TelePaq Technology Inc. violated the Fair Trade Law with its advertisement of "NT$1 Million in Cash Promotion Program"
Case:
TelePaq Technology Inc. violated the Fair Trade Law with its advertisement of "NT$1 Million in Cash Promotion Program"
Key Words:
web advertising, diluting the odds of winning prizes
Reference:
Fair Trade Commission Decision on April 11, 2002 (the 544th Commissioners' Meeting); Disposition (91) Kung Ch'u Tzu No. 091061
Industry:
Telecommunications Industry (6000)
Relevant Law:
Article 21 of the Fair Trade Law
Summary:
1. TelePaq Technology Inc. (TelePaq) launched an "NT$1 million in cash" promotional program in July 2001. The program was scheduled from August to October 2001, during which TelePaq would hold prize drawings to select a monthly winner from a database of eligible customers. TelePaq did subsequently hold a prize drawing each month, but the winners for September and October were pronounced not eligible by TelePaq because they had stopped using TelePaq's products. Nevertheless, according to TelePaq's web advertising, the winner would be selected from a database consisting of only eligible customers, but TelePaq deliberately added non-eligible customers to the database. The advertising further claimed that "a prize not awarded in a given month would be retained and drawn together with that for the next month." This claim implied that TelePaq would definitely find an eligible winner and give the prize away. Yet TelePaq indicated that this procedure would be adopted only if a winner was unable to be contacted or failed to appear to collect the prize. TelePaq was thus suspected of violating Article 21 of the Fair Trade Law. 2. TelePaq's advertisement had in large print the banner "Seize the Chance and Win NT$1 Million Cash" and, in smaller print, the wording, "any on-line user is eligible for the draw with winnings of NT$1 million," "from August to October 2001, one exclusive winner is picked each month to win NT$1 million in cash," "pay and win your chance for the prize right away," and "buy and win your chance for the prize right away." In the notice part of the advertisement, TelePaq declared it would "pick a winner by drawing the product serial number from the database of eligible consumers," and that "if the company is unable to notify the winner or if the winner fails to appear to collect the winnings upon notice, such winner will be disqualified for the prize, and the prize not awarded for that month will be retained and drawn together with the next month's prize." Based on their ordinary understanding of and reliance upon the statement made in the advertisement, a general consumer would be highly likely to anticipate that each month a lucky winner picked from the draw would exclusively obtain NT$1 million in cash and, accordingly, to buy Telpaq's products. The Fair Trade Commission's investigation revealed that although TelePaq did hold three prize drawings in August, September, and October respectively in the year of 2001 and picked a winner each month, but the advertisement stated that only users who paid fees or customers who purchased products during the promotional period were eligible for the program. From the second draw, however, TelePaq changed the requirements for the eligibility for the draw without notice and allowed all its users a chance to win the prize, which will dilute the odds of winning prizes. Moreover, TelePaq added the limitation that "a prize winner who has ceased to pay the monthly service fee will be disqualified for the prizes." It also stated that the prize would be retained and drawn together with the next month's prize only in cases where the company was unable to notify the prizewinners or the winner failed to appear to collect the prize. TelePaq claimed that the September and October winners were disqualified because they had stopped using its products and so the company was objectively under no obligation to make payment. 3. Grounds for disposition: (1) In advertisement promoting its TelePDA product and information services, TelePaq failed to fully disclose relevant information such as the change in eligibility for participation in the prize drawing and eligibility to win, and failed to perform the stated obligations it had assumed when holding the promotion. It thus had violated Articles 21(1) and 21(3) of the Fair Trade Law prohibiting enterprises from making misleading representations in advertisements. (2) Weighing TelePaq's motives and purposes in the violations, its anticipated improper profits, the degree and duration of the damage to the trading order, the benefits obtained, its business scale, operational status, and market standing, past violations, and attitude after the violations, the Fair Trade Commission ordered TelePaq to immediately cease the misleading representations in its advertisements and imposed an administrative fine of NT$800,000 pursuant to the fore part of Article 41 of the Fair Trade Law.Appendix:
TelePaq Technology Inc.'s Uniform Invoice Number: 16447772 Summarized by Lu, Li-Na; Supervised by Lee, Wen-Hsiu