Nan Shan Co., Ltd. [hereinafter referred to as "Nan Shan Company"] complained that Meng Chieh Development Company ["Meng Chieh Company"] and En Ping Co., Ltd. (from Hong Kong) ["En Ping Company"] violated the Fair Trade Law by counterfeiting and selling Capsela, a product of which the complainant was the exclusive agent
Chinese Taipei
Case:
Nan Shan Co., Ltd. [hereinafter referred to as "Nan Shan Company"] complained that Meng Chieh Development Company ["Meng Chieh Company"] and En Ping Co., Ltd. (from Hong Kong) ["En Ping Company"] violated the Fair Trade Law by counterfeiting and selling Capsela, a product of which the complainant was the exclusive agent
Key Words:
competitive relationship, representation, common attention, efficiency competition in the market
Reference:
Fair Trade Commission Decision of January 15, 1997 (the 272nd Commission Meeting); Letter (86) Kung San Tzu Nos. 8409424-008
Industry:
toy entertainment goods retailing industry (5413)
Relevant Laws:
Summary:
1. The Fair Trade Law aims to regulate acts of enterprises in competition, and pursuant to the provisions of Article 4 of the same Law, the term "competition" means the acts whereby two or more enterprises offer more favorable price, quantity, quality, service or any other term in order to secure trade opportunities. The investigation shows that the En Ping Company's major line of business was sales of variety of foods, which was different from the Nan Shan Company, which sold toys. In other words, the products provided by the two said enterprises were not substitutes of each other, and thus did not compete with each other in the same market place. Moreover, the En Ping Company simply used "Ingenious Building Fun" toys as gifts for the purpose of promoting the sales of its milk powder products rather than competing with the Nan Shan Company. Therefore, it is hard to conclude that the two said enterprises were in competition with each other. Therefore, there was no need to look into whether the En Ping Company had violated the Fair Trade Law.
2. In addition, Article 20 of the Fair Trade Law states that no enterprise shall copy any expressions employed by another person to distinguish its products or services, which are commonly known to the relevant general public. So the expressions in question must be commonly known to the extent that at least the relevant general public could easily recognize it in order for said provisions to be applicable. In this case, the Nan Shan Company asserted that Capsela was the only product in the market that used transparent balls as assembly parts, and advertisements for Capsela had appeared in many children's books or publications. However, to determine whether or not the special design of the said transparent balls of Capsela could be deemed an expression, which helped the viewers immediately realize the source of the product, and whether the expression was commonly known to the relevant general public requires a review of the following factors: the publicity drive which specifically appealed to the said expression, the length of time it had been introduced into the market, the sales volume (value) as well as product recognizability (media reports). According to the information provided by the Nan Shan Company, it could be confirmed that since 1992 the Nan Shan Company had started the sale of Capsela and run advertisement for it from time to time, but no objective statistics such as the sales volume (value) and the expenses on advertisements were available, therefore, it is hard to conclude that Capsela had been used for a long time, and have been promoted so extensively that it was commonly known to the relevant general public.
3. Furthermore, Article 21 of the Fair Trade Law states that no enterprise shall make, on its products or in its advertisement, or by any other means designed to make known to the general public, any misrepresentation or misleading manifestation. Whether the representation or expression in question is false, untrue or misleading shall be determined by the attention paid by observing in whole the toy. The Nan Shan Company said that the picture on the packaging of the "Ingenious Building Fun" produced by the Meng Chieh Company showed the angle of the motor-driven power joint, the labeling of positive and negative electrodes on the battery casing, and the number of propeller blades, which were different from the actual product. However, as the "Ingenious Building Fun" could be assembled freely in terms of the angle of the motor-driven power joint and the number of propeller blades, then the actual product should be combined exactly as the aforesaid picture showed. Even if a small discrepancy did exist, the said picture was of a detailed portion [of the product] and it would be difficult to tell the difference between the actual product and the picture without special attention, careful comparison and observation. As to whether the product within the package was lacking in any parts or capabilities as shown in the picture, it is not something that would affect the general public's understanding of the product. Therefore, it is difficult to conclude that such minor difference constituted false, untrue or misleading means employed by the Meng Chieh Company, and led to unfair trade or damaged the interests of the consumer.
4. Article 24 of the Fair Trade Law is a general regulation governing the acts of unfair trade. The said provisions are not applicable in cases where the act of an enterprise is not deceptive or obviously unfair, and the efficiency competition in the market is not adversely affected. In this case, Capsela was a kind of composite toy. If other enterprises planned to enter the specific market of composite toys such as toy building blocks, they were bound to manufacture products which are compatible with the existing products in terms of color, size, design, and functions so that consumers could purchase compatible parts and accessories at a relatively lower price in order to replace or substitute the composite toys bought previously. Therefore, if an enterprise wants to protect its product of composite toys, it should seek protection by applying for a patent or engaging in research and development of new products. If the inventor of Capsela was truly concerned about the interests of his product in the Chinese Taipei market, he should have sought protection pursuant to the Chinese Taipei's Patent Law after the invention was completed. It is unreasonable to seek permanent protection under the Fair Trade Law when Capsela had been sold in local and foreign markets for many years. Moreover, the Meng Chieh Company's purpose of manufacturing the "Ingenious Building Fun" was merely to supply the En Ping Company with gifts which came along with purchase, not to market it for sales. Therefore, consumers obtained the "Ingenious Building Fun" by purchasing milk powder, rather by comparing and making a choice between Capsela and the "Ingenious Building Fun." In addition, as similar composite toys could supplement or substitute one another, to use the "Ingenious Building Fun" as a gift with purchase did not necessarily cause detriment to the interests of Capsela in the market. With regard to the En Ping Company's choice of gift with purchase, even without the competition from the "Ingenious Building Fun," with its requirement that the purchase must be made in whole sets and in view of its price, Capsela was neither in an assured position to win the particular trade opportunity because it still had to compete with other products. Moreover, the Meng Chieh Company still chose to purchase 99 sets of Capsela at the price of NT$1,990 each from the Nan Shan Company after supplying the "Ingenious Building Fun" to the En Ping Company, and then printed promotional fliers for Capsela. Thus, it could be concluded that the Meng Chieh Company did not intend to utilize "Ingenious Building Fun." to compete with Capsela produced by the Nan Shan Company. The reason for the Meng Chieh Company's manufacturing of the "Ingenious Building Fun" was no more than an attempt to acquire trade opportunities with the En Ping Company for this single transaction. Therefore, for both the En Ping Company and the Nan Shan Company, what the Meng Chieh Company had done was hardly deceptive or obviously unfair; neither was the efficiency competition in the market damaged in any way. Therefore, it is hard to conclude that Meng Chien Company had violated Article 24 of the Fair Trade Law.
Summarized by Lin, Chun-hui
Supervised by Hsu, Chao-ying
Appendix:
The Meng Chieh Company's Uniform Invoice No: 86147469
The En Ping Company's Uniform Invoice No: 04319416
＊＊: For information of translation, click here
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