Sino Network Co., Ltd. violated Article 21 of the Fair Trade Law by falsely claiming "Sino Network is Now the Fourth Largest ISP Nationwide" and a provider of "Global Internet Telephone Services" in one of its advertisements
Case:
Sino Network Co., Ltd. violated Article 21 of the Fair Trade Law by falsely claiming "Sino Network is Now the Fourth Largest ISP Nationwide" and a provider of "Global Internet Telephone Services" in one of its advertisements
Key Words:
fourth largest nationwide, ISP, Internet telephone, simple voice resale services
Reference:
Fair Trade Commission Decision of March 1, 2001 (the 486th Commissioners' Meeting); Disposition (90) Kung Ch'u Tzu No. 042
Industry:
Network Information Service Provision Industry (7321)
Relevant Law:
Article 21 of the Fair Trade Law
Summary:
1. This case originated from a letter received by the Fair Trade Commission (FTC) from the Directorate General of Telecommunications (DGT), Ministry of Transportation and Communications. The letter alleges as follows: The claims, "Sino Network is Now the Fourth Largest ISP Nationwide" and a provider of "Global Internet Telephone Services" in an advertisement placed by Sino Network Co., Ltd. (Sino Network) constituted false advertising. Sino Network had not obtained a license to operate a Type II telecommunications services and therefore it did not have any permission to operate a Type II telecommunications business and Internet access business. Furthermore, according to Article 12 of the Administrative Rules on Type II Telecommunications services, Internet telephone services fall within the category of simple voice resale services, and the leasing of circuit equipment for the provision of simple voice resale services is prohibited under the law. Hence the services listed in Sino Network's advertisement obviously constitute false advertising. 2. The FTC found as follows: Sino Network was unable to furnish concrete evidence either in terms of unit revenues or others sufficient to support its claim of being the fourth largest ISP nationwide. Furthermore, Sino Network should not count the market share of another telecommunications company toward the aforesaid claim simply because it was the distribution agent of such a company. At the same time, simple voice resale services did not constitute a legal category of business operations under the current Telecommunications Law, and the DGT had already rendered a disposition against Sino Network ordering it to discontinue the provision of such services. Given that Sino Network was an operator of a Type II telecommunications services, when preparing to engage in new business of operations, it should have carefully reviewed the relevant laws and regulations, and conducted its operations accordingly within the orbit of the relevant laws. When placing the advertisement, Sino Network should have known that the "leasing of circuit equipment for the provision of simple voice resale" services was not a permitted category of business operations under the current Telecommunications Law. Sino Network failed to disclose in the advertisement the legality of the services at issue, and even if it had provided the services after the above had happened, it would still have trouble denying the fact that it concealed the illegality of the services to promote its business. Therefore, it could be deemed that Sino Network made false and misleading representations. The FTC found that Sino Network was in violation of Article 21(3) of the Fair Trade Law where the provision of FTL Article 21(1) shall apply mutatis mutandis. It provides that enterprises shall not make false or misleading representations in advertisements about the contents of their services. 3. In sum, the facts of Sino Network's illegal conduct are clear. After weighing the company's motives, its revenues gained, its degree of cooperation with the investigation, the evidence of its remorse, and the degree of impairment inflicted on the trading order on the marketplace, pursuant to the fore part of Article 41 of the Fair Trade Law, the FTC ordered Sino Network to immediately cease its conduct with respect to the advertisement and imposed on Sino Network an administrative fine of NT$250,000. Appendix: Sino Network Co., Ltd.'s Uniform Invoice Number: 16635916 Summarized by Wu, Lieh-Ling; Supervised by Yeh, Tien-Fu