The Consumer Affairs Agency is set to regulate what is known as stealth marketing, a practice in which companies promote their products or services with paid posts by disguising them as genuine online reviews and feedback from consumers, usually online.

The agency determined that such marketing strategies prevent consumers from making a rational decision on purchase in the absence of being made aware the postings are actually paid for, according to sources.

The marketing method is expected to be added to the list of prohibited corporate activity from the next fiscal year under the law against unjustifiable premiums and misleading presentation, which regulates misrepresentation of goods and services.

Authorities overseas have also begun cracking down on stealth marketing, also known as undercover marketing, to protect consumers from being tricked.

According to the agency, Japan is the only country among the top nine OECD nations in terms of nominal gross domestic product that does not regulate the practice.

Mai Kikumori, an associate professor of business management at Ritsumeikan University in Kyoto, hailed the agency’s move as a step to ensure certain deterrence against problematic marketing strategies.

“Imposing regulations is the first step in the right direction, given Japan is a stealth marketeers’ paradise,” she said. “Companies were asked to self-regulate stealth marketing, but not all of them were on the same page. This meant that companies audacious enough to deploy the strategy reaped huge benefits.”

Paid posts that amount to stealth marketing are anything but glaringly obvious. Examples of such marketing ploys are ubiquitous on social media postings, reviews of products at online shopping sites and comments on digital platforms.

It emerged that many major companies, along with celebrities and influencers, are involved in stealth marketing.

While the existing law against unjustifiable premiums and misleading presentation bans representing goods and services as better than they really are, it does not have any jurisdiction over stealth marketing.

Companies running ads for their products would be subject to the planned regulation, the sources said. Those that fail to specify their ads as paid advertisements, or promotional and PR blurb, would be targeted for administrative disciplinary action.

In short, advertisers will be covered by the planned regulation, but not those who post comments.

The ban on stealth marketing is to be applied to ads on all media beyond digital platforms, including newspapers, magazines and TV. 

However, it would not be applied to repeated anonymous posts on a Twitter account intended to sway public opinion, such as the Dappi account assailing opposition parties, according to the sources. This is because the planned regulation targets ads for goods and services.

An expert panel advising the agency is expected to compile a set of proposals on ways to regulate stealth marketing.

Many panel members expressed concern at the lack of legal means to control undercover marketing, while consumer groups have denounced the marketing strategy as equivalent to deceiving consumers.

Advertisers are also calling for a regulatory step, saying the self-imposed restriction is too limited to be truly effective.

In a survey of 300 influencers on social media, 41 percent said they were asked to cooperate with stealth marketing by advertisers.

Of this, 45 percent, or one in five of the 300 total, went along with the request.

Kikumori of Ritsumeikan University said she “was startled” to learn that such a high ratio of influencers were involved in stealth marketing.

Sixty-four percent of the influencers who took part explained they had limited understanding of stealth marketing when they agreed to help out.

“They did not recognize that what they did actually duped consumers,” Kikumori said. “This shows that companies pitching their products are taking advantage of influencers.”

Research done overseas highlighted one detrimental effect of undercover marketing in that the chances for high-quality products being purchased were reduced as the method pushed up demand for low-quality goods.