A complaint was filed against Tsai Chen-Chin of KLC Company for copying the product and service representation of Yum! Restaurants (Taiwan) Co., Ltd., has deceptive or obviously unfair conduct that is able to affect trading order and violated Article 20 and Article 24 of the Fair Trade Law

Chinese Taipei

Case:

A complaint was filed against Tsai Chen-Chin of KLC Company for copying the product and service representation of Yum! Restaurants (Taiwan) Co., Ltd., has deceptive or obviously unfair conduct that is able to affect trading order and violated Article 20 and Article 24 of the Fair Trade Law

Key Words:

Kentucky, Kala Chicken Leg Burger, Family Meal, Mexican Chicken Roll, representation, confusion

Reference:

Fair Trade Commission Decision of August 18, 2005 (the 719th Commissioners' Meeting), Disposition (94) Kung Ch’u Tzu No. 094089

Industry:

Restaurants (5110)

Relevant Laws:

Article 20 and Article 24 of the Fair Trade Law

Summary:

1. Yum! Restaurants (Taiwan) Co., Ltd. (hereinafter referred to as the complainant) has filed a complaint stating that the Kentucky Company is a world famous fast food chain restaurant and has operated in this country since 1985. At present time , there are more than 120 Kentucky Fried Chicken chain restaurants across the nation. Since its establishment, the Kentucky Fried Chicken has used the globally well-known “KFC” characters along with the upper half of Colonel Sanders (stated briefly as “KFC and picture”) as its product and service representation. This representation is generally known to the relevant consumers. In addition, the product names “Kala Chicken,” “Kala Chicken Leg Burger,” “Take-out Family Meal $399,” and “Mexican Chicken Roll” are also representations commonly known to consumers. KLC Company (hereinafter referred to as the punished) copied and used product names “Kala Chicken,” “Kala Chicken Leg Burger,” “Take-out Family Meal $399,” and “Mexican Chicken Roll” that are either the same to or similar with that of the complainant. Furthermore, KLC Company, with an intention to mislead consumers into associating the product with the chicken bucket of the complainant, has used “Family Meal $399 (with an X placed on its top)” as its slogan. In addition, KLC Company also used the picture and the red, white and blue colors combination that is similar to the “chicken picture” of the complainant on its signboards, advertisements, buckets of Family Meal and meal orders. Such conducts have violated the provisions of Subparagraph 1 and Subparagraph 2, Paragraph 1, Article 20 and Article 24 of the Fair Trade Law.
1. Article 24 of the Fair Trade Law stipulates that “i n addition to what is provided for in this Law, no enterprise shall otherwise have any deceptive or obviously unfair conduct that is able to affect trading order.” Although the act of an enterprise copying the well-known product’s name or service representation of other enterprise does not meet the confusion criterion stipulated in Article 20 of the Fair Trade Law, if there is a circumstance that such conduct is an attempt to free ride on other’s goodwill or exploit other’s efforts, then it is contrary to the business ethics, impair the market competition and thus meets the requirement of obviously unfair conduct that is able to affect trading order as stipulated in Article 24 of the Fair Trade Law.
2. As described earlier, the complainant is a world famous fast food fried chicken chain restaurant and operates in this country for more than twenty years. At present time , there are more than 120 Kentucky Fried Chicken chain restaurants across the nation. The service mark and its product names “KFC and picture”, “Kala Chicken”, “Kala Chicken Leg Burger” are commonly known to relevant enterprises and consumers. The punished KLC Company and its KLG Fried Chicken Franchise Restaurants have used “KLG and picture (picture of chicken)” as their business symbols. A lthough the symbols did not cause any confusion with “KFC and picture”, its overall model, design, colors and appearance seem to have similarity with the symbol of Kentucky Company. In addition, the product names “Kala Chicken” and “Kala Chicken Leg Burger” of the complainant indeed are representations to show the origin of products, but the punished KLC Company has used “Kala Company” and “Kala Chicken” as its company’s name, franchise restaurants’ names and service marks. Although the punished has used different Chinese characters for the word “Kala”, there is no marketing creation or used name that is different from the representation of the complainant. Even though it may not have caused confusion with the business and service of the complainant, nevertheless, there is still a deception act of free riding on the complainant’s goodwill.
3. Although the product names of the complainant, “Take-out Family Meal $399” and “Mexican Chicken Roll” do not meet the requirement of representation that is commonly known to relevant enterprises or consumers, but the complainant has already devoted considerable efforts in marketing the aforementioned products and made a significant amount of sales. Naturally there are certain economic benefits for the aforementioned product’ names. On the grounds that the punished KLC Company established and registered business operation in March 2003 and sold products of fried chickens that were similar to the complainant, it is unreasonable to say that the punished KLC Company did not know the product names of the complainant. Although the punished KLC Company has named the marketed product as “Family Meal $399 (with an X placed on its top)”, in fact, it never sell Family Meal at the price of $399, but intentionally labeled the price of its product similarly to that of the complainant, that is the Family Meal was sold at NT$399 (with an X placed on top). Therefore, it is difficult to conclude that the punished did not have any intention to free ride on the complainant. It is also evident in the confession of the punished. The punished KLC Company confessed that upon seeing that Kentucky has set uniform price of “Take-out Family Meal” at $399 for a long time, KLC, with the aim of attracting consumers, has priced its product at $399 with a X placed on top and label $199 to indicate that the price of 9-pieces chicken for KLC was cheaper than that of Kentucky. Furthermore, the product name “Mexican Chicken Roll” was completely the same to that of the complainant. Although there was a literal background for this product name, the complainant did derive certain economic profit from the said name, furthermore, the degree of similarity between the product names at issue of the punished and that of the complainant seems to show that it is difficult to conclude that the punished did not have any intention to free ride on the complainant. Moreover, the punished has extensively used the colors red, white and blue in its designs of the bucket for take-out Family Meal, signboards and meal orders, these are colors similar to that used by the complainant. Although that did not cause any confusion, nevertheless a view of the overall appearance is substantiate to conclude that the punished has vigorously free ride on the complainant’s goodwill and exploited its efforts, in violation of the provision of Article 24 of the Fair Trade Law.
4. To sum up, the punished KLC Company has used business and service symbols “KLG and picture (picture of chicken)” and “Kala Chicken” that were similar to the symbol of other enterprise, also, used product names “Kala Chicken Leg Burger”, “Family Meal $399 (with an X placed on top) $199” and “Mexican Chicken Roll” that were rather similar to the products’ names of other enterprises; such conduct was an attempt to free ride on other’s famous goodwill and exploit others’ efforts, thus is regarded as obviously unfair conduct that is able to affect trading order and violated the provision of Article 24 of the Fair Trade Law. Therefore, a fine of NT$350,000 is imposed on KLC Company.

Summarized by Lee, Bi-Lin;
Supervised by Shen, Li-Yu

Appendix:

KLC Company’s Uniform Invoice Number: 15686185
Yum! Restaurants (Taiwan) Co., Ltd.