Giraffe International Co., Ltd. violated the Fair Trade Law and Supervisory Regulation of Multi-level Sales
Chinese Taipei
Case:
Giraffe International Co., Ltd. violated the Fair Trade Law and Supervisory Regulation of Multi-level Sales
Key words:
improper multi-level sales, standard contract
Reference:
Fair Trade Commission Decision of July 25, 1997 (the 299th Commission Meeting); Disposition (86) Kung Ch'u Tzu No. 114
Industry:
Retailing Business (4020)
Relevant Laws:
Articles 21(1) , 23(2), 24 , 41, 42 of the Fair Trade Law and Articles 4(1), 5(1) of Supervisory Regulation of Multi-level Sales
Summary:
In the business manual that the respondent provided to the Fair Trade Commission for reference on 2 June 1996, it was indicated that the respondent's capital was NT$10 million. Then in the information the respondent provided to the Commission for reference on 23 August 1996, the respondent's capital was changed to NT$100 million. In the Commission's 28 September 1996 interview with her, Ms. Weng, who was a participant and the president of the respondent, presented the respondent's business manual wherein the capital was indicated as NT$100 million. Notwithstanding the facts mentioned above, the respondent's registered company capital remained NT$10 million, the fact of which represented that the content of the respondent's business manual did not comply with the facts. The respondent's act in this respect is in violation of Article 4(1)(i) of Supervisory Regulation of Multi-level Sales.
As stated in the respondent's business manual reported to the FTC for reference on 13 February 1996, the requirements relating to cancellation or termination of contract and calculation of the time limit for return of goods complied with the relevant provisions of Supervisory Regulation of Multi-level Sales. However, the time limit for return of goods stated in the manual presented by the respondent's participants during the FTC's 23 September 1996 interview was different. Return of goods purchased over thirty days ago (based on number of days between the invoice issuing date and the date when the return was requested) was not acceptable. Such time limit calculation was apparently in violation of Article 5 of the Regulation, which provides that the term for the participant to exercise the right to cancel or terminate the contract is calculated from the contract date. The same article also provides that "within thirty days after the cancellation of the contract becomes effective, the multi-level sales enterprise shall, upon the participant's request, retrieve or accept the participant's delivery of the commodities." The respondent's practice in this aspect impedes the participant's right to return goods and is apparently in violation of the provisions of Article 5 of the Regulation.
Article 21 of the Fair Trade Law provides that no enterprise shall give any false, untrue or misleading presentation or representation in its advertisements. The respondent published an advertisement in page one of the 29 March 1997 China Times Evening News regarding the respondent's negative ion health mattress [the subject product] wherein it was represented: "This product has obtained medical equipment market license (58B) No. 1441 from Japan's Department of Health and No. 85026259 medical equipment market license from Taiwan's Department of Health and is proven legal and safe." However, the Department of Health [DOH] replied to the Commission's inquiry by saying that it had examined the item the respondent forwarded for examination, and it replied to the respondent with its 16 May 1996 letter with the results of its examination. The DOH replied, "...subject to 19 August 1994 public notice Wei Shu Yao Tzu No. 83047750, the subject product belongs to a category of goods which need not apply for market license..." The DOH's reply was given for the purpose of replying to the respondent that the subject product did not need any market license. However, the respondent's advertisement misled the public to believe that the subject product had obtained a medical equipment market license from the DOH. The respondent's act is apparently in violation of the provisions of Article 21 of the Law.
The business manual the respondent printed for distribution to its participants listed an example of the conditions of rejecting goods requested for return such as "where the package of the goods has been removed." In addition, the respondent affixed a seal to the exterior plastic packaging of the subject with an indication that "once the seal is removed, the product cannot be returned." The respondent standardized such requirements and incorporated them into the contract that it signed with a large number of participants. The investigation shows that the respondent's participants must purchase one unit of the subject product upon joining and few of them resold the unit they bought. In other words, the participants retained their consumer capacity. The respondent asked for a price of between NT$70,000 and NT$100,000 for a unit of the subject product. A buyer of such a highly priced item should be entitled to examine the product. Based on the nature of the subject product and ordinary daily life experience, the subject product would not risk any loss or value reduction with the mere removal of the seal. Even if any value reduction should occur, reasonable proportionate deduction should be feasible. However, the respondent excluded the consumer from returning the subject product by requiring "once the seal is removed, the product cannot be returned." Such a requirement is literally against the equality/reciprocity principle, which is one of the essential concerns under Article 24 of the Law. The said provision regulates patently unfair acts that may adversely affect trade order based on the consideration of equality/reciprocity principle and public order and good morals. The respondent's acts are in violation of the said provision of the Law .
In conclusion, the respondent violated Articles 21(1), 24 of the Law and Articles 4(1), 5(1) of the Regulation, which was established pursuant to Article 23(2) of the Law. Pursuant to Article 41 of the Law, the Commission’s 299th Meeting ordered the respondent to halt such acts from the day following its receipt of the disposition, and that it revises its contract to delete the "once the seal is removed, the product cannot be returned" requirement within thirty days from the day after its receipt of the disposition. In addition, pursuant to Article 42 of the Law, the respondent should be imposed a penalty of NT$500,000.
Summarized by Lin, Ch'un-hui
Supervised by Tzuo, T'ien-liang
Appendix:
Giraffe International Co., Ltd.'s Uniform Invoice Number.: 84751737