Sports marketing and sponsorships in Japan - Legal issues & key takeaways

The Japanese government has been placing a strong emphasis on the growth of sports business as one of its key policies. The “Third Sports Basic Plan” announced in 20221 aspires to revitalize sports business, which was heavily hit by the pandemic, by establishing a clear path for its growth2. With younger consumers more interested in experiential products rather than material goods, more businesses are also seeking opportunities to invest in the sports industry in Japan.

Sports marketing, including sponsorships and partnerships, is a good way for companies to invest in sports business in Japan, if done properly. For example, the Japanese national team’s win over the U.S. national team at the final of the World Baseball Classic held in Miami in March 2023 recorded an extremely high viewership rating of 42.4% of Japanese households3, even though the match started at 8:00 a.m. in Japan on a weekday. Some football matches involving the Japanese national team in the FIFA World Cup Qatar in 2022 also recorded household viewership ratings of over 30%, which were the two most watched television programs in 2022 in Japan.4

For companies that seek to enter or increase sales in the Japanese market, using sports in their marketing activities cleverly could be the key to success. On the other hand, there are some legal issues to be taken care of when conducting marketing in Japan through sports, including sponsorships and endorsements. Some regulations cover marketing activities in general in Japan, such as offering excessive premiums to consumers and misrepresenting the quality of goods and services. Current developments in regulations related to stealth marketing, which sometimes involves famous athletes, needs to be closely watched as well.

This article explains these legal issues to help foreign and domestic companies and marketers plan and execute fruitful sports marketing in Japan.

Regulations Relating to Excessive Premiums

The Act against Unjustifiable Premiums and Misleading Representations (“Act”) regulates the maximum and total amounts of premiums that can be given in connection with a transaction for the provision of goods or services. This is because excessive premiums may mislead consumers into purchasing unnecessary goods or services, or those of poor quality. Also, excessive competition among companies in providing costly premiums to induce consumers to buy their goods or services may disrupt the fundamentals of competition, which should focus on the quality and the price of the goods or services themselves.

1. A “premium” means:
2. any article, money, or other source of economic gain
3. given as a means of inducing customers
4. by the seller to the customer in connection with a transaction involving goods or services supplied by the seller, and
5. which are designated by the Prime Minister as such.5

For example, a beverage company enters into a sponsorship agreement with a Japanese baseball club and runs a marketing campaign where consumers who buy its beverages are entitled to participate in a lottery to win a baseball cap with a player’s autograph. The baseball cap could be regarded as a “premium” and be subject to the Act.

There are two main categories of regulations that apply to premiums under the Act:

1. regulations that apply to “general prize contests”, which concern premiums that are given based on chance, such as lotteries and drawings, or by the superiority of specific actions, such as winning or losing a game6; and
   
   
2. regulations that apply to premiums that are given to all participants (“premiums for all”), which concern premiums that are given to all eligible persons without having to win a prize contest7.

If a premium is given based on chance but anyone can apply for it irrespective of whether or not they purchased the relevant goods or services, such as beverage products in the previous example, it is not a “premium” under the Act and thus not subject to the regulations under the Act because it is not given “in connection with a transaction involving goods or services supplied by the seller” as stated in (iii) above.

As shown below, the Act sets:

1. the maximum amount of each premium and a cap on the total amount of all premiums given under a general prize contest; and
   
   
2. the maximum amount of each premium given under a “premiums for all” arrangement.

Table 1: Caps for general prize contests8

Table 2: Cap for premiums for all9

In the case of the autographed baseball cap, assuming that the price of the beverage product is less than 5,000 JPY, the value of the autographed baseball cap should not exceed the amount equal to 20 times the price of the beverage product, and the total value of autographed baseball caps given in the campaign should not exceed two percent of the expected total sales of the beverage products in the campaign. In calculating the value of the premiums, if the same item is commercially available, the value of the premiums is the price at which the person to whom the premium is offered would normally purchase it. If the same item is not commercially available, the value of the premiums is calculated based on the price at which the person to whom the premium is offered would normally purchase it, taking into consideration the price at which premium was obtained, and the market prices of similar items, among others.

Regulations Relating to Misrepresentation

The Act also regulates marketing messaging. The two main types of misrepresentation that are regulated under the Act are:

1. Misrepresentations of quality - representations are factually incorrect and state that the quality, specifications or other attributes of goods or services are significantly superior to what they really are, or to those of competitors, and
   
   
2. Misrepresentations of advantage - representations are factually incorrect and mislead consumers into believing that the price or other terms of a transaction involving goods or services are significantly more advantageous to consumers than in reality or those of competitors.

These misrepresentations are prohibited if they carry a risk of unreasonably inducing customers to enter into transactions and impede consumers from making independent and reasonable choices. Whether such representation is made intentionally or not is irrelevant.

