Outline of Cross-Border Consumer Center Japan (CCJ)

June 2015

Consumer Affairs Agency Japan

2

It is becoming increasingly easier to do business across borders due to the globalization economy and the spread of Internet usage.

- Rapidly Expanding E-Commerce Market in Japan - - Increasing Cross-Border Business -

Source: Ministry of Economy, Trade and Industry’s “FY2013 Report on the Foundation of an Information and Service Economic Society in Japan (Market Survey on E-Commerce)”

2008 2009 2010 2011 2012 20130

20,000

40,000

60,000

80,000

100,000

120,000

60,890 66,960 77,880 84,590 95,130 111,660

Size of the B to C and E-Commerce Market in Japan (2008 - 2013)

E-Commerce Market

Globalization of Economy and Expanding Internet Usage

United States719.7

billion yen

China807.2

billion yen

Size of consumer cross-border e-commerce market in 2013 between Japan, the United States and China (estimated total)

The arrow indicates the direction of the sale

Indicates the total cross-border e-commerce purchase amount

173.6 billion yen

432.3 billion yen

390.2 billion yen

17.9 billion yen

417.1 billion yen

285.7 billion yen

(Hundreds of millions of yen)

Japan19191.5 billion

yen

3

Examples of Problems with Cross-border e-Commerce in Japan

• Counterfeit goods delivered

• Paid but not delivered

• Defective / Broken products delivered

• Delay in delivery

• Unauthorized Charges

• No response from the retailers

4

Cross-border Consumer Center Japan (CCJ)

• Assisting the resolution of disputes over transactions between Japanese consumers and overseas business entities or between consumers in other countries and Japanese businesses

Roles

• Established by the Consumer Affairs Agency of Japan (CAA) in November, 2011

Establishment

• Providing advisory services and information related to cross-border transaction upon the request from consumers by e-mail, fax or web-site

• Operated/funded by the CAA until the end of March, 2015

• From April, 2015, operated/funded by the National Consumer Affairs Center (NCAC)

• Entrusting practical operations of the CCJ to the private sector

Operation

55

• To solve consumer problems with cross-border transactions, CCJ cooperates with 6 overseas organizations

CCJ’ s Overseas Partners

Spain

CCJMarch 2014 ~

United States and Canada

November 2011 ~

Central and South America

February 2012 ~

Taiwan

November 2011 ~Vietnam

January 2015 ~

Singapore

November 2011 ~

6

Consultation Flowchart

Japan Overseas

4. Translate and convey answers

2. Translate and convey consultation details and seeks

advice regarding solutions

BusinessesConsumers

Problem

1. Consultation

1’. Consultation

Nation-wide consumer affairs centers

5’. Advice

5. Convey answersoffer advice

Support

ConsumersBusinesses

Problem

1. Consultation

CCJ: Cross-border Consumer Center Japan

3. Conveys consultation detailspresents solutions

5. Convey answersoffer advice

Overseas consumer affairs organizations

(Six organizations in the United States, Singapore, etc.)

3. Conveys consultation detailspresents solutions

• The sole organization dealing with cross-border consumer complaints

• Mutual relationships with overseas consumer support organizations

7

Problems between Japanese consumers

and US businesses (Example)

1. A problem occurs between a Japanese consumer and US

business

2. Consumer consults with CCJ

3. CCJ conveys the details to the BBB in the US, one of CCJ's

overseas partner

4. The BBB conveys the consultation details to the business

and agrees on a solution

5. CCJ conveys the answer from the business to the consumer

6. The transaction is performed between the consumer and

the business based on the agreed solution

Problems between US consumers and

Japanese businesses (Example)

1. A problem occurs between a US consumer and Japanese

business

2. The consumer consults with the BBB 3. The consultation

details are conveyed from the BBB to CCJ

4. The consultation details are conveyed from CCJ to the

business and a solution is agreed upon

5. The BBB conveys the answer from the business to the

consumer

6. The transaction is performed between the consumer and

business based on the agreed solution

• Handling consumer complaints in the following steps.

Handling Consumer Complaints

8

The number of consumer complaints to CCJ increases year-over-year.

There are some months with an unusually large number of consultations and this is due to a large number of consultations* for a specific product or service.

11/10

11/11

11/12

12/01

12/02

12/03

12/04

12/05

12/06

12/07

12/08

12/09

12/10

12/11

12/12

13/01

13/02

13/03

13/04

13/05

13/06

13/07

13/08

13/09

13/10

13/11

13/12

14/01

14/02

14/03

14/04

14/05

14/06

14/07

14/08

14/09

14/10

14/11

14/12

0

100

200

300

400

500

600

21

123147

193

156138

107

169143154154146

192

220225249253

478

246

399

332341

293

366

421

471

366

503

363

407413418

331

303

345334

382

303

335

Monthly average 166 (2012)

Monthly average 369 (2014)

Monthly average 351 (2013)

Number of Consumer Complaints Received by CCJ

* Specifically Example 6 and Example 7 in 4. Consultation Examples. (Page 30 – 31).

