Key Points of the Premiums and Representations Act That Legal Should Check Before Launching a Campaign
Hello, I'm Noriaki Asato, Representative Attorney at LegalAgent.
Campaigns are a familiar tool for growing a startup's business. They are widely used in many forms, from lotteries for users who follow or repost on social media to gift cards for purchasers, points for referring friends, free trials and limited-time discounts.
In these initiatives, consulting the legal team tends to be put off until later. We also see cases where we are consulted only once the landing page or social media copy has been finished. However, if only the wording is checked at the end, there may not be time to change the plan. This is because whether the premium regulations apply depends on the mechanism itself: who is targeted, on what conditions, and what economic benefit is provided.
Distinguishing Premiums from Discounts
The first thing to determine in campaign legal work is whether the benefit offered constitutes a premium, or whether it is closer to a discount or ordinary transaction terms. Under the Premiums and Representations Act, premiums are economic benefits that a business provides, as a means of inducing customers, incidentally to transactions in the goods or services it supplies, and they refer to goods, money and the like designated by public notice. The scope is broad, covering gift certificates, points, digital items and more.
That said, not every discount or benefit is subject to the premium regulations. Things recognized as discounts in light of normal business practices, and the content of the product itself, are treated separately from premiums.
The important attitude here is not to conclude too readily that something is a premium just because something is being handed over. Conversely, one cannot say definitively that something is not a premium just because it takes the form of points. The judgment is made based on the conditions for the campaign, its connection with transactions, the nature of the benefit provided and its power to attract customers.
The Difference Between Open Sweepstakes and Transaction-Linked Sweepstakes
When considering social media campaigns, the issue is whether the campaign is an open sweepstakes or a sweepstakes incidental to transactions. A lottery that does not require purchasing a product, applying for a service or visiting a store as a condition of entry, that anyone can enter and that does not require a store visit or the like to receive the prize may qualify as an open sweepstakes. For open sweepstakes, the cap on the value of money or goods that can be provided has been abolished.
By contrast, where purchasers, store visitors or participants in sales meetings are targeted, a connection with transactions arises, and the campaign may fall within the scope of the premium regulations. Care is needed because this boundary tends to become blurred in practice. Even if the campaign says "enter by following and reposting," incidental connection with transactions becomes an issue if the information needed to enter cannot be obtained without purchasing, if purchasers are given a higher chance of winning, or if a store visit is required to receive the prize. It cannot be said that incidental connection with transactions is immediately recognized merely because the campaign is on the same site as product advertising or purchase pages.
Mapping out the entry flow in a diagram at the early stage of planning, and visualizing what actions a user must take to obtain the benefit, makes it easier to avoid misjudging the category.
Value Limits for General Sweepstakes, Joint Sweepstakes and Premiums for All
Under the premium regulations, the caps differ depending on the method of provision. General sweepstakes are campaigns, other than joint sweepstakes, that determine who receives a premium or its value by chance or by the relative merit of an act, through lotteries, drawings, quizzes or other contests. A campaign that gives something to everyone who answers a question anyone can easily answer correctly is not judged to be a sweepstakes, even if it is called one.
The maximum value of a premium that can be provided in a general sweepstakes is 20 times the transaction value if the transaction value is less than JPY 5,000, and JPY 100,000 if it is JPY 5,000 or more. The total value must also be kept within 2% of the total expected sales relating to the sweepstakes. These are not merely guideline standards but caps that legally must not be exceeded.
For joint sweepstakes, the cap is JPY 300,000 per premium, and the total value is 3% of the total expected sales relating to the sweepstakes. However, merely adopting a format in which two or more companies run the campaign jointly does not necessarily mean this cap can be used immediately. The condition is that the criteria set out in the public notice are met, such as a considerably large number of businesses in a certain area or a single shopping street participating. For the shopping street category, there is a limit of three times a year and a total of 70 days a year, and a campaign that limits the businesses that may participate in the joint campaign to specific business partners, for example, is not recognized as a joint sweepstakes. Check the scope of participants and the conditions for holding the campaign in advance in light of the Consumer Affairs Agency's Q&A on joint sweepstakes (Japanese).
Premiums for all are premiums provided without a sweepstakes such as a lottery or contest. Gifts to all store visitors or all purchasers are typical examples. The cap for premiums for all is JPY 200 if the transaction value is less than JPY 1,000, and 20% of the transaction value if it is JPY 1,000 or more. Distribution on a first-come, first-served basis is also, as a rule, classified as premiums for all, but there are cases in which it is regarded as a sweepstakes where it cannot be determined at the time of application whether the customer will receive the premium and the outcome depends on chance. In areas where industry-specific public notices impose special regulations, also check how those individual rules apply.
These categories can be hard for marketing staff to grasp intuitively. Even so, the lawful cap cannot be calculated without first settling the basic design: lottery or distribution to everyone, purchase required or open to anyone, single company or joint.
