Hui Kang Co. Ltd.

Case:

Key Words:

anniversary discounts, cash voucher for goods, direct discount

Reference:

Fair Trade Commission Decision of August 16, 2007 (the 823rd Commissioners' Meeting); Disposition Kung Ch'u Tzu No. 096134

Industry:

Retail Sale in General Merchandise Stores with Food, Beverages or Tobacco Predominating (4711)

Relevant Laws:

Article 21(1) and 41 of the Fair Trade Law

Summary:

1. This case was originated from the complaints filed by emails from the general public and the complaints stated briefly as follows: Hui Kang Co. Ltd. held an anniversary discount at the Wellcome. Its advertisement claimed that "with every NT$ 200 of purchases, the customer gets cash vouchers for the value of NT$ 200 for free," and only the date restriction was published in the shop front poster. Following the advertisement, the complainants acquired the cash vouchers after NT$ 200 of purchases, the use of the vouchers was however restricted to one voucher per week after the end of the anniversary sale, as published in the vouchers. The face value of each voucher was NT$ 20 and the use of each voucher was subject to the restriction that a consumer must purchase a product of certain brands in the amount of NT$ 200.
2. Findings of FTC after investigation:
   1. Hui Kang Co. Ltd. held an activity which was that "with every NT$ 200 of purchases, the customer gets cash vouchers to the value of NT$ 200 for free" from June 8 to 14, 2007 and the step published in the advertisement was that "a consumer can get a pack of cash vouchers up to NT$ 200 in total for a single transaction above NT$ 200." However, with an actual inspection on the cash vouchers, it is found that there were a total of ten vouchers in each pack of cash vouchers and each voucher had a face value of NT$ 20. The conditions, "with this voucher, a consumer can get NT$ 20 discount for a single transaction of a Nestle product in the amount of NT$ 200" and "Period of Use: Friday, June 15 ~ Thursday, June 21, 2007" were published in the first voucher in the pack, the words published in the rest of the vouchers were identical to what was stated in the first voucher, the position of the phrase, a product of the certain brand, and that of the phrase, the period of use, were however changed in the rest of the vouchers. Therefore, after the actual acquisition of the cash vouchers, the consumers, who originally expected that by consuming in the amount of NT$ 200, they could get the cash vouchers with the value of NT$ 200 in return and used the vouchers, found out that they must re-spend NT$ 200 in order to use one voucher with the face value of NT$ 20 and get NT$ 20 off – it means that a consumer must spend extra NT$ 2,000 in total in order to completely use the vouchers he or she received. In other words, the consumer must pay a total of NT$ 2,200 in order to truly get the value of the vouchers in return. These facts were significantly different from the perceptions and concepts derived from the representations of the advertisement. