Newspaper distributor demanding as a cancellation condition to pay for the newspapers delivered free and gifts
The following case is related to a condition of cancelling a newspaper subscription contract. A consumer made a newspaper subscription contract with a free service period. When the subscriber asked for cancellation, the newspaper distributor demanded to pay for the newspapers delivered free and gifts given when entering into the contract.
Details of the inquiry
I made a newspaper subscription contract for five years with the condition of first year free service. Two years later, I contacted the newspaper distributor to cancel the contract because I began to go out often to take care of a family member. Later, the newspaper distributor sent me a letter requesting as a cancellation fee to pay for the newspaper delivered free and gifts (beer, rice and detergent). I intended to restart the subscription one day, but now I don't feel like going on with the contract. I want to cancel it.
(man in his 50s, salary earner)
After receiving the inquiry, the National Consumer Affairs Center of Japan (hereinafter called "NCAC") read the letter sent to the inquirer from the distributor and the written contract. Since no major problem was found in the contract, the contract appeared to be effective.
A contract with a specified period like a newspaper subscription contract cannot be unilaterally cancelled by the consumer in principle. A cancellation condition shall be decided based on negotiation between the consumer and the distributor.
In this case, however, the value of premiums given by the distributor appeared to exceed the maximum statutory amount (8% of the trade price or 8% of the subscription fee for 6 months, whichever is lower) specified in the public notice of the Act against Unjustifiable Premiums and Misleading Representations "Limitation on provision of premiums in the newspaper business" (the Public Notice No.29 by the Japan Fair Trade Commission on August 15, 2000) and the self-regulation by the newspaper business based on the Act against Unjustifiable Premiums and Misleading Representations "Fair competition code on limitation on provision of premiums in the newspaper business" (the Public Notice No.17 by the Japan Fair Trade Commission on August 31, 2009). Therefore, NCAC considered this point.
A newspaper delivered free of charge associated with entering into a newspaper subscription contract is called a "freesheet" in the newspaper business. The freesheet is categorized into "gift" or "discount service" depending on ways of providing. If it is regarded as a discount service, there is no maximum statutory amount. If it is regarded as a gift, it is subject to the maximum statutory amount and can be a negotiation issue.
Then, NCAC asked relevant ministry, agent and other organizations whether or not the freesheets delivered in this case fall under the category of gift.
A freesheet is regarded as a gift in the following cases: (1) if it is given as a prize; (2) if it is chosen from two or more different options; (3) if the distributor gives two or more different options (freesheet and other items) and the consumer told he/she would subscribe if both of them are given, and then both are given.
In this case, freesheets as well as other gifts were given, so the freesheets were considered to be categorized into gift. The value of all the premiums including the freesheets amounted to more than 50,000 yen, which exceeds the maximum statutory amount, i.e. 8% of the 6-month contract value.
In light of the above, NCAC communicated the inquirer as follows: "As far as the contract is effective, both parties are obligated to perform the contract in the remaining contract period. It is not always possible to cancel such a contract without condition, but it is possible for the subscriber to negotiate with the distributor on cancellation, considering the possible infringement to the Fair Competition Code". The inquirer wished an early solution and told that he was willing to pay up to half of the subscription fee for the actual subscription period as a cancellation fee.
After the inquirer sent a letter describing the details of the case to the newspaper distributor, NCAC contacted the distributor. NCAC told the distributor that it was problematic for the distributor to give the premiums exceeding the maximum statutory amount and that the inquirer wished a settlement. The distributor agreed to cancel the contract on the condition proposed by the inquirer. Accordingly, the inquirer concluded the consultation.
Newspaper subscription contracts mostly fix the contract period. Consumers cannot unilaterally cancel a contract with fixed period. There are quite a few cases where a subscriber is demanded as a cancellation condition to pay for premiums given by the distributor.
Sometimes substantial premiums are given when entering into a contract like this case. Even if the value of premiums exceeds the maximum statutory amount stated in the Act against Unjustifiable Premiums and Misleading Representations and the Fair Competition Code, the Act and the Code do not have civil effect in cancelling a subscription contract nor in returning the value of premiums.
This means that the inducement of customers by means of unjustifiable premiums and misleading representations against the Act does not directly deny the contract concerned.
Nevertheless, there are some problematic ways of making a contract (e.g. contracts made as a result of unjustifiable inducement by the distributor; inducement of elderly persons to make a long-term contract). In such cases, paying for premiums as a cancellation condition appears to be inappropriate.
If a consumer was given gifts by a distributor against his/her will and used them, it is natural that he/she feels resistance in being charged for the gifts.
In such a case, problems associated with inducement, the principle of suitability, and premiums should be comprehensively communicated to the distributor in order to settle on a mutually agreeable way for the distributor and the consumer.
In addition, if the distributor gave premiums exceeding the maximum statutory amount, it might be effective to report it to the Newspaper Fair Trade Council or to ask the newspaper company for cooperation.