PChome Online Inc. and LISAN International Co. Ltd., made false representation in the “Amazing Abs Shaper” advertisement published on the Internet, a violation of Article 21 of the Fair Trade Law

Chinese Taipei


Case:

PChome Online Inc. and LISAN International Co. Ltd., made false representation in the “Amazing Abs Shaper” advertisement published on the Internet, a violation of Article 21 of the Fair Trade Law

Key Words:

e-Business, PChome online shopping for women, false advertisement

Reference:

Fair Trade Commission Decision of January 27, 2005 (the 690th Commissioners' Meeting); Disposition Kung Ch’u Tzu No. 094008

Industry:

Internet Information Supply Service (7321), Wholesale of Other Household Equipment and Supplies (4419)

Relevant Laws:

Article 21 of the Fair Trade Law

Summary:

  1. The Department of Health, Executive Yuan wrote to this Commission stating that LISAN International Company (hereinafter referred to as LISAN Company) has published an advertisement for the “Amazing Abs Shaper” on the website “PChome Women Shoppers” (http://shopping.PChome.com.tw). The advertisement included claims such as “dissolve excess fat through perspiration, attain the result of weight reduction, body shaping and sports” that were without any medical theory or clinical testing as basis, also exaggerated and false.
  2. Upon the investigation, this Commission found that:

    (1) The production and publication process of the advertisement at issue: The investigation found that the “Cooperation Agreement for On-line Order” signed between LISAN Company and PChome Online International Information Co. Ltd. (hereinafter referred to as PChome Online Company) was an agreement for a general mode and terms of cooperation, not on a specially designated and specific product. The agreement covered a general range of products, and would be confirmed after both parties have agreed and “uploaded” the “document files” of the designated good on to the sales website. LISAN Company provided the aforementioned agreed document files (including “summary, feature, specification and instruction”).

    (2) Trading manner with LISAN Company:

    (i) With regard to the profit allocation between PChome Online Inc. and LISAN Company, in principle, LISAN Company gave PChome Online Company the delivery price and suggested selling price of the designated good. The completed online transactions will be calculated monthly for the payment, computed as total sales at wholesale price, to LISAN Company. LISAN Company issued sales invoices to PChome Online Inc., the difference between the total payment and the total amount of invoice was profit for PChome Online Inc..

    (ii) Secondly, with regard to the delivery procedure for the physical advertised goods at issue, the investigation showed LISAN Company checked consumers’ orders through “online system” as constructed by PChome Online Inc. and mailed the ordered goods to consumers according to their order records. In pursuant to Article 2(1) of the aforementioned agreement, LISAN Company cannot turn down any shipments. After the shipment, PChome Online Inc. issued invoices to consumers. In brief, from the consumers’ standpoints, PChome Online Inc was the final seller of the advertised good at issue.

    (3) PChome Online Inc. was the operator of on-line shopping mall: The advertised good at issue was sold by PChome Online Inc., but, the advertised content at issue was provided by LISAN Company and uploaded on to the shopper web page constructed by PChome Online Inc. after confirmation. Generally speaking, there was no restriction on the duration of posting the advertisement at issue except for the occurrence of incident as stipulated in the agreement; for example, the supplier was out of stock. Moreover, PChome Online Inc was responsible for the construction, maintenance and management of the trading platform and interface of the aforementioned website. Also, the website was facilitated with online electronic payment mechanism and the functions of retrieving and searching designated good or service. Next, the investigation showed that in accordance with Article 7(6) of the Cooperation Agreement signed between PChome Online Inc. and the supplier, “during the valid period of the agreement, Party B (LISAN Company) agrees to collaborate with Party A (PChome Online Inc.) to execute the planned marketing strategy and the implementation of marketing plan.” In this case, the term “marketing activities” referred to the production of additional marketing advertisements (besides the web page at issue) and holding additional promotion activities, for example, sending advertisement mail. In brief, PChome Online Inc. was the operator of the shopping website at issue.
    3. Grounds of Disposition
    (1) PChome Online Inc. was the main entity responsible for the advertisement at issue: PChome Online Inc. sold the advertised good at issue on its own shopping website, provided LISAN Company a web page to post product’s summary and instructions as disclosed in the disputed advertisement. The consumers, in accordance with information that they have, perceived the advertisement distributor and the product seller as the main entities responsible for the advertisement. From consumers’ standpoint, PChome Online Inc. was the distributor of the disputed advertised content as well as the seller of the product. Furthermore, PChome Online Inc. was an active and direct beneficiary of benefits resulted from the advertisement at issue, and certainly not an intermediary. It is obvious that PChome Online Inc. was responsible for the advertisement.
    (2) LISAN Company also was the main entity responsible for the advertisement at issue: The investigation showed that although LISAN Company was the supplier of the advertised good at issue, the Company was not simply supplying goods to PChome Online Inc. for sales but also providing the advertised good and content at issue to PChome Online Inc. for production of the advertisement at issue. Furthermore, the Company shared profits derived from the sales of the advertised good at issue with PChome Online Inc. Both companies cooperated with each other and were responsible for the advertisement at issue together. Therefore, LISAN Company was the main entity responsible for the advertisement at issue.
    (3) The Department of Health, Executive Yuan has concluded that the content of the disputed advertisement “dissolve excess fat through perspiration, attain the result of weight reduction, body shaping and sports” was exaggerated and false. It can be concluded that the aforementioned companies have published false and misleading representation Internet advertisement; in violation of the provision of Article 21(1) of the Fair Trade Law.
    (4) After considering said enterprises’ motivation of the unlawful acts, business scales, the circumstances of violations, and the cooperativeness during the investigations, this Commission, in accordance with the forepart of Article 41 of the Fair Trade Law, ordered PChome Online Inc. and LISAN Company to immediately cease their unlawful acts and imposed administrative fines of NT$ 250,000 and NT$ 50,000 respectively.

Summarized by Hsien, Cheng-Tu
Supervised by Yeh, Tine-Fu

Appendix:

PChome Online Inc.’s Uniform Invoice Number: 16606102
LISAN International Company’s Uniform Invoice Number: 70616117


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