Allegations of falsely recruiting home contractors and profiting from collection of materials fees by Liao Tien-yao of the Ya Tai Crafts Shop in violation of the Fair Trade Law

Chinese Taipei

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Summary:

1. In a letter, a member of the public (the complainant) alleged that Liao Tien-yao (the respondent) of the Ya Tai Crafts Shop recruited unspecified individuals under the false pretext of home contracting when in reality the respondent's business was selling materials for home crafts with the intent of obtaining personal gain in violation of the Fair Trade Law. The respondent enclosed relevant evidence and requested that the Fair Trade Commission (FTC) investigate and handle the matter.

2. The results of the FTC's investigation indicated that the enterprise in question induced prospective contractors by claiming the business was “easy to learn,” “of high profits” and “contract-guaranteed” to sign raw materials purchasing contracts. At the time of concluding the contracts, the respondent did not first inform contractors of the degree of difficulty in producing the contracted goods, the ratio of finished goods conforming to specifications and other information, taking obvious advantage of the neediness, impulsiveness or inexperience of prospective contractors to conclude the contracts. Further, contractors were required to pay NT$16,000 in raw materials fees up front but after working more than one month received payment that did not even amount to their initial investment, an obvious indication of both the extreme degree of difficulty for contractors and obstacles intentionally created in the inspection process by the enterprise in question to achieve its goal of not paying contractors for work performed. Additionally, when approached by contractors complaining that the degree of difficulty and skill required made it difficult to comply with product standards, the failure of the enterprise in question to accept compromise or seek an alternative solution was an obvious breach of its contractual obligations to offer aid and assistance to contractors. Also, when the FTC requested that records, including account books, contractor information, contracting agreements, procurement and sales details, delivery records, quality standards, total raw materials fees collected, payments to contractors, target market and total sales of finished products be turned over for inspection, the enterprise in question stated either that no such records existed or that it was unable to provide said records. As the respondent has acknowledged that it employed only around 10 contractors, and given the extremely low ratio of compliance among their finished products, there is a clear difference between sale revenues and business fixed expenditure. Given that expenditures exceeded revenues and its inability to turn a profit while yet continuing normal business operations, it is evident that sales of raw materials were the major source of income for the respondent.  Further, the respondent's use of contractual terms requiring first-time home contractors to pay for raw materials out of their own pockets and no return of raw materials for refund was allowed is obviously an abuse of its advantageous position to impose unfair contractual terms.

3. Liao Tien-yao of the Ya Tai Crafts Shop thus did recruit unspecified individuals under the false pretext of home contracting, while in reality being engaged in the sale of raw materials and relevant equipment, and collecting and profiting from fees collected under false pretenses. These methods employed by the respondent constituted fraudulent and obviously unfair practices in violation of Article 24 of the Fair Trade Law. After considering the degree of damage to the trading order, the duration of the damage to the trading order, past violations by the enterprise in question, the period of time between violations, the market position and other factors as regards the actions of the respondent, the FTC ordered the respondent, effective the day following receipt of disposition notification, to immediately cease all aforementioned fraudulent and obviously unfair acts sufficient to disrupt the trading order, and issued an administrative fine of NT$500,000 in accordance with the provisions of the fore part of Article 41 of the Fair Trade Law.        

Appendix:

Ya Tai Crafts Shop's Uniform Invoice Number: 14717568

Summarized by Chen, Huei-Jiun; Supervised by Tsai, Shing-Daw