A correction program for pricing practice among the eye-glasses industry

Chinese Taipei

Case:

A correction program for pricing practice among the eye-glasses industry

Key Words:

long term, consistency, actual price prices lower than the list prices on price tags

Reference:

Fair Trade Commission Dispositions (83) Kung Ch'u Tzu Nos. 070 ~ 076

Industry:

Eye-glasses Industry (5220)

Relevant Laws:

Article 21 of the Fair Trade Law

Summary:

1. Background: As the list prices of goods sold by members of the local eye-glasses industry are usually much higher than their actual sale prices, both trading order in the market and the interests and rights of the consumers are adversely affected. Despite the fact that for many years eyeglasses industry associations at provincial and city levels have been promoting the movement of honest pricing, which has led to improvement to a certain extent, some members of the industry still tend to place higher prices on the price tags of their goods and then lower the actual sale prices by giving the consumer bigger discount percentages, thus misleading the consumer to believe that he or she has acquired the goods at a relatively lower price. Such practice where the list prices are higher than the actual sale prices involves false, untrue or misleading information and has the risk of violating the provisions of the Fair Trade Law. As a result, the Commission decided to develop a correction program for pricing practice among the eye-glasses industry.

2. Rectification Process: On 30 August and 6 September of 1993, the Commission took the initiative to invite members of the specific industry and representatives of the particular trade associations to participate in a seminar on the rectification of pricing practice in the eye-glasses industry. The proceedings and conclusions of the seminar were discussed and passed by the 104th Commission Meeting on 29 September 1993. The resolution reached by the Commission the said meeting was as follows: by the end of February 1994, eyeglass retailers shall adjust the way of price labeling in an attempt to sell them at the exact list price so that the consumer will not be misled by unreasonable prices when making choices. In the wake of the 104th Commission Meeting, the Commission issued a press release and on 8 October 1993 notified eye-glasses industry associations located in Taiwan province, Kaohsiung City, and Taipei City of the said decision by mail and asked them to inform their members accordingly. Moreover, as the rectification period was going to expire, on 25 January 1994 the Commission once again direct the three said trade associations by mail, to advise their members of the following information: after the rectification period expired, starting March 1994, the Commission would send its staff to re-investigate the trading activities of members of the specific industry, and were any violations of the Fair Trade Law found, the perpetrating party would be punished pursuant to relevant laws. The three trade associations not only notified their members of the aforesaid matter, but also placed a public notice in their newsletter "Taipei Eyeglass Report" so as to ensure the said matter was known to all eye-glasses retailers throughout Taiwan area. After the rectification period expired, the Commission staffs were sent in turn to look into the transactions in the industry and found that most enterprises investigated would sell their goods at a specific discount on the list prices, that is, as soon as the consumer came in the store and made inquiries about prices, salespersons of the store would right away tell them that the aforesaid discount is available, however, there was wide discrepancy in terms of the percentage of discount. The results of the investigation were discussed in the 136th Commission Meeting of 18 May 1994, and the Commission decided that sanctions shall be imposed on any enterprise that "consistently" and "long-term" sold its products "at a high percentage of discount." The results of the follow-up investigations were submitted to the Commission Meetings, and in the 143rd, 149th, 155th and 159th Commission Meetings, resolutions were reached to impose sanctions on a total of 10 eyeglasses retailers.

3. Follow-up reviews: For the purpose of keeping track of the rectification progress made by the said sanctioned enterprises and the pricing practice among other eyeglasses retailers, the 143rd Commission Meeting and the fourth Meeting of the "Consultation Conference between the Fair Trade Commission and Local Competent Authorities", held on 22 July 1994, decided to seek the assistance of local competent authorities assist in the follow-up investigations. On the other hand, in order to solicit public opinion on the issue and to review the effectiveness of the enforcement, the 160th Commission Meeting decided to hold a public hearing on 16 December 1994. Scholars, experts, representatives from Consumers' Foundation, eye-glass industry associations, and the eye-glasses retailing sector were all invited to participate and discuss ways to regulate eye-glasses retailers' activities of giving discounts. All participants recognized the Commission's efforts to rectify the improper practices in the eye-glasses industry. The hearing reached a conclusion that the three aforementioned eyeglasses industry associations should negotiate with their members so as to achieve a consensus on specific and practical suggestions, which should be submitted to the Commission for reference. The three associations on 11 January 1995 responded by mail that with regard to the price negotiation selling practice no discount shall be over 10 percent in principle and the implementation of the rule would start on 1 March 1995. Such response was in line with the decisions made by the Commission with regards to cases involving false pricing of eye-glasses industry and should their commitment to cooperating with the Commission.

4. Results: The follow-up investigations conducted by local competent authorities revealed that most of the eye-glasses retailers have adjusted their price labeling practice and sold their goods at the list prices. Moreover, since the Commission started to rectify the pricing practice in the particular industry, the eyeglasses retailers have cooperated by making the list prices the exact sale prices, which has been well received by the consumer. Nonetheless, follow-up investigations shall continue and sanctions shall be imposed on the few retailers who set a higher price on the price tags consistently for a long time, and then lower the actual sale price at large discounts.

Summarized by Yeh, Tien-fu
Supervised by Tsuo, Tien-liang

＊＊: For information of translation, click here

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