The International Commercial Bank of China and Promail Inc. allegedly printed false advertisements in their mail order catalogs in violation of Article 21 of the Fair Trade Law
Case:
The International Commercial Bank of China and Promail Inc. allegedly printed false advertisements in their mail order catalogs in violation of Article 21 of the Fair Trade Law
Key Words:
mail order catalogs, advertisement
Reference:
Fair Trade Commission Decision of September 25, 2003 (the 620th Commissioners' Meeting); Disposition (92) Kung Chu Tzu No. 164
Industry:
Domestic Banks (6212), Retail Sale of Other General Merchandise (4759)
Relevant Law:
Article 21 of the Fair Trade Law
Summary:
1. The Taipei City Government Bureau of Health sent a letter to the Fair Trade Commission (FTC) stating, in summary, as follows:
A copy of the International Commercial Bank of China (ICBC)'s May 2002 mail order catalog obtained by the Kaohsiung County Government Bureau of Health contained an advertisement for a “Handy Paraffin Wax SPA Bath,” the content of which stated “SPA is US government registered, safety guaranteed, moisturizes, prevents wrinkles, nourishes the skin, promotes circulation, promotes cell metabolism …” and made other exaggerated claims. On 10 September 2002, the Taipei City Government Bureau of Health (hereinafter “Taipei health authorities”) issued administrative disposition Bei Shih Wei Sih Tzu No. 09144476500 on the grounds that the product is not a medicine and therefore the claims of medical efficacy made in the promotional literature violated Article 69 of the Pharmaceutical Affairs Act. The product’s supplier, High Tgk Industrial Co., Ltd. (High Tgk), maintaining that the content of the advertisement made no claims of medical efficacy, filed an opposition and applied for a review. Upon review, the Taipei health authorities determined that the defending argument had merit and rescinded its disposition but instead ruled that the advertisement in question contained exaggerated claims and turned the matter over to the FTC.
2. Article 2(4) of the cooperative agreement between ICBC and Promail Inc. states: “The entire completed content of the mail order catalog shall be submitted to Party A (i.e. ICBC) for approval prior to mailing.” According to this clause, it is evident that the mail order catalog at issue is a publication of ICBC, and that although the catalog was printed and mailed by Promail, ICBC had reviewed the content in advance and agreed that it be mailed. ICBC furthe provided the mailing list of addresses of ICBC credit card holders to Promail. Additionally, ICBC credit card holders wishing to purchase items out of the mail order catalog were required to first fax their order forms to ICBC, which would then forward the purchase and delivery details to Promail. Upon delivery of the goods to the credit card holder, Promail would then present the delivery voucher and billing details to ICBC, which would then pay Promail for the cost of the goods. Considering the content of the cooperative agreement between ICBC and Promail and the review, printing, distribution and overall transaction process regarding the mail order catalog in question, there can be no doubt that ICBC and Promail maintained a cooperative relationship on matters pertaining to the mail order catalog and mail order transactions in question and that ICBC had prior veto authority over the content of the mail order catalog.
3. In the “points for attention” on the mail order form, Point 1 states that “ ICBC provides this mail order information as a service to its credit card holders and is not the manufacturer, importer, or seller of the mail order goods nor does ICBC have any advertising, partnership, marketing, or guarantee relationship with the mail order seller. Any disputes or legal liability issues between the purchaser and the seller shall be settled directly between purchaser and seller and not involve ICBC.” However, in ICBC’s cooperative relationship with Promail, as has been previously stated, the contractual terms between ICBC and Promail regarding provision of goods and liability for those goods have no bearing on the fact that the mail order catalog advertisement in question was the product of cooperative effort between the two parties. Moreover, the recitals of the cooperative agreement between ICBC and Promail expressly states that “Both sides agree, based on mutual benefit, to promote sales of Party B’s (i.e. Promail) goods under various payment plans for Party A’s (i.e. ICBC) credit card holders;” and the provisions of Article 3 of the agreement reads that “Party B (i.e. Promail) shall pay layaway account processing fees to Party A in accordance with the number of payment periods.” ICBC profited from the credit card transaction fees resulting from the goods promotions, therefore, ICBC directly benefited from the mail order transactions in this case.
