The Fair Trade Commission initiated an investigation on Eastern Home Shopping Network for its exaggerated and false “Sort Patch” advertisement

Chinese Taipei

Case:

Key Words:

close contact slimming, shopping channel, advertiser, medical theory, clinical testing

Reference:

Fair Trade Commission Decision of January 27, 2005 (the 690th Commissioners' Meeting); Disposition Kung Ch’u Tzu No. 094011

Industry:

Electronic Shopping and Mail-Order Houses (4811)

Relevant Laws:

Article 21 of the Fair Trade Law

Summary:

This case originated from the investigation initiated by this Commission on Eastern Home Shopping Network’s (hereinafter referred to as “Eastern Home Company”) “Sort Patch” advertisement broadcasted in a program on Eastern Home Shopping’s Channel 9 on June 25, 2004. The advertisement included claims stating that “place one piece after getting out of bed to become youthful and beauty, take one pill before sleeping to keep intestine healthy”, “verified by the European Union organization to lose five kilograms easily in one month”, “a healthy way to become beautiful without taking medicine or injection”, which were suspected to be false.
Article 1 of the “Product Consignment Agreement” signed between Eastern Home Company and the supplier Sin-Chu Health Care Company Ltd. (hereinafter referred to as “Sin-Chu Company”), stipulated that “Both Party A (refers to Sin-Chu Company) and Party B (refers to Eastern Home Company) have mutually agreed that Party A shall be responsible for the supply of products and the related advertisement materials; Party B shall be responsible for the production of the related programs and (or) advertisements which are publicly broadcasted and (or) published in media channels including television, radio, books and periodicals, DM and network.” Article 9 stipulated: “Party B has the rights to reproduce, modify, and edit the advertisement materials and samples provided by Party A for advertising and marketing purposes. The productions may be publicly broadcasted, showed and printed.” In other words, the agreement showed that Sin-Chu Company has given Eastern Home Company an authorization to sell the product “Sort Patch” on the cable television home shopping channel. The investigation found that Eastern Home Company has produced and released the advertisement in question according to “Product Consignment Agreement” signed with Sin-Chu Company; the produced advertisement was then broadcasted on the Eastern Home Shopping Channel. Prior to the production, both parties had held meetings to discuss matters regarding the product’s characteristics, content of advertisement and the presentation manners. Thereafter, Eastern Home Company produced, recorded the advertisement film and broadcasted the advertisement on the television home shopping channel. The recorded tape for the aforementioned advertisement revealed that Eastern Home Company had sold the disputed product on the shopping channel and that consumers were connected directly to Eastern Home Company when they dialed the “order hotline.” Consequently, consumers did not notice that the advertised content in question was in fact provided by Sin-Chu Company. Without any doubts, consumers considered Eastern Home Company was responsible for broadcasting the advertisement in question. Such recognition was sufficient to affect consumers’ judgment in making rational trading decisions. During the sales period, Eastern Home Company notified Sin-Chu Company about the shipment volumes. Then, Eastern Home Company personally delivered goods and issued invoices to consumers. Sin-Chu Company issued invoices to Eastern Home Company and requested payment for the shipments. Summing up from the aforementioned facts and evidences, both Eastern Home Company and Sin-Chu Company cooperated to determine the content of agreement, materials provided, production and broadcasting content for the advertisement in question and the entire trading process.
Eastern Home Company argued that Sin-Chu Company has provided product information and the related materials or suggested the product name, price to Eastern Home Company for the production and broadcast of the aforementioned advertisement. Hence, Sin-Chu Company should guarantee the information provided is legal. If the government authorities find any violation of relevant laws and regulations, Eastern Home Company has absolutely no involvement, and Sin-Chu Company should bear the responsibility by itself. However, as stated earlier, Eastern Home Company and Sin-Chu Company have cooperation relations; hence, the supply of product and the sharing of responsibility shall not affect the fact that the disputed advertisement was resulted from their cooperation. Even though Eastern Home Company argued that the material of the advertisement in question was provided by Sin-Chu Company, Eastern Home Company sold the disputed product through its own shopping channel. Furthermore, throughout the entire trading process, regardless of the objectivity of trading partner (Eastern Home Company is the salesperson for the issued invoices) or the subjectivity of trading confidence from consumers (Eastern Home Company is the operator of the shopping channel), all were linked to Eastern Home Company. Moreover, Eastern Home Company also stated that the difference between the selling price and cost of good purchased for the disputed product belonged