Sin Chang Gas Appliance Co., Ltd. violates the Fair Trade Law by employing improper sales practice in marketing gas safety appliances

Case:

Sin Chang Gas Appliance Co., Ltd. violates the Fair Trade Law by employing improper sales practice in marketing gas safety appliances

Key Words:

gas quick disconnect device, improper sales practice

Reference:

Fair Trade Commission Decision of May 6, 2004 (the 652th Commissioners’ Meeting); Disposition Kung Ch’u Tzu No. 093052

Industry:

Wholesale of Other Household Applicance and Supplies (4449)

Relevant Laws:

Article 24 of the Fair Trade Law

1. A certain enterprise complained that Sin Chang Gas Appliance Co., Ltd. employed improper sales practices such as excuses of safety inspections to market gas safety appliances. The similarity in enterprise names may easily mislead the general public to believe that this is the gas company supplying their natural gas, which is a violation of Article 24 of the Fair Trade law (FTL).
2. Grounds of disposition:
   1. Sin Chang Gas Appliance Co., Ltd. operates in the business of selling gas safety appliances, with the primary business areas in Tachia, Chingshui, and Shalu districts in Taichung. Although its nature of business is different from the gas company supplying natural gas, the company name was purposely chosen to imitate the name of Sing Chang Natural Gas Company that supplies natural gas in Tachia, Chingshui, and Shalu districts in Taichung. Also, the upper right corner of the service notice distributed by the respondent reads “Taiwan Domestic Mailing Services Department file #093001” and “Please return to the servicing address if postcard is undeliverable”. It is understood that the respondent dispatches its own personnel to distribute the so-called “gas service notice”, whose aim understandably is to create a false impression that the inspection notice was sent by the natural gas company. The notice itself did not include the business address of the respondent, thus the indication of “Please return to the servicing address if postcard is undeliverable” is also invalid. Furthermore, although the respondent did print its full business name “Sin Chang Gas Appliance Co., Ltd.” on the notice, it specifically enlarged the words “Sin Chang Gas” in red letters, and used even larger emboldened letters “Sin Chang” on the upper left corner, with an obvious intention to highlight “Sin Chang” and “Sin Chang Gas”. The overall effect is sufficient to mislead to a belief that the service notice was issued by the gas company supplying natural gas in the area.
   2. Investigations also revealed that the respondent admitted to having only four employees, with no further internal department divisions within the company. The company’s business only covers retail sales of gas quick disconnect device. However, words such as “Engineering Dept.” and “Mailing Services Dept.” are printed on the gas service notice, which was obviously intended to cause a misinterpretation that the better organized Sin Chang Natural Gas Company was offering free inspection services to its customers. Finally, it was also found that the respondent operates by distributing service notices to residential areas several days in advance, but the service notice only indicated “safety inspection of old gas pipes and switches”, and the sales of products was not mentioned. When dispatching staff for onsite calls to the residents, the staff would claim that they have issued prior notice to come and conduct a promotion of “automatic switch registration”, and provide “free inspection services”, without a word mentioning the sale of “gas safety switches”. The staffs of the respondent do not possess the qualification to perform gas pipeline inspections. But they used the confusing business name, and by taking advantage of the general public’s trust in the natural gas company, they were able to enter residential premises to inspect gas pipes, and then to sell and install gas safety switches. Only if the resident raised doubt about their identity, they would then reveal that they are not the employees of the natural gas company, obviously hiding important information related to the transaction.
   3. For the purpose of closing sales, the respondent Sin Chang Gas Appliance Co., Ltd. intentionally selected a business name similar to that of the Sin Chang Natural Gas Company, and distributed service notices with highly confusing contents, and is thereby ruled as using false information to mislead and deceive consumers. The respondent was also found to conduct product sales under the false excuse of gas safety inspections. The whole marketing method was a deceptive behavior that is sufficient to influence market order, and is ruled in violation of Article 24 of the FTL. Therefore in accordance with the first section in Article 41 of the same law, the Fair Trade Commission (FTC) orders the company to immediately cease the aforementioned deceptive behavior that is affecting market order, and also in consideration of factors such as the respondent’s motive and aim in breaking the law, the time of such behavior, the illegal benefits obtained, and the level of damage caused that its business scale is causing to the competitive market order, the FTC imposed a administration fine of New Taiwan Dollars (NT$)50,000 .

Appendix:
Sin Chang Gas Appliance Co., Ltd.’s Uniform Invoice Number: 80602320

Summarized by Hsieh, Hsiu-Lin; Supervised by Tso, Tien-Liang