4. The internal pages and enclosed order form of the mail order catalog in question were all contained the printed words “International Commercial Bank of China.” Furthermore, the targets of the mass mailing of the mail order catalog in question were ICBC credit card holders, with the cardholder mailing list not only provided by ICBC but the bank also acting as the window for accepting orders from cardholders wishing to purchase goods from the catalog. With respect to ICBC’s defense that the catalog was published by Promail and that the bank had used only four pages – including the front and back covers – to promote its goods and events, the exterior is clearly emblazoned with the words “International Commercial Bank of China,” it is only in the “points for attention” on the order form clarifying that the mail order goods are provided by Promail; pages 1 and 2 carry ICBC advertisements for bonus gifts for credit cards purchases or special offer promotions; the back cover carries an advertisement for ICBC’s cash card. Based on overall appearance, it would be impossible for general cardholders to identify the catalog in question as being published by Promail as the design and textual arrangement would easily mislead cardholders to believe that the catalog is published by ICBC and are sufficient to affect a cardholder’s rational judgment and trading decisions. Given that ICBC was profiting from the mail order transactions generated by the catalog, it should have an obligation to monitor the veracity of the content of the catalog and ICBC does not deny that it had the right to review the catalog’s content in advance. The sum of the above evidence is sufficient to show that ICBC is a principal actor in this mail order catalog case. Additionally, as Promail actually printed the catalog in question and provided the goods for sale, gaining a sales conduit to ICBC credit card holders through cooperation with ICBC, Promail is also a principal actor in this mail order catalog case.
5. Advertising is a customary marketing technique by which enterprises compete for trade. An advertiser has an obligation to do the utmost to verify and substantiate the claims made in its advertisements. In the event an advertiser fails to verify the authenticity of an advertisement and proceeds to publish it, and where false or misleading representations are made, the advertiser must bear liability for false advertising. In the “handy paraffin wax SPA bath” advertisement on page 57 of the mail order catalog in question, the text claims that “moisturizes, prevents wrinkles, nourishes the skin, promotes circulation, promotes cell metabolism…." and other effects. Consumers would be easily led to believe that using the product will achieve the effects stated in the advertisement. However, neither ICBC nor Promail were able to provide any evidentiary documentation or other specific evidence of a medical or other scientific basis for those claims. An opinion proffered by the Executive Yuan Bureau of Health, however, states that “… The effect of the ‘Handy Paraffin Wax Bath’ is similar to that of a paraffin bath, which maintains a high temperature around the afflicted area (such as hands or fingers) to reduce pain and inflammation and does not have the effects of ‘moisturizes, prevents wrinkles, nourishes the skin, promotes circulation, promotes cell metabolism …’ as claimed in the advertisement, which is exaggerated and untruthful.” As such, given that ICBC and Promail are unable to present any specific evidentiary materials proving the claims made in the advertisement in question, the advertisement is false or untruthful and likely to mislead people. In addition, although Promail has claimed that High Tgk provided the promotional text accompanying the product and that it had requested that High Tgk provide evidentiary materials, Promail is, however, the advertiser in this case and High Tgk’s failure to provide the evidentiary materials does not excuse Promail from its responsibility to be truthful as an advertiser. ICBC advanced the arguments that the language used in the advertisement in question was not technical medical terminology and any number of ordinary actions could achieve the claimed results, and that the decision by Taipei health authorities to rescind its original disposition after deciding that the appeal had merit indirectly prove that the text of the advertisement in question was not exaggerated or untruthful. However, the original disposition was rescinded on the grounds that the product in question is not a medical device with medical effects, and thus does not violate the Pharmaceutical Affairs Act. This is irrelevant to whether the language used in the advertisement contained false or misleading representations. Consequently, the actions of ICBC and Promail were found to have violated the provisions of Article 21(1) of the Fair Trade Law.
Appendix:
The International Commercial Bank of China’s Uniform Invoice Number: 03705903
Promail Inc.’s Uniform Invoice Number: 84553954
Summarized by Yu, Fei-Ping; Supervised by Yeh, Ning