Shun Hsin Home Appliance Co., Ltd. falsely promoted products under the disguise of being a gas company, and used gas safety inspections as a pretext to impair the public's right to freely choose whether to trade with it (purchase products from it), in violation of the Fair Trade Law's prohibition against deceptive acts sufficient to affect the trading order
Case:
Shun Hsin Home Appliance Co., Ltd. falsely promoted products under the disguise of being a gas company, and used gas safety inspections as a pretext to impair the public's right to freely choose whether to trade with it (purchase products from it), in violation of the Fair Trade Law's prohibition against deceptive acts sufficient to affect the trading order
Key Words:
deception, gas company
Reference:
Fair Trade Commission Decision of April 20, 2001 (the 493rd Commissioners' Meeting); Disposition (90) Kung Ch'u Tzu No. 063
Industry:
Retail of Other Fuels (4729)
Relevant Law:
Article 24 of the Fair Trade Law
Summary:
1. This case was originated with a letter forwarded by the Taipei County Government alleging inappropriate business conduct by Shun Hsin Electric Home Appliances Co., Ltd. (Shun Hsin) According to the allegations, Shun Hsin dispatched sales personnel to make door-to-door visits under the excuse of conducting gas safety inspections or gas water heater safety inspections, and by so doing led the consumers to mistakenly believe that the safety checkups were authorized by their gas providers. The sales personnel would then falsely claim that there was a gas leak or the gas heater was not safe, and would, without the consent of the consumers, arbitrarily dismantle the original heaters and replace the original equipment with their own products, requiring the consumers to pay for the new products. The Taipei County Government had notified the parties to appear before it to state their cases and to discuss a resolution to the matter, but in four notifications involving two separate complaints, either the respondent failed to respond to the legal notification by appearing, the parties were unable to reach agreement, or the agreement was untenable. The Taipei County Government therefore made a written request to the Fair Trade Commission (FTC) to conduct an investigation into the improper sales activities by Shun Hsin. Another member of the public also sent evidence directly to the FTC relating to Shun Hsin's improper sales promotion of gas water heaters and gas control devices, and stated "This abominable company has harmed countless people, and the public is helpless against their tactics. We hope that the FTC will give them a warning." 2. Mr. Hsu, the responsible person of Shun Hsin candidly admitted to the Commission that the company's door-to-door sales and training of new sales personnel were all based upon using free gas heating equipment safety inspections as a pretext to enter private residences and promote the company's products. The FTC further found that gas water heaters are Shun Hsin's major product (accounting for over 90% of its sales volume), and Shun Hsin requires its sales personnel to sell the heaters at a retail price of 3.63 to 3.19 times Shun Hsin's own procurement cost. This is in comparison to the standard industry retail price of only 1.17 to 1.24 times of distributors' procurement cost for brand-name gas heaters. The FTC also found in a questionnaire survey of Shun Hsin customers that Shun Hsin had sold products under the disguise of being a "gas company" or carrying out "gas safety inspections," and had forcibly dismantled existing equipment without the consumers' consent and replaced it or converted it with Shun Hsin's own products. It further failed to inform the consumers of their right to have the new equipment removed, return it, or rescind the contract within seven days of installation. The respondent also displayed a hostile attitude toward consumers. When consumers requested to return merchandise within the seven day grace period, the consumers were confronted with harsh language spoken by the respondent. The consumers further complained that the company refused to talk a reason with them, its sales tactics were based on pure deception, it provided no after-sales services, its products were overpriced, the cellular phone numbers it provided were invalid numbers, it refused to accept return of goods, and it simply ignored requests to return goods. 3. In sum, Shun Hsin deliberately concealed the fact that it is a gas heater equipment company and misled consumers by promoting sales of its products under the disguise of being a "gas company." By using gas safety inspections as a pretext of to promote the company's products, it impaired the public's right to freely choose whether to trade with it (purchase products from it). These practices constituted deceptive acts sufficient to affect the trading order, in violation of Article 24 of the Fair Trade Law. In consideration of factors as the respondent's motives and objectives for contravening the law and its operational scale and business condition, the Commission rendered a disposition against the respondent pursuant to the forepart of Article 41 of the Fair Trade Law. Appendix: Shun Hsin Home Appliance Co., Ltd.'s Uniform Invoice Number: 89555214 Summarized by Wu, Min-Show; Supervised by Tso, Tien-Liang