Outline of Cross-Border Consumer Center Japan (CCJ) June 2015 Consumer Affairs Agency Japan

Globalization of Economy and Expanding Internet Usage 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 - (Hundreds of millions of yen) Size of consumer cross-border e-commerce market in 2013 between Japan, the United States and China (estimated total) 417.1 billion yen United States 719.7 billion yen China 807.2 billion yen 285.7 billion yen 432.3 billion yen 390.2 billion yen Japan 19191.5 billion yen 17.9 billion yen 173.6 billion yen The arrow indicates the direction of the sale Indicates the total cross-border e-commerce purchase amount 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)”

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

Cross-border Consumer Center Japan (CCJ) Establishment Established by the Consumer Affairs Agency of Japan (CAA) in November, 2011 Roles Providing advisory services and information related to cross-border transaction upon the request from consumers by e-mail, fax or web-site Assisting the resolution of disputes over transactions between Japanese consumers and overseas business entities or between consumers in other countries and Japanese businesses Operation 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

CCJ’ s Overseas Partners To solve consumer problems with cross-border transactions, CCJ cooperates with 6 overseas organizations Spain United States and Canada CCJ March 2014 ~ November 2011 ~ Singapore Taiwan Central and South America November 2011 ~ Vietnam November 2011 ~ February 2012 ~ January 2015 ~

Consultation Flowchart The sole organization dealing with cross-border consumer complaints Mutual relationships with overseas consumer support organizations Japan Overseas 1’. Consultation Problem 5’. Advice Consumers Businesses 1. Consultation 3. Conveys consultation details presents solutions Problem Nation-wide consumer affairs centers Consumers Businesses 5. Convey answers offer advice 1. Consultation 3. Conveys consultation details presents solutions 5. Convey answers offer advice Support 2. Translate and convey consultation details and seeks advice regarding solutions CCJ: Cross-border Consumer Center Japan Overseas consumer affairs organizations (Six organizations in the United States, Singapore, etc.) 4. Translate and convey answers

Handling Consumer Complaints Handling consumer complaints in the following steps. Problems between Japanese consumers and US businesses (Example) Problems between US consumers and Japanese 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 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

Number of Consumer Complaints Received by CCJ 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. Monthly average 369 (2014) Monthly average 351 (2013) Monthly average 166 (2012) Specifically Example 6 and Example 7 in 4. Consultation Examples. (Page 30 – 31).

Type of Transaction 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. Type of Transaction No. of Cases Share E-commerce 10,576 97% Local purchase 221 2% Other 143 1% Total 10,940 100% (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.

Financial institution transfer Payment Method 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.* 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 Total 10,940 100% (n=10,940) 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”.

Imitation product delivered Merchandise not delivered Type of Problem A majority of problems involve fraudulent businesses (“imitation product delivered”* and “suspected fraud”). Other problems include (contract termination (21%)” and “merchandise not delivered (13%)”). 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% (n=10,940) “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”.

Country/Region of Business 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. (n=7,603) 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.

Efforts for Protecting Consumers from Problems (1) Releasing regularly case examples based on consumer consultations to CCJ and providing tips to avoid problems related to cross-border transactions Each case example shows useful advice and points to solve and prevent problems Statistical data is used to easily explain trending problems

Efforts for Protecting Consumers from Problems (2) Released a list of features of counterfeit selling websites for protecting consumers against them (February, 2013) Has regularly released the names and URLs of overseas malicious websites (280 as of the end of May, 2015) (Example) Website confirmed to sell imitation products (*) Information on the website is updated periodically.

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