The American World Gym Fitness Co., Ltd. made false and misleading representation in its service content when soliciting for new members, a violation of Article 21 of the Fair Trade Law

Chinese Taipei

Case:

Key Words:

American World Gym, preferential program, false advertisement

Reference:

Fair Trade Commission Decision of March 30, 2006 (the 751st Commissioners’ Meeting), Disposition Kung Ch’u Tzu No. 095030

Industry:

Other Sporting Services (8749)

Relevant Laws:

Article 21, , Paragraph 1 of the Fair Trade Law, applied mutatis mutandis to Paragraph 3

Summary:

1. The Fair Trade Commission (FTC) received a complaint from the public indicating that the complainant has seen the member solicitation advertisement published by World Gym Fitness Co., Ltd., Kaohsiung branch in the United Daily on April 21, 2005. The said advertisement has made the following announcements, “no entrance fee and only NT$ 888 per month”, “one to one personal coach”, “about 100 lessons each week”, “free parking”, “investment of NT$150,000,000”. However, the complainant found the truth was quite different from that indicated in the advertisement after joining the club. In addition, the punished did not give its members a period to review the contract before they signed contracts. The consumers can only read the contract after they made payment and even when the contract was provided to the consumers for review, the reviewing period was only three days. Recently, the punished has even announced the false advertisement “The entrance fee is only NT$ 2688 now, the last day of this super value program” everyday. Such advertisement will mislead the ignorant consumers into making the decisions of joining the club, thus has violated the provisions of Article 21 and Article 24 of the Fair Trade Law.
2. Upon the investigation, the FTC found:
1. The “no entrance fee and only NT$ 888 per month” program: The members of this program were not required to pay any entrance fees and they only have to pay the monthly fees of NT$ 888. There was a usage restriction for members of this program, they can only come to the club, use the club’s facilities and group aerobic class two days per week on the days chosen by them.
2. “One to one personal coach”: Upon joining the club, regardless of the types of program chosen by the member, the punished will make an appointment with each member to arrange a free two hours one-to-one personal coach course. A physical assessment of the member was conducted in the first hour and in the second hour; the member was given suggestions on his/her individual exercise plan and the instructions to operate the fundamental sport equipments.
3. “About 100 lessons each week”: there were three group aerobic classes in the club, the aerobic teachers will teach aerobic lessons in these group aerobic classes. During his or her visit to the club, the member can choose any class time to learn aerobic. The class schedule for October was enclosed for examination.
4. “Free parking”: Each member was entitled for a two hours free parking every time he or she visited the club. The charges for extra hour were NT$ 20 per hour for regular day and NT$ 30 per hour for holiday.
5. “Investment of NT$150,000,000”: Refers to the total expense of overall planning for the club, including rental for the site, design, decoration, sports equipments, and management system for members, salary and training of employees. The list of development expenses for the club was enclosed for examination.
6. With regard to the advertisement, “The entrance fee is only NT$ 2688 now, the last day of this super value program”: The punished has posted the advertisement poster of inviting customers to join the club at NT$ 2688 at the hall entrance for a long time. After receiving a letter from the FTC, only then the club discovered that the management at the site has not removed the said advertisement immediately according to the regulation at the end of the NT$ 2688 promotion program. The punished has routinely introduced different promotional programs every month. In general, in order to coordinate with the advertisement of print media, every promotion program is lasted for two weeks. The punished has organized the following promotional programs for the period between September and November; “Only NT$ 2688 entrance fee (a program that has usage time restriction)” from September 1, 2005 to September 15, 2005, “Buy 18 months get 18 months free” program from September 16, 2005 to September 28, 2005, “Only NT$ 688 per month (a program that has usage time restriction)” from October 1, 2005 to October 14, 2005, “Only NT$ 588 per month (a program that has usage time restriction)” from October 15, 2005 to October 31, 2005 and “Only NT$ 888 per month (a program that has usage time restriction)” from November 15, 2005 to November 30, 2005. The punished would not promote the activities of each program after the expiration of the said program. The salespersons also were not allowed to sell the expired program. The failure of Kaohsiung branch to promptly replace poster of previous program with a new one was simply a flaw of the administrative management. The punished must admitted that its on-site management indeed was not perfect, and should immediately ordered the management at the site to remove the said poster after receiving the FTC’s letter to avoid any misinterpretation by consumers.
3. Grounds for disposition:
1. The promotion program “The entrance fee is only $2688 now, the last day of this super value program” was carried out by Kaohsiung branch of the punished from September 1, 2005 to September 15, 2005. The member of the said program must pay entrance fee of $2688 for the membership of the club. After that, the member must pay monthly cleaning fee of $1288 for using the club’s facilities every month. The member may be or was given two to three months of gratuitous club’s uses if he or she prepaid one-year cleaning fees in advance. The punished noted that the said program did not perform well and not attract anyone to join the club during the promotion. The said program was not used again in the club’s marketing after its expiration. However, the staffs at the site have made an administrative mistake by forgetting to remove the said advertisement. Actually, the punished did not have conduct and intention of making false advertisement. However, the investigation found that the phrase of “the last day of this super value program” as used by the punished in its advertisement might lead the ignorant consumers into believing it and thus making a hasty decision of joining the club. It is found that two consumers have requested the salesperson for joining the club with “$2688 program” when the said advertisement was posted on the signboard. Even though both consumers only paid $200 deposits and called the punished later to demand for contract rescission, the punished still advertised the “the last day of this super value program”. It is obvious that the content of service has false and misleading representation. Other than that, it is still difficult to conclude that the other parts of the advertisement at issue have false representations.
2. Taking into consideration the motivation and purpose of the unlawful acts of World Gym are not serious, the expected improper benefit derived from the unlawful acts is small, the degree of the act’s harm to market order is slight, the duration of the act’s harm to market order is not long, the scale, operating condition, sales and market position of the enterprise, the enterprise has not been corrected or warned by the central competent authority, first violation, acceptable remorse shown for the act and attitude of cooperation in the investigation, a fine of NT$ 170,000 is imposed according to the anterior paragraph of Article 41 of the Fair Trade Law.

Summarized by: Huang, Chian-Mei;
Supervised by: Lee, Wen-Hsiu

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