Japan’s Court Rules Against Ban on Internet Drug Sales

Rakuten (4755) Inc. unit Kenko.com Inc. (3325), an online retailer that quadrupled in Tokyo trading in the past 30 days, won a lawsuit seeking the Japanese government’s withdrawal of a ban on selling over-the-counter drugs online.

The Supreme Court in Tokyo today rejected an appeal by the government, allowing resumption of Internet sales of items including cold remedies, pregnancy tests and laxatives.

The ruling permits online sales of two categories of drugs accounting for about 67 percent of all non-prescription purchases in a country where such medicines are sold off-line only by specially licensed retailers. The Japan Pharmaceutical Association, representing about 100,000 licensed pharmacists, had opposed online sales, saying they increased risks that users would experience side-effects.

“I can’t describe how happy I am in words,” Kenko.com President Genri Goto said in a briefing in Tokyo after the verdict. “We have suffered tremendously mentally and financially for the past four years.”

Kenko.com climbed by the daily exchange imposed limit, gaining 27 percent to 190,000 yen in Tokyo trading as of the 3 p.m. close. The shares have almost tripled in the six trading days this year and are at their highest since 2006 after gaining from 46,650 yen at the close on Dec. 11. Rakuten has rallied 15 percent this year, compared with a 3.9 percent advance for the benchmark Nikkei 225 Stock Average.

Lost Sales

Kenko.com lost about 500 million yen ($5.6 million) in annual sales, or 30,000 orders, in 2009 when the government ordered it to stop sales of over-the-counter drugs, the company said in a statement. The online retailer will resume sales of the OTC drugs today, Goto said.

Yahoo Japan Corp. (4689) is preparing to expand its product line- up of OTC drugs online after the verdict by the Supreme Court, the company said in an e-mailed statement today.

Rakuten will also offer hosting for shops selling OTC drugs through its online mall, it said in an e-mailed statement today.

Wellnet, a closely held rival online drug seller based in Japan, was also party to the lawsuit.

Kenko.com and Wellnet lost an initial suit filed in May 2009 at the Tokyo District Court. They appealed the decision and won at the Tokyo High Court, a ruling the government appealed to the nation’s highest court.

To contact the reporters on this story: Kanoko Matsuyama in Tokyo at kmatsuyama2@bloomberg.net; Yuki Yamaguchi in Tokyo at yyamaguchi10@bloomberg.net

To contact the editor responsible for this story: Jason Gale at j.gale@bloomberg.net

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