Introduction
The Japan Fair Trade Commission and the Small and Medium Enterprise Agency announced that they had conducted an intensive investigation into transactions between advertising agencies and production companies, and had issued guidance to a total of 71 companies for violating, or potentially violating, the Act on the Optimization of Transactions with Small and Medium-sized Entrusted Business Operators, commonly referred to as the Transaction Fairness Act. The investigation identified long-overlooked transaction practices in advertising production, including failure to clearly specify order details in writing or by other means, delayed payments, unpaid revision work, and the uncompensated transfer of intellectual property rights created by production companies. The Japan Fair Trade Commission pointed out that verbal orders had become a customary business practice in the advertising industry, and called for specific corrective measures regarding revision fees, compensation for intellectual property rights, and clear specification of order details.
The Essence of the Problem Is Not Merely “Lack of Written Documentation”
At first glance, this news may appear to be a matter of administrative procedure: “Make sure to issue proper purchase orders.” However, the essence of the problem lies much deeper.
Advertising production involves many accumulated processes, such as planning, design, copywriting, photography, video editing, proofreading, and revisions. Moreover, in many cases, the final form is not clearly fixed at the time of ordering, and it is not unusual for the content to change during the production process due to the intentions of advertisers or advertising agencies.
For this reason, when work begins based on verbal orders or ambiguous ordering conditions, it becomes unclear what falls within the original scope of work, how many rounds of revisions are included in the price, and who will bear the cost when additional work arises. As a result, a structure tends to emerge in which the production company bears time, labor costs, outsourcing costs, and management costs without receiving additional compensation.
In other words, what has become an issue here is not simply defective documentation. Rather, it is the transaction structure itself, which shifts the uncertainty of the production process onto the weaker receiving party.
“Revisions” Are Not a Service, but Work
Particularly important is how revision work is handled.
In advertising production, requests such as “just a small correction,” “one more adjustment after the client’s review,” or “we would also like to see another option just in case” occur on a daily basis. However, for production companies, revisions are clearly work. Designers, copywriters, directors, editors, photographers, engineers, and others must spend working time, and coordination inside and outside the company also takes time.
The Japan Fair Trade Commission also requires that, when revisions and proofreading are expected to occur, the conditions should be determined in advance and reflected in the price, or that additional costs should be sufficiently discussed during the production process and paid separately. For example, the Commission has indicated an approach in which a certain number of revisions may be included in the initial price, while revisions exceeding that number should be subject to separate discussion.
This marks an important turning point in the advertising industry. Work that has traditionally been treated as “included in revisions,” “flexible handling,” or “the usual process” will now need to be clearly handled as part of the contractual scope of work.
The Uncompensated Transfer of Intellectual Property Rights Cannot Be Dismissed as “Customary Practice”
Another noteworthy point in this investigation is that cases in which intellectual property rights arising for production companies were transferred or licensed without compensation were identified as problematic.
Advertising materials include a wide range of intellectual property, such as designs, illustrations, photographs, videos, copy, music, layouts, characters, and proposals. These are not merely delivered items. They are rights whose value changes depending on the scope of use, period of use, media, territory, and whether secondary use is permitted.
Despite this, if a basic agreement contains a broad clause such as “all rights relating to deliverables shall be transferred without compensation,” and the consideration for the transfer of intellectual property rights is not reflected in the price for each individual project, there is a risk that the interests of the production company will be unfairly harmed.
Going forward, it will be important for advertising agencies and advertisers to clearly state, at the time of ordering, the scope within which they wish to use the produced materials, and to set compensation according to that scope of use. The contractual terms should naturally differ depending on whether the transaction is a buyout, a time-limited license, limited to web advertising, or includes television commercials, outdoor advertising, overseas expansion, and secondary use.
Responsibility Also Lies with Advertisers, Not Only Advertising Agencies
This intensive investigation mainly targeted transactions between advertising agencies and production companies. However, the Japan Fair Trade Commission also referred to the need for improvement across the entire supply chain, including advertisers. This is because there were multiple cases in which the content was changed after ordering due to the wishes of advertisers, resulting in additional work for production companies.
This is a very important point.
In order for advertising agencies to pay appropriate additional fees to production companies, advertisers must also understand the premise that midstream changes generate costs. If advertisers refuse to recognize additional costs and demand that only advertising agencies handle them free of charge, the burden will ultimately be shifted to production companies.
Therefore, improving transaction fairness in the advertising industry is not an issue that can be resolved solely between advertising agencies and production companies. Advertisers, advertising agencies, and production companies must share clear rules in advance regarding changes to deliverables, revisions, cancellations, intellectual property rights, and payment terms.
