Legal Considerations for Prize Lotteries [Complete Guide to Japan's Premiums and Representations Act]

"Is it legally okay to hold a prize lottery at our company event?" "Are there prize limits for SNS campaigns?"

When companies conduct prize lotteries, they must comply with Japan's Premiums and Representations Act. Violations can result in fines and damage to corporate reputation.

This article provides a clear explanation of the legal rules for prize lotteries in Japan.

Reference Sources for This Article

This article is based on the following official sources:

Consumer Affairs Agency (Official):

• Overview of Premium Regulations
• About General Lotteries
• About Premium Regulations

Japan Fair Trade Commission (Official):

• Premiums and Representations Act

Important: This article is for general informational purposes only and does not constitute legal advice. For specific cases, please consult the Consumer Affairs Agency, Japan Fair Trade Commission, or an attorney specializing in the Premiums and Representations Act.

What is the Premiums and Representations Act?

Purpose of the Law

Official Name: Act against Unjustifiable Premiums and Misleading Representations (Act No. 134 of 1962)

Purpose:

• Protect consumer interests
• Ensure fair competition
• Prevent unjust customer inducement through excessive premiums

Jurisdiction: Consumer Affairs Agency / Japan Fair Trade Commission

Definition of "Premium"

A "premium" under the Premiums and Representations Act meets the following three requirements:

1. For customer inducement

   • Aimed at promoting sales of goods or services

2. Provided by a business operator

   • Provided by companies or individual business operators

3. Economic benefit

   • Money, goods, services, or other items with economic value

Examples that qualify as premiums:

• Gift certificates, gift cards
• Home appliances, food products
• Travel vouchers
• Points, coupons

Examples that do not qualify as premiums:

• Product samples (within the scope of normal business practices)
• Discounts
• After-sales service (part of normal business transactions)

Types of Premiums and Regulations

Premiums are broadly classified into three types, each with different regulations.

1. General Lotteries (Prize Campaigns)

Definition: Providing premiums to purchasers or users of goods/services through chance such as draws.

Legal Basis: Japan Fair Trade Commission Notification No. 3 of 1977 "Restrictions on Matters Related to Provision of Premiums through Lotteries"

Examples:

• "100 winners selected by lottery from product purchasers will receive prizes"
• "One winner selected by lottery from applicants will receive overseas travel"
• SNS follow & retweet campaigns (when purchase is required)

Premium Limits: (From Consumer Affairs Agency Official Information)

Transaction Value	Maximum Premium	Total Limit
Less than 5,000 yen	20 times transaction value	2% of projected lottery sales
5,000 yen or more	100,000 yen	2% of projected lottery sales

Specific Examples:

• 1,000 yen product → Maximum 20,000 yen
• 10,000 yen product → Maximum 100,000 yen

Important: Must also satisfy the "2% total limit" simultaneously.

2. Joint Lotteries

Definition: Lotteries conducted jointly by multiple business operators.

Legal Basis: Japan Fair Trade Commission Notification No. 3 of 1977 "Restrictions on Matters Related to Provision of Premiums through Lotteries"

Examples:

• Stamp rally across an entire shopping district
• Joint campaigns by multiple companies
• Shopping mall-wide prize draws

Premium Limits: (From Consumer Affairs Agency Official Information)

Transaction Value	Maximum Premium	Total Limit
No limit	300,000 yen	3% of projected lottery sales

Why more lenient than general lotteries: Since multiple business operators jointly conduct the lottery, no specific business operator gains an unfair advantage.

3. Open Lotteries (Open to Everyone)

Definition: Lotteries that do not require purchase of goods or services.

Legal Basis: Not subject to regulation under the Premiums and Representations Act (because purchase is not required)

Examples:

• "Anyone can apply! Win ○○ by lottery"
• Prize draw for all store visitors (when purchase is not required)
• Premiums for survey respondents (when purchase is not required)

Premium Limits: (From Consumer Affairs Agency Official Information) No limit

Reason: Since purchase is not required, it does not constitute unjust customer inducement.

Caution: Statements like "double winning chance for purchasers" qualify as general lotteries and are subject to regulations.

Cases of Violation

Case 1: Exceeding Premium Limit

Violation Example: "200,000 yen travel voucher" by lottery from purchasers of a 1,000 yen product

Reason:

• Transaction value: 1,000 yen
• Limit: 1,000 yen × 20 = 20,000 yen
• Actual: 200,000 yen → 10 times over the limit

Correct Approach:

• Set premium to 20,000 yen or less
• Or set product price at 5,000 yen or more to apply the 100,000 yen limit

Case 2: Exceeding Total Limit

Violation Example: Campaign with projected lottery sales of 10,000,000 yen and total premiums of 3,000,000 yen

Reason:

• Limit: 10,000,000 yen × 2% = 200,000 yen
• Actual: 3,000,000 yen → 15 times over the limit

Correct Approach:

• Set total premiums to 200,000 yen or less
• Or increase the number of winners to reduce individual amounts

Case 3: Misleading "Everyone Wins" Lottery

Violation Example: "Free gift for everyone!" displayed, but actually only some people selected by lottery

Reason:

• Quality misrepresentation (Premiums and Representations Act Article 5, Paragraph 1)
• Unjustifiable representation that misleads consumers

Correct Approach:

• Accurately display "Win prizes by lottery (○ winners)"
• Clearly state winning probability

Case 4: Double Price Display

Violation Example: "Regular price 10,000 yen → Special price 3,000 yen" but no actual sales record at regular price

