Articles 33 through 40-3 of the Japan ASCT regulate Multilevel Marketing Transactions (Rendoshikihanbai Torihiki 連鎖販売取引) including MLM + Network Marketing + Direct Selling with downline compensation structures. Japan has one of the world's strictest MLM regulatory regimes. (1) Article 33 Definition + Scope: (a) sales of goods/services to consumers with promise of commissions from recruiting other consumers; (b) tier-based compensation structure; (c) emphasis on recruitment over product sales triggers scrutiny; (d) distinguished from legitimate direct sales by recruit-based income. (2) Article 33-2 Distinction from Pyramid Scheme (Mugen Renkan Kou 無限連鎖講 - prohibited per Pyramid Scheme Prevention Act 1978): (a) MLM with REAL PRODUCT + INCOME FROM PRODUCT SALES = legal under ASCT; (b) PYRAMID with NO REAL PRODUCT + INCOME FROM RECRUITMENT FEES ONLY = prohibited + criminal; (c) Test - is income from product sales > 50% to distributors?; (d) Test - are unsold inventory buybacks honoured?; (e) Test - are recruitment incentives proportionate?; (f) MLM with product but artificially inflated wholesale = grey zone investigated. (3) Article 34 Mandatory Pre-Recruitment Disclosure: (a) before recruiting potential distributor + provide (i) business name + representative + address + phone; (ii) product/service details; (iii) compensation structure CLEARLY EXPLAINED; (iv) typical income data + median + range + percentage earning at each level; (v) initial purchase cost + ongoing minimums; (vi) inventory buyback policy; (vii) cooling-off rights; (viii) risks of MLM business; (b) NO TYPICAL INCOME OVERSTATEMENT; (c) NO USE OF SUCCESS STORIES AS REPRESENTATIVE. (4) Article 35 Pre-Contract Document: (a) before signing distributor agreement + comprehensive written document; (b) includes Article 34 information; (c) cooling-off in red font + 8-point font (similar to door-to-door). (5) Article 36 Contract Document: distributor agreement with all terms including post-Article 34 disclosures + signed copy to distributor. (6) Article 37 Solicitation Restrictions: (a) prohibition on misleading recruitment language; (b) prohibition on income guarantee claims; (c) prohibition on confining recruits at meetings; (d) prohibition on pressure tactics + isolation; (e) prohibition on targeting vulnerable (students + housewives + seniors uniquely); (f) university student recruitment - CAA special attention 2024-2025. (7) Article 38 Administrative + Civil Penalties: (a) CAA Business Suspension Orders up to 2 years (longer than other types); (b) Distributor agreement voided; (c) Inventory buyback required; (d) Compensation to consumers. (8) Article 40 Cooling-Off Period (20 DAYS from contract document receipt + start of distributor activity): (a) longest cooling-off in Japan ASCT; (b) reflects complexity + buyer remorse common; (c) 20 days from LATER of - contract document receipt + first goods delivery; (d) full refund + inventory return; (e) seller bears return costs. (9) Article 40-2 Inventory Buyback Right: (a) distributor right to return unsold inventory within 1 YEAR of receipt; (b) seller must buy back at 90% of distributor purchase price; (c) inventory must be unused + resaleable; (d) protects against forced inventory accumulation. (10) Article 40-3 Distributor Termination Right: (a) distributor may terminate distributor agreement at any time; (b) seller cannot impose unreasonable termination penalty; (c) termination effective immediately; (d) outstanding inventory subject to Article 40-2 buyback. (11) Penalties: heightened per Article 70-76 - up to JPY 3M + 3 years criminal + JPY 100M corporate fine cap for serious cases. (12) High-Profile Cases: (a) Amway Japan periodic enforcement (multiple Business Improvement Orders); (b) Forever Living Products (foreign MLM scrutinised); (c) Various crypto-MLM schemes 2022-2024 (criminal prosecutions); (d) Cosmetics + nutritional supplement MLMs (medical claims overlap with Pharmaceutical Affairs Act); (e) Student-targeted English language tutoring MLMs (overlap with Specified Continuous Service). Coordinates with Pyramid Scheme Prevention Act 1978 + Consumer Contract Act + Premiums and Representations Act + Pharmaceutical Affairs Act + Financial Instruments and Exchange Act + Direct Selling Association of Japan (DSA) self-regulation + Federation of Direct Selling Industries + international WFDSA. Japan ASCT Multilevel Marketing + Articles 33-40-3 applies.
The graph holds this control, the 0 it maps to, and the evidence behind each claim, over MCP and REST.