Stealth Marketing Ban Leaves Influencers Unregulated

Jiji Press

10:30 JST, June 27, 2023

TOKYO (Jiji Press) — Stealth marketing on the internet will be added to the list of misrepresentations that are prohibited under Japan’s revised law against misleading representations, which will come into force on Oct. 1.

Third-party “word-of-mouth” advertising will be covered by the ban unless it is recognized as self-motivating posting. Still, only advertisers such as companies will be held liable for infraction, leaving questions about the effectiveness of the regulation.

The issue of stealth marketing, or advertising products or services to people without their knowledge, came to the fore after consumers, previously information recipients, began to spread information about products and services online.

With the expansion of the internet advertising market, it has become increasingly common for social media influencers, who have the ability to affect the purchasing decisions and opinions of others in the same online communities, to post advertising under the guise of third-party word-of-mouth information.

In November 2021, the Consumer Affairs Agency issued an order for the first time under the law against misrepresentations to prevent a recurrence of stealth marketing. In the incident, a distributor of supplements allegedly provided product samples to 15 Instagram users and asked them to make posts with the hashtag “#breast-enlarging effect.”

The posts were judged to be misrepresentations that misled people into believing that the product was significantly better than it actually was, but the practice of hiding the fact that the posts were advertising was not determined to be an illegal act.

“Due to this incident, we came to understand clearly what the law against misleading representations does and doesn’t cover,” an official at the agency said of a factor behind the efforts to tighten regulations.

In line with the law revision, the agency published guidelines to regulate representations that do not appear to be advertisements although they are actually ads for business operators. Representations other than those generally recognized as advertisements, such as television commercials, will be required to be clearly indicated as ads. Those lacking such indications or with them as notes in fine print are banned.

In addition, reviews posted by third parties about products and services will be regarded as stealth marketing if the advertisers are found to have been involved in the decisions on the posts’ content.

Even if no clear request or instruction from the advertisers is confirmed, posts will be deemed to be in violation of the law unless they are determined, from relationships between relevant parties, to have been made by the independent decisions of the third parties. Examples include reviews posted in exchange for money or event invitations.

In cases where companies provide products to influencers or others free of charge and ask them to post reviews of them on social media, the posts will not be regarded as stealth marketing, provided that they are based on such people’s voluntary intent.

Violators will be subject to administrative cease-and-desist orders, and those who do not comply will face up to two years in prison or a fine of ¥3 million or less.

Still, there are problems in the coming ban on stealth marketing that need to be resolved.

The European Union’s regulations cover not only advertising but also all other aspects of transactions, including marketing methods. In the United States, influencers may be held accountable along with advertisers.

In Japan, third parties, such as influencers, will not be regulated under the law against misleading representations. In a report last year, a panel of experts commissioned by the Consumer Affairs Agency recommended that the scope of people and organizations that can be held responsible under the law be expanded to include influencers and brokers who solicit deceitful word-of-mouth postings.