The Fair Trade Commission has announced that penalties for ‘no-shows’ in reservation-based businesses, like ‘omakase’ dining or group reservations at regular restaurants, will be significantly increased. This announcement was made today, and the revision of the “Consumer Dispute Resolution Standards,” which includes these changes, will be pre-notified until November 11th.
The revision is aimed at addressing no-shows, which have become a significant issue for the dining industry during the economic downturn, by increasing the penalty rate substantially. Currently, the no-show penalty at regular restaurants is up to 10% of the total charge, but the amendment proposes to double it to 20%.
Additionally, businesses that operate on a reservation basis, such as omakase or fine dining that prepare ingredients and meals in advance, will be classified as ‘reservation-based restaurants,’ allowing them to set penalties of up to 40%. For regular restaurants, a 40% penalty can be applied to large orders or group reservations if such conditions are clearly communicated to the consumer in advance.
This amendment considers that the average cost ratio in the dining industry is around 30%. However, to prevent consumer damage, businesses must inform consumers in advance if they intend to consider late arrivals as no-shows.
If the penalty is less than the advance reservation deposit, businesses must return the difference to the consumer. Refund standards are set for 100%, 50%, or 25% based on when the cancellation notice is given.
The Consumer Dispute Resolution Standards serve as guidelines for settlement or recommendation if the parties involved in the dispute do not express how they want to resolve it. Adherence to these penalty standards is not mandatory.
A Fair Trade Commission official explained that the previous 10% penalty rate allowed some ‘black consumers’ to commit deliberate no-shows, prompting some businesses to set excessive penalties, up to 100%, which was disadvantageous to regular consumers. The new realistic standards are designed to guide businesses and allow for reasonable adjustments during dispute resolution.
Penalties for wedding venue cancellations, previously criticized for being unrealistic, have also been revised. The current standard sets a 35% penalty for cancellations from 29 days to the wedding date. However, it will now become 40% for cancellations between 29 and 10 days prior, 50% for 9 to 1 day prior, and 70% for cancellations on the wedding day, considering challenges in covering losses such as food waste.
Standards for travel-related issues have also been revised. In cases where natural disasters make lodging facilities unusable, free cancellations will be allowed, even on the reservation day, if any part of the route from the point of departure to the lodging location is affected by such events. Moreover, free cancellations of overseas trips can occur if there is a “government order,” defined specifically as a Level 3 (travel advisory) or Level 4 (travel restriction) travel alert issued by the Ministry of Foreign Affairs.
Other updates include establishing dispute resolution standards for study cafes, which have seen increased conflicts recently, and reflecting recent updates to standard contracts regarding changes to cancellation fees for trains and express buses.
This revised amendment is expected to be implemented as early as this year after the administrative notification period.