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Almost all consultations are related to e-commerce.

The cross-border e-commerce market for consumers is estimated to continue increasing in the future* and this trend is forecast to continue.

E-Commerce97%

Local Purchase2%

Other1%

Type of Transaction

E-Commerce

Local Purchase

Other

Type of Transaction

(n=10,940)

* According to the Ministry of Economy, Trade and Industry’s “FY2013 Report on the Foundation of an Information and Service Economic Society in Japan (Market Survey on E-Commerce)”, the size of the cross-border e-commerce consumer market among Japan, the United States and China will increase from 1.7 trillion yen (estimated) in 2013 to maximum 4.1 trillion yen in 2020.

Type of Transaction

No. of Cases Share

E-commerce 10,576 97%

Local purchase 221 2%

Other 143 1%

Total 10,940 100%

10

Credit card49%

Financial insti-tution transfer

43%

Payment agency2%

Cash1%

Other3% Unclear

2%

Payment Method

Credit card

Financial institution transfer

Payment agency

Cash

Other

Unclear

Credit card payments make up more than half of all payment methods.

Because fraudulent businesses prefer to receive payment through bank transfers, “financial institution transfers” also make up a large portion of payments.*

(n=10,940)

Payment Method No. of Cases Share

Credit card 5,366 49%

Financial institution transfer 4,755 43%

Payment agency 239 2%

Cash 73 1%

Other 281 3%

Unclear 226 2%

Total 10,940 100%

Payment Method

* Businesses must wait to receive payment in case of credit cards from the credit card company. On the other hand, businesses can receive payments from bank accounts immediately and this is why it is thought fraudulent businesses prefer “financial institution transfers”.

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Imitation product de-

livered18%

Suspected fraud33%

Merchandise not delivered

13%

Contract termination

21%

Unauthorized charges

4%

Returns3%

Defective product2%

Other7%

Type of Problem Imitation product delivered

Suspected fraud

Merchandise not delivered

Contract termina-tion

Unauthorized charges

Returns

Defective product

Other

A majority of problems involve fraudulent businesses (“imitation product delivered”* and “suspected fraud”).

Other problems include (contract termination (21%)” and “merchandise not delivered (13%)”).

(n=10,940)

Type of Problem No. of cases Share

Imitation product delivered 2,017 18%

Suspected fraud 3,608 33%

Merchandise not delivered 1,368 13%

Contract termination 2,284 21%

Unauthorized charges 399 4%

Returns 289 3%

Defective products 191 2%

Other 784 7%

Total 10,940 100%

Type of Problem

* “Suspected fraud” includes cases where even though consumers are able to confirm orders or payments, communication is cut off with the business without anything being delivered (or the business doesn’t respond in a reasonable way) and the consumers cannot accurately grasp the situation of the business. The meaning of “Imitation product delivered” can be taken broadly to mean fraudulent, but this has been differentiated in order to grasp the facts and trends of imitation products being delivered. “Merchandise not delivered” is used when the existence of the business can be confirmed and is different than “Suspected fraud”.

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The highest number of consultation of cases * concerned China at 38%. Next was the United States at 29% and these two countries made up 70% of all cases.

Country/Region of Business

* From the total number of 10,940 consultation cases, 3,184 cases which the business location was unknown and 153 cases which the business location was in Japan were excluded and a total of 7,603 cases was set as the parameter.

China38%

United States29%

England6%

Hong Kong4%

India3%

Netherlands3%

South Korea2%

Taiwan1%

Thailand1%

Germany1%

France1% Other counties /

regions8%

Country/Region of Business

ChinaUnited StatesEnglandHong KongIndiaNetherlandsSouth KoreaTaiwanThailandGermanyFranceOther counties / regions

(n=7,603)

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• Releasing regularly case examples based on consumer consultations to CCJ and providing tips to avoid problems related to cross-border transactions

Statistical data is used to easily explain trending problems

Each case example shows useful advice and points to solve and prevent problems

Efforts for Protecting Consumers from Problems (1)

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• Released a list of features of counterfeit selling websites for protecting consumers against them (February, 2013)

(*) Information on the website is updated periodically.

(Example) Website confirmed to sell imitation products

Efforts for Protecting Consumers from Problems (2)

• Has regularly released the names and URLs of overseas malicious websites

(280 as of the end of May, 2015)

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Summary

• Operated more than three years

• Total number of consultations since the establishment: more than 11,000

• Accumulating know-how for handling consumer complaints related to cross-border transactions

• Developing into a permanent entity and having more stable operations

• Consumer issues with overseas shopping continue to increase in Japan

• Hoping to expand cooperation relationship with overseas organizations