Improper promotional methods used by Chun Hsiang International Cosmetology Ltd., Co. in violation of Article 24 of the Fair Trade Law
Case:
Improper promotional methods used by Chun Hsiang International Cosmetology Ltd., Co. in violation of Article 24 of the Fair Trade Law
Key Words:
weight loss, contract review, information transparency
Reference:
Fair Trade Commission Decision of September 20, 2001 (the 515th Commissioners' Meeting); Disposition (90) Kung Ch'u Tzu No. 155
Industry:
Cosmetology and Hair Styling (9620)
Relevant Law:
Article 24 of the Fair Trade Law
Summary:
1. The Hsin Lo Yuan branch of Chun Hsiang International Cosmetology Ltd., Co. (Chun Hsiang) in Taichung induced the complainant, by means of improper advertising, to spend over NT$300,000 between the months of April and July 2000 for courses of treatment for breast enhancement, anti-aging, cleavage enhancement, lower body treatment, aromatherapy, and yearly treatment courses, in alleged violation of Article 24 of the Fair Trade Law.2. It was discovered through Fair Trade Commission's investigation that Chun Hsiang failed to display or make available at its place of business reference information for consumers on the items included in treatment courses, or their features or unit prices, nor did it display any relevant professional licenses; the only information kept on public display was product-related information. Information on courses of treatment was only provided when their cosmetologist was designing treatments specifically tailored to the desires and circumstances of the individual consumers, and when the consultation concluded, consumers' requests for copies of relevant information would be refused with the response that such documents were for internal use only. Chun Hsiang later defended its actions by claiming that company regulations required price lists for products and courses to be posted on a bulletin board, stating the code number for the treatment course, its Chinese name and unit price; customers, they claimed, would be given trial treatments or product samples for their use prior to enrolling in treatment courses. When signing up for any treatments, consumers would be given receipt of treatment purchased invoices, and treatment information to take with them for reference, with detailed descriptions of treatment processes included in the price lists. However, even if it had made published materials available in each of their places of business as claimed, Chun Hsiang was still under the obligation to manage and supervise of the business practices of its various branches. It did not fulfill or dismiss its obligation simply by stating that it had informed those branches of their obligations. Chun Hsiang's failure to make available at its business venues the materials mentioned above for consumers' reference not only meant that it failed to guarantee that consumers would have sufficient prior understanding of the necessary information before making their choices, it also meant that the already disadvantageous transactional position of consumers would be further weakened through entering into agreements on the basis of insufficient information. Such a situation represents a serious threat to the trading order, and was deemed obviously unfair conduct sufficient to adversely affect the trading order in violation of Article 24 of the Fair Trade Law.3. In addition, based on the complainant's statement, Chun Hsiang also failed to provide a seven-day period for contract review, requiring the complainant to purchase and sign on the same day and give up the right to review the agreement. Chun Hsiang contended, however, that due to the complainant's eagerness to begin treatments, she signed the agreement and began treatments the same day, as evidenced by the agreement and the receipts of treatment purchased. While both sides maintained their respective accounts of events, the Fair Trade Commission twice dispatched personnel in the guise of consumers to investigate the business venue of the respondent. Prior to the time the consumer signed an agreement or made a deposit, Chun Hsiang employees refused to provide the consumer with sample contracts or price lists for weight-loss or cosmetology programs to take home, for review giving a reason that they needed to maintain the successive order of contract numbers and price lists; Chun Hsiang's admission of these facts is on record. Chun Hsiang also defended its actions by claiming that each of its branches was equipped with copies of necessary membership information that consumers could freely take home to review, which extracted the main clauses of its cosmetology treatment agreements. However, the contents of its "membership information" and its cosmetology treatment agreements were not the same, and provision of "membership information" does not deprive consumers of the right and opportunity for review of contracts. Further, during the Fair Trade Commission's investigations at the site, it did not obtain any of the aforementioned information, thus Chun Hsiang's arguments in its defense do not seem appropriate.4. In summary, Chun Hsiang's practices were deemed an obviously unfair conduct sufficient to adversely affect the trading order, in that it failed to give trading counterparts opportunity to review contracts before signing and failed to prominently display or make available general consumer information, thus interfering with the consumer's ability to gain sufficient understanding of such information. Such conduct was thus deemed a violation of Article 24 of the Fair Trade Law. Furthermore, the Fair Trade Commission's "Principles for Handling Cases Regarding Information Transparency and Improper Marketing Practices of Weight Loss and Body Care Businesses" were implemented on 1 June 1999, and the Fair Trade Commission had offered its guidance on issues therein to weight loss and body care enterprises on numerous occasions. As a market leader in the industry, the respondent could not claim ignorance, and various factors were considered in the disposition, such as Chun Hsiang's motives, the degree of injury to the trading order, the duration of the improper practices, the benefits obtained, the scale of Chun Hsiang's operations, and its attitude after committing the unlawful act. The facts of Chun Hsiang's violation were clear, and it was ordered to immediately cease its unlawful conduct and an administrative fine of NT$2.5 million was imposed.Appendix:Chun Hsiang International Cosmetology Ltd., Co.'s Uniform Invoice Number: 84285613Summarized by Tai, Mei-Chin; Supervised by Yeh, Ning