to Eastern Home Company. The aforementioned difference, whether it was considered as advertising or marketing “expenses” for Sin-Chu Company, it nevertheless can be regarded as “profit” for Eastern Home Company from selling the disputed product. Thus, Eastern Home Company should get more profit when more products were sold. It is sufficient to conclude that Eastern Home Company has received benefits in the trading process and should not shirk its responsibility with the argument that the disputed advertised material was provided by Sin-Chu Company. Eastern Home Company is the main entity responsible for the disputed advertisement and furthermore has made profits from the trading of the disputed product, therefore, should assume the obligation of paying attention to the content’s truthfulness of the aforementioned advertisement.
The investigation found that Sin-Chu Company, by providing the disputed product and its advertised material as well as signed the “Product Consignment Agreement”, has cooperated with Eastern Home Company in order to acquire a channel to sell its product with the advertisement in question. In addition, Sin-Chu Company has admitted its participation in the production of the disputed advertised content prior to the broadcast. Therefore, it can explained that Sin-Chu Company also is the main entity responsible for the advertisement in question.
It is common for enterprises to employ advertisement as a means to win over trade. The advertiser must bear the obligations of verifying and confirming the facts at the time of publishing. The advertiser, in the case of being unable to verify the truthfulness of the advertisement or proceed to make false and misleading representation publication, shall bear the responsibility of providing false advertisement representation. Eastern Home Company and Sin-Chu Company have jointly published advertisement on Eastern Home Shopping network, claiming that “place one piece after getting out of bed to become youthful and beauty, take one pill before sleeping to keep intestine healthy”, “verified by the European Union organization to loose five kilograms easily in one month”, “a healthy way to become beautiful without taking medicine or injection”. The Department of Health, Executive Yuan found the contents of “Sort Patch” advertisement exaggerated and false. The supplier Sin-Chu Company argued that the Chinese version of advertised materials were translated from the overseas company’s original publication. Since Sin-Chu Company was unable to give any medical theory or clinical testing as proof, therefore, the results of product uses as stated in the content of the advertisement in question were obviously false and misleading representations. Upon the invitation by this Commission, Sin-Chu Company has attended a meeting to give explanation and present the related information. The aforementioned meeting revealed that “European Union Organization” as mentioned in the disputed advertisement was only an European private institution on weight loss. The claim can easily mislead consumers to believe that quality of the disputed product has been approved by European governmental agencies or public interest organizations. With respect to the product’s quality, the disputed advertisement also showed false and misleading representation, already in violation of Article 21 (1) of the Fair Trade Law. Eastern Home Company did not explain theory and basis for the advertised content of “place one piece after getting out of bed to become youthful and beauty, take one pill before sleeping to keep intestine healthy”, “verified by the European Union organization to loose five kilograms easily in one month”, “a healthy way to become beautiful without taking medicine or injection” as broadcasted on Eastern Home Shopping network, but repeatedly insisted on the aforementioned words were given by Sin-Chu Company and thus not related to Eastern Home Company. However, Eastern Home Company was the advertiser at issue, therefore, it still must bear the responsibility of advertiser in paying attention to the truthfulness even though the materials of the disputed advertisement were provided by the third party.
Eastern Home Company and Sin-Chu Company have broadcasted “Sort Patch” advertisement on the cable television shopping channel, the contents of the advertisement were without medical theory and clinical testing basis. Furthermore, the claim can easily mislead consumers to believe that quality of the disputed product has been approved by European governmental agencies or public interest organizations. The content and quality of the product were untrue and misleading representation, and were found in violation of the provision of Article 21 (1) of the Fair Trade Law. After considering the aforementioned companies’ motivation for the unlawful actions, the business scales, the circumstances of violations, and their cooperativeness during the investigations, this Commission, in accordance with the forepart of Article 41 of the Fair Trade Law, imposed administrative fines of NT$ 600,000 and NT$ 100,000 respectively on Eastern Home Company and Sin-Chu Company.

Summarized by Lai, Mei-Hua
Supervised by Shen, Li-Yu

Appendix:

Eastern Home Shopping Network’s Uniform Invoice Number: 22456427
Sin-Chu Health Care Co. Ltd.’s Uniform Invoice Number: 70562290

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