Under the Act, “representations” means advertisements or other representations which a person makes as a means of inducing customers, which concern the substance of the goods or services which the person supplies, or the terms or other aspects of the transaction.10 For example, in the case of the autographed baseball cap mentioned above, if the campaign advertisement indicates that a substantial number of applicants will win baseball caps, when in fact only a few applicants will win, it could be considered as a misrepresentation of advantage, as it misleads consumers into believing that the terms of the transaction are more advantageous than they actually are.

Whether a representation is “significantly superior” and falls under a misrepresentation of quality, or “significantly more advantageous” and falls under a misrepresentation of advantage, is not determined based on the understanding of the person making the representation or industry practice; rather, it is determined from the perspective of consumers. The term “significantly” indicates that the degree of the exaggerated representation exceeds the degree that is generally accepted in society and affects the consumer's choice of goods or services11.

In addition to the Act, the Unfair Competition Prevention Act regulates the act of using an indication on goods or services, in an advertisement thereof, or in trade documents or communication thereof, in a way that is likely to mislead as to the place of origin, quality, content, manufacturing process, purpose, or quantity of the goods, or the quality, content, purpose, or quantity of the services. Such an act is classified as “unfair competition” under the Unfair Competition Prevention Act and may be subject to an injunction and an obligation to pay compensation.12

Special Regulations Relating to Food, Medicines, etc.

In addition to regulations generally applicable to the marketing of goods and services as described above, there are special regulations for some goods and services that may apply based on the nature of the specific goods or services. Those regulations may be based on laws covering specific products or industries, or self-regulations or guidelines set by industry groups.

For instance, the labeling and advertising of food is subject to special regulations because it closely relates to the health and safety of consumers. Misleading representations on the labeling of food may constitute a violation of the Food Labeling Act, which mandates and regulates the labeling of food products. The Health Promotion Act and the Act on Securing Quality, Efficacy and Safety of Products Including Pharmaceuticals and Medical Devices (“Pharmaceuticals and Medical Devices Act”) may also apply to misleading advertisements in terms of the health-improvement effects of food products.

Advertisements related to medical practices and hospitals are regulated by the Medical Care Act from the viewpoint of protecting patients, and the details of the regulations are set forth in the Medical Advertisement Guideline.13 The Pharmaceuticals and Medical Devices Act and the Standards for Proper Advertising of Medicines, etc.14 strictly regulate the advertising of, among others, medicines, cosmetics and medical devices, prohibiting false or exaggerated advertisements thereof and advertisements of unapproved medicines.

In some industries, there are “fair competition rules”, which are voluntarily established by industry groups and regulate premiums and representations that specifically target goods and services that are relevant to each industry. The Act allows industry groups, upon obtaining authorization from the Prime Minister and the Fair Trade Commission, to establish such fair competition rules to prevent the unjust inducement of customers and secure an environment where consumers can make the right choice of products and fair competition in the industry. More than 100 fair competition rules have been established in industries such as food, alcoholic beverages, home appliances, automotive and real estate.

Ambush Marketing

“Ambush marketing” generally refers to a marketing method in which a company that does not have rights as an official sponsor of an event conducts promotional activities in a way that indirectly associates the company with the event, to gain brand recognition and other benefits that an official sponsor would gain by paying sponsorship money. For more information on ambush marketing, please see this article on LawInSport.

There is no Japanese law specifically regulating ambush marketing. Although nowadays it has become common for countries hosting big international events, such as the Olympics and the World Cup, to establish special laws to regulate ambush marketing related to the specific event, no special law was established in Japan in relation to the Tokyo Olympics 2020.

Ambush marketing is illegal in Japan if it violates the intellectual property rights of third parties such as trademarks, copyrights, image rights and publicity rights. For example, if a company uses without permission an event logo of a football event held in Japan which is registered as a trademark by the event organizer, the company will infringe the trademark rights of the event organizer. If the company also uses photographs of a football player participating in the event without the player’s consent, it may infringe the image and publicity rights of the player as well. However, in recent years, ambush marketing by famous companies rarely involves illegal methods such as infringement of intellectual property rights. Rather, most ambush marketing is carefully conducted using sophisticated methods, such as by indirectly evoking a connection with the event in a way that is not illegal.

Ambush marketing might be perceived in some Western countries as a very effective and creative way of marketing and may in some sense help build momentum for the event. However, culturally, ambush marketing tends to be negatively perceived by the Japanese public even if it is creatively done without any infringement of intellectual property rights. That is why Japanese companies tend to refrain from doing that. Foreign companies seeking to conduct ambush marketing in Japan should be careful not to be perceived by the Japanese public as being unfair or dishonest.

Stealth Marketing

“Stealth marketing” generally refers to advertising that is done in such a way that consumers are unaware that it is advertising. For example, if a popular athlete posts on his/her social media account a recommendation for a sponsor’s product but consumers are not aware of the sponsorship arrangement between the athlete and the company, consumers may incorrectly perceive that the athlete is neutral and recommends the product based purely on his or her personal preference. This could unfairly lead to a higher degree of consumers’ trust than in a normal sponsored advertisement.

