Evertrust Rehouse Co., Ltd., published false advertisements in violation of the Fair Trade Law
Case:
Evertrust Rehouse Co., Ltd., published false advertisements in violation of the Fair Trade Law
Key Words:
false advertising, regular chain agencies, franchise agencies
Reference:
Fair Trade Commission Decisions of October 13, 1999 (the 414th Commissioners' Meeting), and November 10, 1999 (the 418th Commissioners' Meeting); Disposition (88) Kung Ch'u Tzu No. 145.
Industry:
Real Estate (6812)
Relevant Laws:
Article 21 of the Fair Trade Law
Summary:
1. A complaint was filed by You Hsin Realty Co., Ltd. ("You Hsin") alleging that after a Mr. Wang and seven other former Evertrust Rehouse Co., Ltd., employees successively left Evertrust for jobs at You Hsin, Evertrust began launching all kinds of attacks at You Hsin, as follows: (1) The respondent published frequent advertisements defaming its competitors and tarnishing their creditability in the minds of consumers, and continually circulated promotional literature in the real estate agency market intimating to consumers that real estate agencies operated as regular chain businesses were superior to those operated as franchise businesses. One leaflet claimed for example, "Only regular chain agencies can offer you a 100% guarantee." It went on to claim, by citing addresses, that "Ch'eng Hsing Realty Co.," "T'ai XX Realty Co.," and the "Chu X Franchise" had gone out of business, and "The Evertrust Rehouse's Tung Men regular chain agency = a guarantee of closing the deal." None of the content was factual, and the allegations were exaggerated. (2) In one specific case, the complainant had already found a prospective buyer for a client's property; however, the respondent had an attorney send a certified letter to the seller, falsely claiming, among other things, that the complainant had not completed procedures to register its incorporation. The letter prompted the seller to turn the case over to the respondent, who subsequently sold the house to the same buyer the complainant had found. (3) The respondent damaged the complainant's business reputation, in violation of Article 22 of the Fair Trade Law (FTL), by filing a report with the Chinese Association of Real Estate Brokers claiming that employees of the complainant, including one Wang Kuo-t'ien, had engaged in "irresponsible actions." (4) The managers of the respondent's Hsinsheng Road branch and Shihta Road branch each sent letters to property owners slandering employees of the complainant in an attempt to damage the complainant's business reputation. (5) The respondent sent personnel to pull down "for-sale" placards posted by the complainant, who were contracted to sell the property. (The complainant submitted photographs in evidence.) (6) The respondent's headquarters instructed that employees at its chain branches continually harass the complainant during July and August by making silent crank phone calls to the complainant and sending crank letters to its employees' homes. The respondent also circulated an internal notice to its agents offering them an incentive of NT$2 for each of the complainant's fliers they pulled out of mailboxes, NT$500 for each placard they pulled down, NT$1,000 for each market investigation that turned up an address of a property for sale through a competitor, and NT$2,000 for each case snatched away from a competitor. (7) The respondent warned service suppliers such as printing companies, radiation detection companies, placard production companies, waterproofing companies, and flier distribution companies not to do business with the complainant. (8) The respondent used slanderous letters to damage clients' trust in the complainant. (The complainant submitted as evidence a written statement provided by a client.) 2. The investigation by the Fair Trade Commission (the Commission) found the following: (1) The respondent violated Article 21(3), which refers to and applies Article 21(1), of the FTL: (i)The respondent argued that the sabotage of the complainant's advertising occurred through individual actions of a small number of its agents, and no consumers had filed complaints with the Commission since the occurrences, which were a year ago. However, regular chain agencies and the head agency are a single entity in terms of their shared rights and obligations, and agents at the chain branches are the respondent's employees. Furthermore, there was no evidence that the respondent had ceased or corrected the actions or taken other remedial measures after discovering the improper advertising content. The respondent thus could not shirk responsibility on the grounds that the actions were those of individual agents at its chain agencies and had not been reported by consumers despite having occurred over a year ago. (ii) As for the respondent's claim that "only regular chain agencies can offer you a 100% guarantee," and its claims, by citing addresses, that "Ch'eng Hsing Realty Co.," "T'ai XX Realty Co.," and the "Chu X Franchise" had gone out of business, and "The Evertrust Rehouse's Tung Men regular chain agency = a guarantee of closing the deal" - the respondent couched its advertised claims that competitors had gone out of business in the guise of "factual reportage," but failed to actually investigate whether the competitors had really gone out of business or simply relocated, and subsequently could not provide any evidence that the companies had indeed gone out of business. In the same advertisement, it went on to state that its own regular chain agencies were a "guarantee of closing the deal." Viewed overall, the advertisement's devices and rhetoric would tend to mislead consumers to believe that competitor franchise real estate agencies were prone to go out of business, and only the respondent could g uarantee closing a deal. Also, no standard currently exists for determining with certainty whether one kind of real estate agency - either regular chain agencies or franchise agencies - is superior to the other. By implying in its advertising that franchise agencies are prone to go out of business and stating that "only regular chain agencies can offer you a 100% guarantee," the respondent might