METI Tolerated Nova's Methods

It's starting to become clearer as to how Nova found itself in deep legal trouble. The Daily Yomiuri is reporting that METI tolerated Nova's refund practices:

The Economy, Trade and Industry Ministry issued a document in June 2002 that tolerated English conversation school industry leader Nova Corp.'s controversial practice of minimizing refunds of students who terminated their contracts, according to sources close to the issue.

Four months before the document was issued, the Tokyo metropolitan government began its own administrative procedures against Nova, criticizing the Osaka-based chain's refund method as being detrimental to departing students.

But because the ministry's document said the refund method was not wholly illegal, the metropolitan government discontinued its administrative procedure.

Nova had continued its refund calculation method until March, when the Supreme Court ruled it illegal.

This would explain why Nova thought it could tell consumers that the cooling off period for contracts and merchandise didn't apply. What is revealing is how Nova played METI and the Tokyo government to its advantage.

In February 2002, four months before the document's issuance, the metropolitan government began its own administrative procedures against Nova, demanding the company review its business practices, including the refund calculation.

Other problems included false explanations to potential students that they would be able to book lessons at any time, and faulty contract forms.

The metropolitan government said Nova admitted in March that employees had made mistakes in judgment when they made sales pitches to potential students, and that Nova promised to correct the problem.

But Nova declined to discuss its refund calculation method with the metropolitan government and said it would take action after consulting the ministry.

When the ministry presented its opinion in the June 2002 document, the metropolitan government could not continue administrative procedures against Nova.

One wonders how long Nova's scam would have went on if it were not for the mountain of consumer complaints.