While stealth marketing is strictly regulated in some jurisdictions, such as the guidelines issued by the Federal Trade Commission in the United States15, there was no Japanese law specifically regulating stealth marketing, and there were only some voluntary guidelines set by industry groups. Although representations made in stealth marketing could be illegal on the basis that it constitutes a misrepresentation of quality or a misrepresentation of advantage under the Act, if such representations mislead consumers into believing that its goods or services are significantly superior or more advantageous than they actually are, these regulations do not specifically address the danger that is specific to marketing that is conducted by “stealth”.

In December 2022, the Consumer Affairs Agency’s study group on stealth marketing published a report stating that stealth marketing should be regulated under the Act after investigating and examining the actual conditions and practices of stealth marketing16. In response, in March 2023, the Consumer Affairs Agency added “representations that are difficult for consumers to identify as representations of a business operator” to the scope of unjust representations that are regulated under the Act, and this change will come into effect on October 1, 202317.

The Consumer Affairs Agency has also published enforcement rules in relation to such new regulations18. According to the enforcement rules, the representations that are prohibited under the new regulations are representations made by a business operator with respect to transactions involving goods or services supplied by the business operator, where such representations do not make it clear that they are being made by the business operator, thereby making it difficult for consumers to discern that the representations in question are in fact made by the business operator. The overall content of the representation is considered when deciding whether consumers would be misled into believing that the business operator’s representation is disguised as a representation made by a third party, such as athletes. For a representation to be “the representation of the business operator”, it is required that the business operator is involved in determining the content of the representation. In other words, if it is objectively the case that the content of the representation is determined in the sole discretion of a third party, it would not be subject to the regulations.

League Rules and Players Contract

Due to the structure of the sports industry, there are various rights holders in different layers of the industry, each of which has different rights vested in it. Therefore, there may be limitations on the rights that can be granted to sponsors by a single rights holder due to the interests of other rights holders getting in the way. Thus, it is necessary to understand which rules apply to whom and how they relate to each other. There are a variety of rules in the sports industry, such as league rules, team rules, and rules set forth by other sports organizations or event organizers, as well as player contracts between athletes and teams. One of the most well-known rules of this kind would be “Rule 40” of the Olympic rules, which regulates the licensing of the use of images by athletes during the competition.

It should be noted that it is typical in Japanese professional sports leagues that the leagues and teams have broad authority over the use of images and publicities of the players. In many cases, players need their teams’ approval to enter into endorsement deals and other marketing activities. For example, the standard player contract that is used in the Nippon Professional Baseball league contains the following provisions19:

The player must allow the team to take photographs, etc. as instructed by the team and agrees that all image rights, copyrights, etc. related thereto shall belong to the team and may be used in any manner for promotional purposes.

The team’s approval is required for the player to appear in, have his or her photo taken, write articles, and otherwise be involved in any product advertising.

Also, the standard player contract that is used in the Japanese Professional Football League contains the following provisions20:

The club has the right to commercialize products using the images, etc. of the player, and may grant such rights to the league, etc.

The club’s approval is required for players to appear on TV or at events, to grant permission to use their images, etc., to give interviews, and to be involved in third-party advertising and publicity.

These rules are not legislations but arise from contractual relationships created between private parties. If violated, athletes may be disciplined or be sued for compensation by leagues, teams or event organizers. Even if the sponsor is not directly imposing those sanctions on the athletes as it is not a direct party to these agreements, such a situation should be avoided because it diminishes the value of the sponsorship and even harms the reputation of the company.

Key Takeaways for Companies and Marketers Conducting Sports Marketing In Japan

As explained above, the laws and regulations applicable to sports marketing in Japan depend on, among others, the nature of the products or services, the specific marketing method, and the type of sports in question. Thus, it is essential to examine applicable restrictions on a case-by-case basis when planning to conduct sports marketing in Japan. As a clue for starting such scrutiny, the following is a brief list of the laws and regulations explained in this article.

Premiums and misrepresentations are subject to the regulation under the Act against Unjustifiable Premiums and Misleading Representations, in addition to the regulation applicable to misleading representation under the Unfair Competition Prevention Act.

Special regulations, including fair competition rules voluntarily established by industry groups, may apply based on the nature of the specific goods or services in question such as food and medical devices.

Ambush marketing tends to be negatively perceived by the Japanese public even if it does not infringe any intellectual property rights.

Stealth marketing is newly regulated under the Japanese law as “representations that are difficult for consumers to identify as representations of a business operator”.

League rules and standard player contract needs to be examined because it is typical in Japanese professional sports that the leagues and teams have broad authority over the use of images and publicities of the players.