Points to Note for SaaS and B2B Campaigns
The Premiums and Representations Act tends to be seen as a regulation limited to consumer-facing businesses, but careful design is also important for services aimed at businesses. Gift cards for requesting materials, digital gifts for attending sales meetings and cashback for adopting companies are frequently used in SaaS and B2B sales initiatives as well.
Even in transactions between businesses, the sweepstakes regulations apply to campaigns that give premiums through lotteries, contests or other sweepstakes incidental to transactions, even if the counterparty is a business. On the other hand, benefits provided to businesses without a sweepstakes are not subject to the regulations on premiums for all that apply to consumers, except in the fields specified in the public notices for the prescription drug, medical device and clinical laboratory industries. This difference in treatment is shown in Question 4 of the Consumer Affairs Agency's Q&A on its guidelines (Japanese).
In making the judgment, it is important not to reach a conclusion based solely on formal aspects, such as the counterparty being a sole proprietor or the individual contact person receiving the benefit. Confirm in substance what transaction, with whom, the benefit accompanies. When giving a gift to an individual contact person, separately consider the business partner's internal rules and whether prior approval has been obtained, as well as conflict of interest and tax issues.
Stealth Marketing Regulation and the Basis for Advertising Claims
Since October 1, 2023, stealth marketing has been clearly positioned as a misleading representation under the Premiums and Representations Act. The regulation covers representations whose content the business is found to have been involved in determining and that ordinary consumers find difficult to recognize as the business's advertising. The party that bears legal liability is the advertiser that supplies the goods or services. Even where influencers or ordinary posters are asked to post, if the post takes a form that looks like a neutral third-party opinion, liability may extend to the advertiser itself.
At early-stage startups, there are situations in which founders ask personal acquaintances, investors or contractors to post in good faith. The criterion here is not limited to monetary payment; the provision of products, the grant of free use and the existence of an ongoing ordering relationship are also taken into account. Where to place labels such as "PR," "Ad" or "Sponsored," and at what size, needs to be decided according to the UI structure of the social media platform being used. Rather than merely stating in the contract that "the poster shall make disclosures in accordance with laws and regulations," sharing recommended sample posts and examples to avoid in advance makes operations run smoothly.
Objective Grounds Supporting Advertising Claims
In campaigns, attention must be paid not only to the caps on premiums but also to the wording of the announcement itself. Claims such as "among the lowest prices in the industry," "No. 1 in customer satisfaction," "half price for a limited time" and "feel the effect" should be checked carefully from the perspective of misleading representations of superiority and advantage.
For No. 1 claims and comparisons with other companies in particular, it is important to have objective support in place, down to the survey method, the population and the criteria for selecting comparison targets. Emphasizing only survey results cut in a way favorable to your own company creates a risk of being found to have made a misleading representation. Even for initiatives promoted as "free," the scope covered and the timing at which charges begin must be clearly indicated. For subscription-type services, also cross-check whether the wording on the advertising screen, the final confirmation screen and the conditions in the terms of use match completely.
Practical Checks That Go Beyond Drafting Terms
When running a campaign, it is common for legal staff to draft dedicated terms. Clarifying the entry conditions, period, what is provided, the inquiry contact and similar matters in writing is basic practice.
However, simply preparing the terms does not make everything secure. Unexpected friction arises unless the content of the terms is cross-checked against the actual landing page, social media posts, application forms and even the operating procedures in the sales field. For example, discrepancies such as the terms stating "by lottery" while sales staff give priority allocations to specific customers, or the landing page proclaiming "gift for everyone" while the terms say "by lottery," lead directly to problems after launch.
Self-Check Items at the Planning Stage
Below are practical issues to confirm when designing an initiative.
- Whether entry conditions involve a purchase, application, store visit, request for materials or attendance at a sales meeting
- Whether the benefit provided is a discount or ordinary transaction term, or a premium
- Which of open sweepstakes, general sweepstakes, premiums for all or joint sweepstakes applies
- How the transaction value and the value of the premiums provided are calculated
- Managing the ratio of the total value of premiums to total expected sales
- Clarity of advertiser disclosure in social media posts and review requests
- Whether there are objective grounds supporting No. 1 claims, comparisons and claims of effect
- Clarity of representations regarding free benefits, discounts, automatic renewal and cancellation conditions
- Consistency among the campaign terms, landing page, posts, application screen and winner notifications
- Whether the purpose of collecting personal information, contractors and scope of use have been made known
It is important to complete these checks at the early stage of planning rather than leaving them to the very end. If the cap on what can be provided has been exceeded, the problem cannot be solved by revising the text alone, and the campaign design itself would have to be rebuilt.
Legal Support Involved from the Planning Stage
In LegalAgent's legal outsourcing, we value responding to consultations from the planning and design of marketing initiatives, rather than merely reviewing the wording of finished announcements and campaign terms as a formality. Who is targeted, what the conditions are and what benefit is granted. Which category it falls into under the premium regulations. How to include a disclosure that conveys that it is advertising. These are matters to be sorted out while maintaining the speed of the business.
Contact for Campaign Legal Consultations
For legal checks from the planning stage of an initiative, please contact us through the following.
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