Reason:

• Advantageous misrepresentation
• Misleads consumers to believe it is more advantageous than it actually is

Correct Approach:

• Only display prices with actual sales records
• Or clearly mark as "reference price"

Internal Events and Non-Profit Events

Internal Company Events / Year-End Parties

Application of Premiums and Representations Act: Not applicable (not for customer inducement purposes)

Examples:

• Prize lottery at company year-end parties
• Employee trip prize draws
• Awards at company sports events

Cautions:

• No monetary limit, but keep within reasonable bounds
• Be aware of tax issues (potential wage taxation)
• Check internal company regulations

NPOs and Volunteer Organizations

Application of Premiums and Representations Act: Not applicable if not for profit

Examples:

• Lottery for NPO participants
• Community event prizes
• School bazaars

Cautions:

• May be applicable if substantially commercial activity
• Clearly separate from donations and membership fees

School Events

Application of Premiums and Representations Act: Not applicable

Examples:

• Lottery at school festivals
• Class events
• Club activity prizes

Compliance Checklist

Event Planning Stage

• Is the event purpose clear (customer inducement or internal event)?
• Confirm whether subject to Premiums and Representations Act
• Identify lottery type (general lottery, joint lottery, or open lottery)
• Accurately calculate transaction value
• Confirm maximum premium is within limit
• Confirm total premiums are within limit

Advertisement and Announcement Stage

• Accurately display entry conditions
• Clearly state number of winners and winning probability
• Avoid misleading expressions like "guaranteed to win"
• Specifically describe premium contents
• Clearly state entry period and drawing date

Lottery Implementation Stage

• Adopt fair lottery methods
• Ensure transparency of lottery process
• Announce method of winner notification in advance
• Comply with Personal Information Protection Act

Post-Event Actions

• Promptly contact winners
• Reliably deliver or provide premiums
• Preserve records (recommended for 3 years)
• Establish complaint response system

Penalties for Violations

Legal Basis: Act against Unjustifiable Premiums and Misleading Representations (Premiums and Representations Act)

Administrative Measures

Cease and Desist Orders (Premiums and Representations Act Article 7): (From Consumer Affairs Agency Official Information)

• Suspension of violation
• Implementation of recurrence prevention measures
• Public notification to general consumers

Surcharge (Premiums and Representations Act Article 8):

• 3% of violation sales
• Target period: Up to 3 years

Example: Violation involving product with annual sales of 100,000,000 yen → Surcharge: 100,000,000 yen × 3% = 3,000,000 yen

Criminal Penalties

Intentional Violations (Article 36):

• Imprisonment of up to 2 years
• Or fine of up to 3,000,000 yen
• Or both

Corporate Punishment (Article 37): Fine of up to 300,000,000 yen for corporations

Social Impact

• Decline in corporate image
• Media coverage
• Loss of trust from business partners
• Negative impact on recruitment activities

Points for Legally Conducting Prize Lotteries

Point 1: Utilize Open Lotteries

Benefits:

• No premium limit
• Lenient regulations
• Broader appeal

Design Example: "Anyone can apply regardless of product purchase"

Point 2: Keep Premium Amounts Low

Products 1,000 yen or less: Premium limit is 20,000 yen

Products 5,000 yen or more: Premium limit is 100,000 yen

Strategy: Prepare multiple medium-value premiums instead of one high-value premium

Point 3: Consider Joint Lotteries

By conducting jointly with multiple companies:

• Premium limit increases to 300,000 yen
• Total limit also increases to 3%

Point 4: Consult Specialists

When uncertain:

• Attorney (specializing in Premiums and Representations Act)
• Inquiry to Japan Fair Trade Commission
• Check industry association guidelines

Frequently Asked Questions

Q1: Is anything okay for internal events?

A: Generally yes, but be aware of:

• Tax issues (excessive amounts may be subject to wage taxation)
• Check internal company regulations
• Be considerate to avoid harassment

Q2: Are SNS campaigns subject to regulations?

A: It depends on the case:

• Follow & RT only → Open lottery (no limit)
• Limited to product purchasers → General lottery (with limits)

Q3: Must winning probability be clearly stated?

A: Not legally required, but strongly recommended:

• Recommended by Consumer Affairs Agency guidelines
• Prevents disputes
• Improves credibility

Q4: Are individual business operator events also subject to regulations?

A: Yes, applicable to all business operators.

• Irrelevant whether corporation or individual
• Applicable if conducted as business

Q5: What if a foreign company conducts campaigns in Japan?

A: If targeting Japanese consumers, Japan's Premiums and Representations Act applies.

Summary

Legal points for prize lotteries in Japan:

Subject to Regulations:

• Premium provision for customer inducement purposes
• Conducted by business operators

Types of Premiums and Limits:

• General lottery: Maximum 100,000 yen (or 20 times transaction value)
• Joint lottery: Maximum 300,000 yen
• Open lottery: No limit

Risks of Violation:

• Surcharge (3% of sales)
• Criminal penalties (imprisonment of up to 2 years, etc.)
• Loss of social credibility

Safe Implementation Methods:

• Utilize open lotteries
• Keep premium amounts low
• Adopt transparent lottery methods
• Consult specialists in advance

Follow the law while achieving fair and exciting lotteries!

Disclaimer: This article is for general informational purposes only and does not constitute legal advice. For specific cases, please consult an attorney or the Japan Fair Trade Commission.