Taipei High Administrative Court finds Far Eastern Department Stores made false and misleading representations in its advertising in violation of the Fair Trade Law

Taiwan

Case:

Taipei High Administrative Court finds Far Eastern Department Stores made false and misleading representations in its advertising in violation of the Fair Trade Law

Key Words:

wireless intercom, false advertisement

Reference:

Taipei High Administrative Court Judgment (92) Su Tzu No. 234

Industry:

Department Store Industry (4751)

Relevant Law:

Article 21 of the Fair Trade Law

Summary:

1. The Plaintiff Far Eastern Department Stores was reported to the authorities alleging that it had made false advertisement since in the advertisement printed by the Plaintiff during special discount period, a product on discount named “EASY TALK wireless intercom MY-520” was listed even though the Plaintiff did not actually supply the product. After the investigation by the Defendant, it was found that the Plaintiff made false and misleading representations in its advertising in violation of Article 21(1) of the Fair Trade Law. Pursuant to the fore part of Article 41 of the same Law, a disposition by Kung-Chu-Tzu No. 091099 was issued. The Plaintiff was ordered to cease the above illegal conduct on the next day after this disposition was served. The plaintiff did not accept the disposition, and after filing an appeal that was also rejected later, instituted this administrative action.

2. According to Article 21 (1) of the Fair Trade Law, “No enterprise shall make or use false or misleading representations or symbol as to price, quantity, quality, content, production process, production date, valid period, method of use, purpose of use, place of origin, manufacturer, place of manufacturing, processor, or place of processing on goods or in advertisements, or in any other way making known to the public.” Despite the Plaintiff's contention that it did not intentionally make false or misleading representations, its acts are nonetheless subject to administrative penalty in accordance with the content of interpretation Shi Tzu No. 275 of the Council of Grand Justices, which states that an actor’s negligence still needs to be shown before any administrative penalty could be imposed on him but will be presumed for violations not requiring any real harms or danger unless the actor could rebut the presumption.

3. For this case, the Court has summoned witness Lin Yu-de, salesperson of Yashida Company and his testimonies were as follows: with respect to the matter of providing specially discounted products to the Plaintiff for promotion, it was determined by Mr. Lin and the purchase staff of the Plaintiff. After confirmed by upstream manufacturers of their willingness to supply those products, he sent the promotion confirmation to the Plaintiff. Normally, branch stores of the Plaintiff started to place orders one week before the promotion period, and the company would send goods to be put on shelves 1 or 2 days before the sales periods began according to the demand by each branch store. For the wireless intercom in this case, he followed the same business practice and faxed the promotion confirmation to the Plaintiff on Nov. 24, 2001 after receiving confirmation from the upstream manufacturer. After receiving orders from each branch store, the upstream manufacturer indicated problem in goods supply; Lin immediately notified purchase staff of the Plaintiff, and decided after negotiation that the upstream manufacturer would replace the above wireless intercom with products of the same type but with relatively higher price. He then contacted each branch store that placed order; however, not every branch store would accept this alternative plan. For these that accepted new products, new intercoms were sent to put on their shelves. For stores that have not accepted the alternative plan, if their customers intended to buy the above intercom based on the advertisement, the branch store would make known to them regarding the shortage in supply of the product and the [availability of] substituting product. If consumers agreed to buy the substituting product, the branch store would then place an order etc. The description was consistent with that by the Plaintiff, and could be verified by the statement of promotion confirmation, certificate letter of short supply and statement of sales quantity of substituting products. Therefore, the Plaintiff’s claim about not making false advertisement on purpose is plausible. However, based on the above testimony, the Plaintiff has already known about the supply problem of the wireless intercom and had decided to replace it with the alternative plan one week before Dec. 14, 2001, that is, earlier than the promotion period began. The Plaintiff still have sufficient time to print correction advertisement or notify all branch stores to put on poster to notify consumers to protect their interest. However, the Plaintiff did not adopt any countermeasure such as correction or notification, but just let the supplier Yashida Company give notice to other branch stores, and let each branch store decide whether to replace the wireless intercom in the advertisement with new product. As a result, consumers could not know beforehand about the change of specially discounted products in the advertisement and thereby decided whether to go to the store or not. Therefore, the Plaintiff could not be regarded as having properly fulfilled its duty of care and without negligence. Although the Plaintiff claimed that it had provided products of the same category with higher grade but same price to be selected by consumers, yet according to the witness Lin Yu-de, not all branch stores of the Plaintiff have accepted the alternative plan. As indicated by pictures during special discount period of Yungho branch store provided by the Plaintiff, the branch store only put on a notice notifying the shortage in supply of the wireless intercom in the advertisement, but did not mention other substituting products were available. Consumers would not know the alternative option unless they took the initiative to ask the store. So the Plaintiff’s claim that it did not impair consumers’ interest since the original price of the substitute products provided afterwards was actually higher than the product in the promotional advertisement is without merit. The plaintiff's administrative lawsuit requesting to reverse the appellate decision and the original disposition is in lack of legal grounds and is dismissed.

Summarized by: Lai, Chia-Ching; Supervised by: Wang, Rong-Ging