A likelihood of impediment to fair competition caused by Hong Ling Chiao through inducing the trading counterparts of her competitors to transact with her by offering them free gifts
Chinese Taipei
Case:
A likelihood of impediment to fair competition caused by Hong Ling Chiao through inducing the trading counterparts of her competitors to transact with her by offering them free gifts
Key Words:
promotion with free gift, distribution of newspaper, multi-speed gearshift bicycle
Reference:
Fair Trade Commission Decision of December 23, 1998 (the 372nd Commission Meeting); Disposition Ref. (88) Kung Ch'u Tzu No. 002
Industry:
Personal service industry (8090)
Relevant Laws:
Summary:
According to the complaint:
Hong Ling Chiao (the respondent) promoted the distribution of the China Times in violation of the Fair Trade Law (FTL). During May and June 1998, the respondent, using the name of "China Times Nan T'ou Chung Hsing Liaison Office," offered a 18-speed gearshift bicycle (reportedly to cost NT$2,500 as sold on the market) to each subscriber who pre-paid NT$1,888 (discounted from the original price of NT$2,700) for a six month subscription. Such sales promotion is in violation of the FTL.
The respondent distributes the China Times and acts as an agent for the publication of ads in the same newspaper. She is an independent saleswoman who bears profits and losses on her own instead of as an employee assigned by the China Times. The so-called "China Times Nan T'ou Chung Hsing Liaison Office" is one of the common names used by such newspaper distribution businesses. It is not an officially registered business name. The investigation shows the promotion with free gift in question was organized by the respondent alone and had nothing to do with the China Times. The respondent, having the entrepreneurial characteristics of profit-making and independence, falls into the "enterprise" category as referred to under FTL Article 2(iv) and therefore is subject to be regulated by the same.
According to the literature of the promotion with free gift in question, the subscriber is asked to pay NT$1,888 (discounted price) in advance or a six month subscription and in exchange he or she will be given for free a multi-speed gearshift bicycle said to be worth NT$2,500 on the market. Such an advertisement, which informs the relevant public of the specific value of the free gift, substantially affects the consumer's decision regarding the transaction. In other words, irrespective of the cost at which the respondent obtained the free gift, the relevant public has been led to determine the value of the free gift based on the advertisement as published by the respondent. Therefore, the respondent's sales promotion with free gifts is considered as competing through the offering of gifts which value is larger than the product itself rather than through efficient competition based on the quality, price of the product and service. Accordingly the respondent is found to have affected the consumer's normal choice regarding goods or services by inducing them with economic advantage and making them transact with her in violation of FTL Article 19(iii).
Despite the evidence as presented by the respondent regarding the cost and the actual result of the promotion with free gift in question, the Fair Trade Commission (the Commission) finds that the cost as reported by respondent does not serve to determine the value of the free gift based on the market value of the free gift specified in the promotional literature and the customary practices regarding market transactions. In addition, merely based on the results of the promotion with free gift as she reported, the Commission cannot find the respondent absent of the intention in the responsibility for attempting to affect the trading order. Furthermore, the investigation shows that the respondent's sales account for 23% of the market, which indicates her prominent market position. Therefore, her act of promoting sales by improperly offering free gifts is considered likely to impede the fair competition of that specific market.
In conclusion, the respondent is disposed for violating the provision of FTL Article 19(iii).
Summarized by Cheng, Chia-Lin
Supervised by Lin, Yu-Ching