The 44% Cost Pass-through Rate Shows Weak Bargaining Power
According to the Small and Medium Enterprise Agency’s follow-up survey for the Price Negotiation Promotion Month, the overall cost pass-through rate as of March 2026 was 54.2%. By contrast, the cost pass-through rate for the advertising industry, calculated by industry of the ordering company, was 44.0%, significantly below the overall average.
This figure indicates that cost increases are not being sufficiently reflected in prices in the advertising industry. If increases in labor costs, outsourcing costs, shooting costs, editing costs, software usage fees, material costs, transportation expenses, and other costs cannot be adequately passed on, the earnings of production companies and small businesses will be squeezed.
Advertising production is labor-intensive, yet because deliverables are handled as digital data, costs are often difficult to see. Even if the ordering party thinks of the work as “just slightly correcting some data,” behind the scenes, human judgment, work, checking, revisions, and redelivery are all taking place. The comment by an official of the Japan Fair Trade Commission that ordering parties tend not to recognize the costs incurred by production companies precisely reflects this structure.
Compliance with the Transaction Fairness Act Is Not Merely a Compliance Issue, but a Production Quality Issue
Responding to the Transaction Fairness Act is not merely a compliance measure to avoid administrative guidance. Rather, it is a form of business design for improving the quality of deliverables, preventing disputes, and stabilizing long-term business relationships.
If order details are clear, production companies can properly estimate the necessary personnel, processes, deadlines, and outsourcing arrangements. If the number of revisions and the handling of additional costs are clear, unnecessary conflicts can be avoided. If the treatment of intellectual property rights is clear, later secondary use and media expansion will also proceed more smoothly.
Conversely, if work proceeds while matters remain ambiguous, it may appear flexible in the short term, but disputes over costs, deadlines, and rights are more likely to arise later. As a result, this becomes disadvantageous for advertisers, advertising agencies, and production companies alike.
Practical Measures Required
The measures that advertising agencies and production companies should take going forward are quite specific.
First, at the time of ordering, the content of the deliverables, delivery deadline, price, payment due date, delivery method, inspection conditions, number of revisions, conditions under which additional costs will arise, and treatment of intellectual property rights must be clearly specified in writing, by email, or by other means.
Next, with regard to revision work, it is necessary to clarify the scope included in the initial price. For example, it is important to determine how many minor revisions are included, whether structural changes or the creation of alternative proposals will be subject to additional fees, and who will bear the cost of changes made for the advertiser’s convenience.
Furthermore, intellectual property rights should not be handled in a blanket manner, such as by stating that “all rights are transferred.” Instead, they should be structured according to the intended purpose of use. It is desirable to confirm the media, period, territory, secondary use, modification, and whether sublicensing is permitted, and to set compensation accordingly.
In addition, with regard to payment, it is necessary not to rely solely on the timing of invoice submission, but to thoroughly observe the basic rule that payment must be made within 60 days from the date on which the provided services or deliverables are received. Under the Transaction Fairness Act, obligations of entrusting business operators include clear specification of order details, creation and preservation of transaction records, setting of payment due dates, and payment of late-payment interest.
Toward an Era of Visualizing the Value of Advertising Production
This intensive investigation should be viewed not as a one-off warning to the advertising industry, but as an opportunity to fundamentally review the rules governing production transactions.
Until now, the advertising production field has placed importance on flexibility, speed, business relationships, and trust. These are, in themselves, strengths of the industry. However, if that flexibility leads to unclear order details, unpaid revisions, payment delays, and uncompensated acquisition of intellectual property rights, a review is unavoidable.
The work performed by production companies has costs. Revisions have costs. Planning has costs. Intellectual property rights have value. Properly reflecting these elements in contracts and prices not only protects production companies, but also contributes to enhancing the sustainability of the advertising industry as a whole.
Conclusion
The guidance issued by the Japan Fair Trade Commission and the Small and Medium Enterprise Agency sends a clear message to the advertising industry: the era of verbal orders is coming to an end.
Going forward, advertising agencies will be required to take practical measures to clarify order details, revision conditions, payment terms, and the treatment of intellectual property rights. Production companies will also be required to clearly explain the scope of their work and the value of their rights, and to negotiate the necessary conditions. Advertisers, too, have a responsibility to understand that midstream changes and additional requests generate costs on the production side.
Advertising production should not be supported by vague goodwill or the patience of people on the ground. Precisely because it is creative work, its value, scope, compensation, and rights relationships must be made clear. This intensive investigation can be regarded as an important turning point for the advertising industry as it shifts from “customary practice” to “proper contracting.”