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About the importance and role of Japan's "Fair Competition Code" in food labeling, And the compliance to its rules

In Japan, the "Fair Competition Code" is voluntarily set by business operators or business associations (councils): It is based on the "Act against Unjustifiable Premiums and Misleading Representations" which stipulates to prohibit misleading and false labeling statements or representations giving a significantly superior or more advantageous image to a certain food.

Recently the Fair Trade Commission and the Consumer Affairs Agency agreed on including, in the Fair Competition Code, the labeling rules for "Foods for Specified Health Uses" known as "Tokuho" (Japanese: "特保"), which is a part of the broader group of "Foods with Health Claims".

When labelling claims related to the effect on body functions or health maintain, a single wrong description can lead to misleading representations – and possibly, to a conflict with the Act against Unjustifiable Premiums and Misleading Representations.

However, it is difficult to judge which kind of claims are acceptable or not just by referring to the Act against Unjustifiable Premiums and Misleading Representations because the Act stipulates only general and abstract contents. On the other hand, the "Fair Competition Code" established by the industry indicates specific guidelines.

Specifically, we believe that the role of the Fair Competition Code for Foods with Health Claims has become clearer, since its rules have been recognized for such products (for which, as mentioned earlier, the claims compliance can be hard to judge). I would like to now touch on the importance and role of the "Fair Competition Code" in the light of food labeling in Japan, and its compliance.

First, let's look at the purpose of the "Fair Competition Code".
It is described as follows in the CAA (Consumer affairs agency) site:

(Note: Here are some excerpts from the site.)

The "Fair Competition Code" (which stipulates –in line with the characteristics of the products and actual market of the related sector- mandatory items required to be displayed in advertisements and catalogs, as well as standards for displaying specific expressions, and limitation of offering premiums) plays an important role in creating an environment which reassures general consumers in their purchasing of quality products and services.
The aim of the Fair Competition Code is to prevent misleading representations and excessive premiums offers, which are otherwise prone to be escalated. It will be attained by creating clear rules on reasonable commercial practices concerning "misleading representations and excessive premiums" that could obstruct a fair competition, and provide guarantee to businesses that if they comply with said practices, other operators will follow as well.

To summarize the contents of the above description, the purpose of the Fair Competition Code is to prevent misleading representations and excessive premiums offers (which tend to easily escalate between competitors) by:

- Setting items that must be displayed in advertisements or catalogs
- Setting the standards for labeling specific expressions
- Setting the restrictions for offered premiums, etc.

which are to be set:

- by assimilating each industry unique "commercial practices"
- and in accordance with product characteristics and actual market of each business industry

based on the provisions of the Act against Unjustifiable Premiums and Misleading Representations.

Next, let us have a look at the content established in the Fair Competition Code. The following description can be found on the CAA site.

  1. Define the mandatory labeling items (mandatory labeling of Ingredients list, Net weight, Best before, Manufacturer’s name, etc.)
  2. Setting the criteria for displaying specific items (e.g., the time required for walking to a location, as appearing on a real estate advertisement, should be displayed in 1-minute conversions per 80 meters)
  3. Prohibition of display of specific terms (ex: the term "Milk" is not allowed for use on processed milk and milk beverage products, etc..)

As stated here, generally speaking, the Fair Competition Code specifically stipulates what should be displayed and what should not for the corresponding product.

By the way, among the enforced regulations in the "Fair Competition Code" for "Foods for Specified Health Uses", which were approved this time, one can find 17 case examples of improper labeling which may mislead general consumers about the contents of the food or the terms and conditions of trade, corresponding to the following types of misleading labeling that must not be indicated on containers and packaging:

  • Labeling that can mislead consumers into believing that the product has some benefits in the treatment or prevention of diseases, listed in the labeling license or labeling approval certificate (hereinafter referred to as "food that has received permission, etc."),
  • Labeling that can mislead consumers into believing that the product is a medicinal drug, which can lead to losing the chance of receiving a proper medical treatment

The above is a general explanation of the "Fair Competition Code", but to what extent is this code legally binding?

The "Fair Competition Code" is voluntarily set by business operators or associations, therefore, it does not apply to business bodies that do not participate in it.
Consequently, its compliance is voluntary except for the participating companies.

However, since its rules are industry rules based on the Act against Unjustifiable Premiums and Misleading Representations (targeting all food business operators in the related industry), regardless of whether or not they participate in said rules, as long as they comply with these terms, it seems unlikely that they would meet an issue related to the relevant regulations.

More specifically, this "Fair Competition Code" has 35 rules for foods in general and 7 rules for alcoholic beverages. If you are considering, or will consider labeling claims on foods, it will be useful to check the contents of the relevant food classification regulations once again.

References:
Fair Competition Code (CAA)
"What is the Fair Competition Code?" (Federation of Fair-Trade Conferences)
"Fair Competition Code and its regulations for labeling Foods for Specified Health Uses"

September 2020