Cover Corp. Receives Recommendation from Japan Fair Trade Commission After Violating Subcontract Act

© Cover Corporation

Cover Corporation, the parent company of the hololive productions VTuber management company, received on Friday recommendations and guidance from the Japan Fair Trade Commission (JFTC), after it violated the Subcontract Act by having subcontractors make 243 revisions of VTuber videos without compensation.

According to the JFTC, the company had commissioned 23 businesses, including 19 freelancers, to produce videos, illustrations, and other materials used in VTuber videos between April 2022 and December 2023, and had the businesses make a total of 243 revisions free of charge, even though the businesses were not responsible for the revisions.

Additionally, when the company asked 29 businesses to re-produce videos, the company did not pay the fees on time. The payment delay was as long as one year and seven months, and the late interest had amounted to a total of about 1.15 million yen (about US$7,495).

Cover Corporation has already paid the price set at the time of ordering and late interest, and the JFTC issued the recommendations and guidance to prevent a similar incident from happening again.

Cover Corporation also released a statement on Friday regarding the incident, and detailed that the transactions that were subjected to the recommendations by the JFTC were orders made between April 2022 and February 2024, primarily for the creation of Live2D and 3D models, "[that] considerably inconvenienced contractors by requesting of them an excessive number of revisions, or prolonging of projects as a result of incorrect wording in written order specifications and instructions."

The company further explained that during the stated period, the number of transactions the company was managing increased significantly due to its rapid expansion. The company admitted that this has resulted in oversight and lateness when dealing with contractors, and deficiencies in its internal structure and employee training.

The company apologized to the contractors and all related parties for any inconvenience it has caused, and stated that all the late payments and interest have been settled, but will continue to provide updates on any matters as soon as possible.

Accordingly, the company also stated it is currently making improvements in all areas, such as hiring of new staff and revising the workflow of transactions, as well as the reformation of internal structures, including improving internal announcements during staff training.

Cover Corporation announced in March that it was establishing its first overseas subsidiary Cover USA in North America.

On November 1, a new law in Japan commonly referred to as the Freelance Act will take effect, which requires business operators to clearly state the nature of work, when dealing with freelance workers.

Sources: Cover Corporation's website, Livedoor News