A Study on the Application of Article 21 of the Fair Trade Law and Other Regulations in False Advertising Cases

1. Background
To resolve issues derived from application of Article 21 of the Fair Trade Law and other regulations regarding false labeling and advertising for specific products or services and division of jurisdiction, the FTC has since its establishment in 1992 acted according to Paragraph 2 of Article 9 of the Fair Trade Law and consulted with the competent authority of each type of product or service to clarify each other’s responsibility. These consultations have led to the conclusion that when handling false labeling and advertising, under the principle of special laws prevailing over ordinary laws, special laws shall apply if such special laws and Article 21 of the Fair Trade Law are both applicable.
Since it was promulgated and took effect in 2006, the Administrative Penalty Act has served as the consolidated legal code for various administrative penalties to be imposed and the regulations therein provide the principles and standards for interpretation and application of various administrative penalty stipulations. Unless non-application is specified, when a practice is in violation of several administrative laws and fine imposition is deemed necessary, the competent authority to impose the highest fine is given the priority to determine the sanction as set forth in Paragraph 1 of Article 24 and Paragraph 2 of Article 31 of the Administrative Penalty Act. Under such circumstances, whether the division of jurisdiction established between the FTC and the competent authorities of the industries in question is in contradiction with the double jeopardy provision prescribed in Article 24 of the Administrative Penalty Act and whether revision or adjustment is required are worthy of scrutiny.
Moreover, the series of food safety and false labeling events that happened in the country recently has drawn public concern that the fines imposed by the competent authorities were not enough to punish the offenders or deter further attempts. There have been complaints about the government not applying the Fair Trade Law to administer the sanctions as the fines would be higher. Apparently, it is necessary to review and discuss and coopetition relations between Article 21 of the Fair Trade Law and other special laws for specific products or services and their application in cases involving false labeling and advertising and the division of jurisdiction between the FTC and the competent authorities of various industries.

2. Main Suggestions
The conclusion of this study shows that, whether in legal theories or actual execution, it is more appropriate to consider that regulatory coopetition between ordinary laws and special laws exist between the Fair Trade Law and special laws for specific products or services in regulating false labeling and advertising. However, the statutory maximum fine set forth in the Fair Trade Law for false labeling or advertising in violations of Article 21 is far higher than those stipulated in special laws for specific products or services and protection of legal interests may lose balance. To rectify this imbalance, this study suggests the following measures:
(1) Revising the fines specified in the Fair Trade Law to be imposed for violations of Article 21:

Violations of Article 21 of the Fair Trade Law are sanctioned according to Paragraph 1 of Article 41 of the same act. The types of practices to be sanctioned include competition restriction and unfair competition practices. The fines range between NT$50,000 and NT$25 million. The levels of damage to trading order from competition restriction and unfair competition practices vary and the patterns of each type of conduct are too many and complicated for the competent authority to apply a single regulation to assess all competition order violations. Therefore, it is suggested that the provisions set forth in Paragraph 1 of Article 41 of the Fair Trade Law for violations of Article 21 of the same act should be made independent while the fines prescribed in special laws for specific products or services should also be reevaluated. Establishing separate penalty regulations and lowering the statutory fines will facilitate determination of the nature of various violation and the corresponding fines to be imposed. At the same time, it can also reduce the impact of unbalanced protection of legal interests as a result of the fines imposed according to special laws being lower than those imposed according to an ordinary law.

(2) Increasing the penalties set forth in special laws:
Take the special laws for food products and cereals for example. According to Article 45 of the Act Governing Food Safety and Sanitation and Paragraph 2 of Article 18 of the Food Administration Act, the statutory maximum of fine for false labeling or advertising is NT$200,000. Considering the scale of businesses today, this amount is by no means sufficient enough to warn or deter related businesses. The objects of the regulations in the Act Governing Food Safety and Sanitation and the Food Administration Act are food products and cereals. These products are closely related to people’s health and this is why the competent authorities have established special laws to regulate the conduct of related businesses. For this reason, from the aspect of keeping balance in protection of legal interests, the aforesaid special laws should be revised at the right time to raise the statutory maximum of fine according to the development of market and economic scales in order to deter false labeling and advertising that might lead to serious consequences while at the same time resolve the problem of unbalanced protection of legal interests.