mislead consumers to believe that regular chain agencies are superior to franchise agencies and only chain agencies can offer a 100% guarantee." Viewed overall, then, the respondent made false and misleading presentations about its services in its advertising, in violation of Article 21(3), which refers to and applies Article 21(1), of the Fair Trade Law. The acts, however, occurred before the amendments to the FTL (which took effect on February 5, 1999), and thus should be sanctioned under the fore part of Article 41 of the FTL in effect at the time the acts occurred. (2) As for the allegation that the respondent had warned suppliers not to do business with You Hsin, the respondent said that the printing company had contacted the respondent on its own initiative in September 1998 and indicated it no longer wished to accept print advertising business from the respondent. The respondent agreed it would be best not to continue hiring the services of that printer, and ceased doing so as of that September. The two parties thus diverged in their accounts of why the relationship was terminated. The content of the certified letter sent by the respondent did not involve any request that the printing company cease dealings with the complainant; therefore, there is no evidence to substantiate that the respondent impelled the printing company to stop trading with You Hsin. In regard to the other suppliers mentioned by the complainant, the complainant also failed to provide any factual evidence that the respondent had impelled them to stop trading with You Hsin; therefore, th e respondent was not found to have violated Article 19(1)(i) of the FTL. (3) As for the allegation regarding a letter sent by the respondent to the complainant's client, the investigation found that the certified letter submitted by You Hsin had been sent by the attorney at that client's behest. It could not be proven that the respondent had engaged the attorney to send the letter, nor did the letter's content involve any threats, inducement with profit, or other improprieties. Furthermore, the investigation showed that the owner of the property at issue had, at different times, engaged the services of the respondent and the complainant to sell the property; therefore, the respondent was not found to have violated Article 19(1)(iii) of the FTL. (4) As for the complainant's claim that, during the criminal investigation, the respondent sent a letter to the Chinese Association of Real Estate Brokers notifying it of "irresponsible actions" on the part of the respondent's employees including one Wang Kuo-t'ien: the respondent sent the letter pursuant to the Administrative Procedures for Reporting Irresponsible Employees of Real Estate Agencies passed by both the Taipei and national real estate brokers' associations. The letter was not directed to trading counterparts of competitors or the complainant, and its content described facts of police search and seizure; thus, it did not violate Article 22 of the FTL. As for the allegations that the two branch managers and various customer service centers had sent out letters damaging the business reputation of the complainant, the content of those letters described litigation involving the respondent and You Hsin and facts of police search and seizure, and contained no false statements. In respect of o ne such letter, the Taipei District Prosecutors Office had already made a final decision not to prosecute. Also, the letters sent out by the respondent's customer service centers stated that when they left their employment with the respondent to go to work at You Hsin, some agents had taken materials of the respondent with them and noted that the case had been reported to the professional association and was under review by the court. The letter urged customers to pay attention to whether the agents presented to them, or utilized, materials of the respondent. The letter contained no false statements, and did not violate the provisions of Article 22 of the FTL. (5) Regarding the respondent's alleged violations of Article 24 of the FTL: (i) The photographs submitted by the complainant merely showed two persons riding together on a motorcycle and employees of the respondent holding up a placard of the complainant at a business location of the respondent. The persons riding on the motorcycle could not be positively identified by their features as employees of the respondent. The photographs were thus insufficient proof that the respondent had pulled down placards of the complainant. (ii) The complainant had no concrete factual evidence to support its claims that the respondent had instructed its chain agencies to harass You Hsin with crank phone calls and smear letters or had encouraged employees to sabotage You Hsin's cases, nor did it have evidence that the smear letters it submitted had been sent by the respondent. The respondent thus could not be determined to have committed unlawful acts. (iii) The complainant submitted a chart detailing alleged sabotage of its cases by the respondent, e.g. the respondent had described litigation involving You Hsin to property owners, had attacked You Hsin's business reputation, and had harassed its clients. The complainant also submitted a written statement from a client which said the respondent had approached the client regarding a deal already closed by the complainant and informed it that it could have gotten a cheaper purchase price from the respondent, had visited the client to inquire into the purchase price, and had slandered the complainant's employees. However, the content of the chart and written statement could all be traced to the litigation between the two parties. The mutual accusations and defamation between the two parties are all devices employed by them in the dispute originating in the departure of the complainant's employees from their original employment with the respondent. The dispute is an individual case with no bearing o n the public interest, so the parties should seek other avenues of remedy. Article 24 of the FTL was not violated. Appendix: Evertrust Rehouse Co., Ltd.'s Uniform Invoice Number: 22760834 Summarized by Wu Pi-ju; Supervised by Hu Kuang-yu