By Makiko Taga
As of Oct. 1, 2023, stealth marketing activities are illegal in Japan. Previously, there was no legal regulation that addressed stealth marketing: a practice where promotional activities are carried out without disclosing they are paid advertisements.
Now, the focus is on proper representations and what advertisers or agencies must be aware of, particularly those engaged in consumer and influencer marketing.
In this blog post, I will explore the background and reasons for the new regulation, notable concerns and shifts in client priorities related to our work.
Japan’s Journey to Regulating Stealth Marketing
Stealth marketing has long been a contentious issue. Unlike the U.S. and Europe, Japan had no specific regulation against stealth marketing until Oct. 1, 2023. This left Japan as the only top Organisation for Economic Cooperation and Development (OECD) country without such regulation.
The issue first gained attention more than a decade ago, with the “Penny Auction Incident” in 2012. Several celebrities and influencers promoted a penny auction on their blogs using extreme promotional phrases, without disclosing the auction’s operators compensated them. The company was later revealed to be a fraudulent scheme, leading to the manager’s arrest and public outrage over the celebrities’ complicity.
This incident highlighted the need for legal regulation, especially with the rise of social media and its influence. However, the legislative process was slow. This delay was partly due to cultural challenges in distinguishing between stealth advertisements and genuine online word-of-mouth, which Japanese consumers value. Japan also lacks mega-influencers seen in other countries – celebrities like Kylie Jenner and Liu Wen can significantly impact sales or business with a single remark.
The Importance of Advertising Labels
Advertising labels play a crucial role in helping consumers make informed choices. Attorney Takaaki Someya explained at a lecture by The Public Relations Society of Japan in March 2024 that consumers are naturally wary of advertisements, often skeptical of exaggerated claims. Without clear disclosure of advertisement status, consumers may take promotional messages at face value, hindering their ability to make rational choices.
Japan’s Act against Unjustifiable Premiums and Misleading Representations (Keihin Hyoji Hou) already prohibits false or misleading representations. The new regulation extends this and now designates stealth marketing as “misrepresentation” or “improper representation.”
Advertisements must now clearly display phrases like “Advertisement” or “Promotional” to distinguish them from stealth marketing. This applies across all media forms, including television, newspapers and social channels.
Advertisers in violation of the stealth marketing regulation face penalties, such as the disclosure of company names and fines in severe cases. Advertising, marketing and PR agencies involved in such activities are also held accountable.
The Challenges of Identifying Stealth Marketing in Social Media
The Consumer Affairs Agency specifies the new regulation to target marketing methods that are difficult for consumers to identify as advertising or paid promotion. The agency assesses a company’s involvement in social media posts, such as by instructing promoters to make the posts, or requiring confirmation they have followed specific post requirements.
The Word-of-Mouth Marketing Association of Japan (WOMJ), which comprises more than 60 advertising agencies and other companies, has developed a reliable solution. WOMJ’s guidelines aim to prevent stealth marketing by requiring clearer relationships between brands and social media users.
For example, when media owners and publishers – including influencers – receive compensation for social media or digital media advertising, their content must clearly state they are paid by the marketing entity. Guidelines drew from examples from other countries and have been published in Japanese for ease of local adoption.
Fair Play as an Essential Component of Competitive Consumer Marketing
A recent study by Japanese social media marketing company CyberBuzz, shows influencer marketing in Japan has grown rapidly, with a projected year-on-year growth of 1.8 times to 130.2 billion yen (approximately $830 million) in the next three years. In combination with the emergence of new social media platforms, more companies, especially in the B2C sector, will likely resort to influencer engagement as part of their marketing mix.
I believe this trend reflects the global phenomenon where marketing disciplines are more fluid than ever due to the digital media landscape. Agencies from various marketing disciplines – media, creative and PR agencies – can potentially take on influencer engagement scopes of work from their clients.
Even before the latest regulation came into effect, our team always approached influencer engagement with caution. For instance, during an Instagram promotion project, we ensured influencers included the hashtag “#Ad” in their posts, following strict processes we implemented, including various stages of client approvals. Similarly, in the production of product review videos, we instructed influencers to include statements like, “This product is provided for review by [name of advertiser]” to maintain transparency.
Our proactive efforts to ensure appropriate disclosure are validated by the new regulation. In all our projects, since the regulation was implemented, all three parties – client, influencer and agency – are more aligned on the need to adhere to these standards.
Since the regulation took effect, no serious violations have been reported to The Consumer Affairs Agency as of May 2024.Someya emphasizes how we must remain vigilant, as stealth marketing tactics can be deceptive and easily disguised.
As professional consultants, we must stay informed about laws and regulations governing PR and marketing activities. This enables us to confidently advise our clients and uphold our commitment to fair play in all our public activities.
Makiko Taga is an account manager at Allison Japan. She specializes in consumer media relations for both corporate branding and consumer product marketing, across sectors ranging from technology to packaged foods.
