ready to face the benefits and potential risks of a free market? The question has thrown the nation into a heated debate over proposals for a new consumer protection law designed to help consumers deal with growing problems involving contracts for goods and services.
In fiscal 1997, the Japan Consumer Center and public consumer offices received a record 430,000 complaints from consumers nationwide. Roughly 80 percent of all complaints concerned problems between businesses and customers over sales methods, contracts and attempts to cancel them. Experts say ongoing deregulation allowing the establishment of an increasing number of new businesses in fields such as financial and insurance services, nursing for the elderly and electronic commerce may leave consumers at a loss in dealing with a whirl of new products and services.
Companies, blessed with comparatively overwhelming resources, are seen as having the upper hand over consumers when concluding contracts. The Ministry of International Trade and Industry introduced a bill Friday to revise the door-to-door sales law to protect consumers from business practices concerning not only goods but certain services, such as language schools and aesthetic salons. The government is also working on a more comprehensive set of consumer protection rules.
Tentatively named the consumer contracts law, the new law is expected to put consumers on an equal footing with businesses in concluding contracts by stipulating clear-cut rules.
According to a report published in late January by a subcommittee of the Social Policy Council, an advisory panel to the prime minister assigned to work on the legislation, the law will bar companies from using certain contract stipulations considered unfair to consumers and list what information should be given to consumers when they conclude contracts with businesses.
The rules will also enable consumers to nullify contracts or seek damages for losses resulting from contracts with companies that cheated customers or resorted to intimidating sales methods. Such rules have long been in force in other major industrialized countries — established either through an accumulation of court decisions, as in the United States and Britain, or by legislation, as in continental Europe.
Japan’s long-standing civil law stipulates only that parties entering into economic contracts must be acting voluntarily, but it does not specify how to ensure the parties are on equal terms. However, the government’s attempts to put together a tougher consumer contract bill have been blocked by stubborn opposition from business interests. “They question why the government should try to control (businesses) during this time of economic hardship and amid the trend to deregulate, while protecting consumers who should be responsible for their own actions,” said a senior official at the Economic Planning Agency. The EPA acts as a secretariat for the social policy council.
At hearings conducted last year by the EPA, some industry groups, such as medical associations, real estate and securities businesses, expressed concern that the proposed legislation will impose excessive controls on businesses that are already regulated by voluntary codes of practice, existing laws and administrative directives.
Some government officials, concerned about the negative impact such broad rules might have on their influence over industries under their jurisdiction, have even accused the EPA of using the proposed legislation to expand its turf, the official said. “Until now, individual business laws have contributed to protection of consumers to a certain extent. But these laws were intended primarily as a means for government offices to control certain industries in their jurisdiction in order to better promote them,” said Seiichi Ochiai, a professor of law at the University of Tokyo and chairman of the Social Policy Council’s subcommittee.
Although Ochiai acknowledges that such cozy relations between the government and industry helped Japan achieve its impressive postwar economic growth, he said this system no longer works now that the nation is shifting toward a cross-border market economy.
Unless traditional government controls are replaced by extensive and clear-cut rules on contracts between businesses and consumers, deregulation would create only markets where anything goes for businesses, Ochiai warned.
Companies that abide by existing laws — but are ready to do whatever is not banned by the government — seem to be at a loss when told to decide by themselves what should be made clear in concluding contracts with consumers, he added. Consumer groups and experts point out flaws in the present legal system. “When shady companies find a loophole to cheat their customers, the victims in many cases give up seeking damages because their chances of winning are unpredictable due to the present loose consumer-protection rules,” said Nobuko Hiwasa, secretary general of the National Liaison Committee of Consumer Organizations.
Hiwasa added that the costly and lengthy legal procedures involved often also discourage consumers from taking action.
On the other hand, companies, even if they should lose a case, only have to pay compensation to the plaintiffs and can carry on with business as usual.
Consumer representatives insist that new civil rules must allow consumer organizations to take legal action against companies on behalf of the consumers to seek damages for all people affected by unfair business practices. There should also be rules that ban certain contract stipulations that have been judged by courts to be unfair to consumers.