New Green Life Corp. inappropriately issued warning letters alleging violation of the Fair Trade Law

Chinese Taipei

Case:

New Green Life Corp. inappropriately issued warning letters alleging violation of the Fair Trade Law

Key Words:

warning letters, patent rights

Reference:

Fair Trade Commission Decision of February 23, 2000(the 433rd Commissioners' Meeting); Disposition (89) Kung Ch'u Tzu No. 023

Industry:

Medical Instruments and Equipment Manufacturing (3330)

Relevant Laws:

Article 24 of the Fair Trade Law

Summary:

1. New Green Life Corp. ("New Green Life") sent letters to Hsiho Inc. on 24 August 1998 and 8 September 1998 asking Hsiho to recall the TEN-880S Microcomputer Low Frequency Therapeutic Device products within three days to prevent consumers from confusing it with the Pan-100 Low Frequency Massager manufactured by Maruman Co. (Japan) and distributed by New Green Life. Confusion between the two products, New Green Life claimed, was damaging the business reputations of New Green Life and its resellers. However, the TEN-880S is in fact manufactured not by Maruman but by Fan Sheng Inc. Thus by sending warning letters to resellers without notifying Fan Sheng in advance, New Green Life committed a breach of business ethics. In its warning letters, moreover, New Green Life simply asserted without evidence that the resellers were selling ersatz Pan-100 massagers without explaining that Maruman has not patented the Pan-100 in Chinese Taipei. The resellers nonetheless believed New Green Life's misleading claims that Hsiho had infringed on Maruman's patent rights. New Green Life therefore used its warning letters to deceive Hsiho's resellers and compete with Hsiho in an obviously unfair manner.
2. New Green Life's warning letters also claimed that the TEN-880S had not been authorized by the Department of Health, Chinese Taipei and that the Department has imposed a sanction on Hsiho. While Taipei City Department of Sanitation did rule that the LP-1000 Computer Massager formerly marketed by Hsiho was sold without authorization and referred the matter to the Taipei Prosecutor's Office pursuant to the Pharmaceutical Affairs Law, the TEN-880S is manufactured by Fan Sheng, which has a medical instrument permit issued by the Department of Health. This permit appears in the standard sales contract. Nonetheless, New Green Life's allegation convinced resellers that the TEN-880S had not been authorized by the Department of Health and affected their ability to make reasonable judgments. This was the second act of deception that obviously damaged unfair competition.
3. Upon receiving New Green Life's warning letters, resellers including Watson's, the Kang Shih Mei chain, Ta Jun Fa Inc., and Tung Yi Hsing Lu Inc., pulled the TEN-880S out of their shelves. The reactions demonstrate that the warning letters did in fact affect market trading order in violation of Article 24 of the Fair Trade Law. The Fair Trade Commission therefore imposed a fine of NT$150,000 pursuant to Article 41 of the law on New Green Life.
   

Summarized by Wang Li-ta
Supervised by Li Yan-his

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