Watson's Park 'N Shop Ltd. violated Article 21 of the Fair Trade Law through false advertising
Case:
Watson's Park 'N Shop Ltd. violated Article 21 of the Fair Trade Law through false advertising
Key Words:
lowest-price guarantee, double refund on the price differential
Reference:
Fair Trade Commission Decision of April 4, 2002 (the 543rd Commissioners' Meeting); Letter (90) Kung Ts'an Tzu No. 0910003359
Industry:
Retail Sale of Other General Merchandise (4579)
Relevant Law:
Article 21 of the Fair Trade Law
Summary:
1. This case arose with a letter of complaint from a consumer. The complainant stated that they had seen a large advertisement posted by Watson's Park 'N Shop Ltd. (Watson's) guaranteeing the lowest-priced daily-use consumer goods and reduced prices for an indefinite period on 1000 product items, and promising a double refund of any price differential should other stores sell the same products at a lower price. The complainant went to a Watson's store in January 2002 and purchased products covered by the lowest-price guarantee, including a Johnson's Baby Wipes 80-count refill packet for NT$65, and Shui Ping Heng facial cleansing cream-gel for NT$65, both guaranteed-lowest prices. The complainant than went to a nearby COSMED store, discovered that the same two products were selling for NT$59, and therefore returned to Watson's to request a double refund of the NT$6 price differential. However, the store employee said that the refund was subject to certain restrictions and the request could not be satisfied by the store at that time. Behind the store counter was a sign listing "Refund Restrictions," of which the following were relatively unreasonable: (1) A Watson's price can only be compared with non-sale prices charged by another store for the same product on the same day. (2) To receive a refund, a customer must present a Watson's receipt and an advertisement or direct mailing as evidence of the price differential. (3) Watson's prices can only be compared with prices charged at franchise stores (defined by Watson's as retail stores with three or more outlets) in the same county or city. (4) Watson's reserves the right to verify and approve refunds for price differentials. However, Watson's advertising in the print media, radio, and television did not clearly state the conditions attaching to the price differential refunds policy, regular consumers had no way of easily obtaining a refund under the stipulated conditions. Moreover, newspaper ads stated that Watson's would reduce its prices indefinitely, yet their direct mailings stated that prices were subject to change and that customers would have to visit a Watson's store to confirm the latest prices. 2. The Fair Trade Commission (FTC) investigated this case and concluded that the statements made in the advertisements at issue ("guaranteed lowest prices," "guaranteed lowest prices for daily-use consumer goods," "double refund on the price differential if you find a lower price") mean that if a consumer discovers that a particular product is sold at a lower price at another store, not only is Watson's obliged when informed thereof to provide a refund, but the store is furthermore required to lower its own price for that same product within a reasonable period of time to the same price or lower, otherwise the veracity of its claim to "guarantee the lowest prices for daily-use consumer goods" would come into question. However, the FTC's investigation revealed that Watson's does not necessarily lower its prices in such cases, and even when it does, it does not do so at all stores "in the same county or city," which is the scope of the price comparison district adopted by Watson's itself with respect to the price-differential refunds; rather, Watson's lowers prices within certain "competition districts" of their own determination. In other words, prices at stores located outside the competition districts as delineated by Watson's could very well be higher than the prices offered by other enterprises, which is at odds with their pledge to offer "guaranteed lowest prices." Moreover, the aforementioned untruthful statements are sufficient to affect the ability of Watson's customers to carry out a rational judgment and make a transaction decision. The commissioners concluded that this situation constituted a violation of Article 21(1) of the Fair Trade Law, which provides that an enterprise shall not include any false or misleading representation in its advertising. In addition, the commissioners found that Watson's began on 4 January 2002 to place advertisements in newspapers and on buses stating that "We dare to make an oath that Watson's products are the lowest priced." During this same period Watson's also purchased radio and television advertisements, the gist of which was that "Watson's guarantees that its daily-use consumer goods are the cheapest...", "Indefinite price reductions on 1000 products...", "Anyone who can find lower prices gets a double refund on the price differential...", "Guaranteed lowest prices...", etc. Print advertisements (including newspaper ads and flyers) distributed after 26 January indicated that the offer of a "double refund on price differentials was subject to certain conditions and restrictions, and thus can be regarded as not containing any false or misleading representations, but beyond this period of time, their advertisements in all media (including print media, buses, radio, and television) either carried no indication of any of the above restrictions, or simply included such statements as: "For further information, visit a Watson's store", "For information on related conditions and restrictions, inquire at any Watson's store", and "For information on related conditions and restrictions, inquire at any Watson's store or call our customer service number: 0800-051148". Moreover, it was not until after the FTC initiated its investigation in response to the complaint that the respondent began to mention the aforementioned conditions and restrictions in its advertisements or started to include such statements as "For information on related conditions and restrictions, inquire at any Watson's store." An average customer would get a number of impressions from the "guaranteed lowest price" statement in the advertisements at issue, namely: that Watson's sells daily-use consumer goods at a lower price than its competitors does; that Watson's is willing to give a refund equal to twice the price differential to anyone who discovers a product selling at a lower price elsewhere; that after a consumer has bought a product at Watson's, if they later discover that some other shop or enterprise was selling the same product on the same day at a lower price, they will have satisfied the conditions of the advertisements promising a refund equal to twice the price differential. As a matter of fact, however, Watson's has adopted additional conditions and restrictions that apply when a consumer finds a lower price elsewhere and requests the aforementioned refund. For example, Watson's limits the double refund on price differential to products sold in the same city or county, but they operate their business throughout Chinese Taipei and their advertisements are targeted at consumers nationwide. The offer is further limited to instances where products are found to be sold at a lower price by chain stores, which Watson's defines as retail stores with three or more outlets, but the types of stores that provide daily-use consumer goods are generally not limited to this sort of "chain store." Yet a customer could not reasonably be expected to anticipate, on the basis of Watson's advertisements, any of these limitations or restrictions. Advertisements that offer "double your money back on the price differential if you find a lower price anywhere else" without disclosing, or without fully disclosing, these conditions, could hardly be described as truthful, complete, or not misleading. Accordingly, the commissioners concluded that this case comes under the purview of Article 21(1) of the Fair Trade Law, which states that advertisements shall not make or use any false or misleading representation or symbol. 3. In summary, when Watson's advertisements claim to "guarantee the lowest prices" and "guarantee the cheapest daily-use consumer goods," these guarantees are at variance with the facts. The advertisements do not fully disclose important information, including the conditions and restrictions attaching to the offer to "double your money back on the price differential if you find a lower price anywhere else," and therefore shall be considered as in violation of the provisions of Article 21(1) of the Fair Trade Law, which prohibits enterprises from using advertisements that make or use any false or misleading representation or symbol as to product prices or any conditions or restrictions attaching thereto. In view of the motive and purpose of Watson's illegal actions as well as their expected illegitimate profit, degree and duration of impact upon trading order on the market, amount of illegitimate profits gained, size of the company, state of the company's business operations, the company's market position, the company's past record of legal infractions, and its attitude following such infractions, the commissioners, acting pursuant to the provisions in the fore part of Article 41 of the Fair Trade Law, ordered Watson's to immediately cease their illegal activity and to pay an administrative fine of NT$1 million.Appendix: Watson's Park 'N Shop Ltd.'s Uniform Invoice Number: 23224657 Summarized by Wu, Hung-Kuan; Supervised by Yeh, Ning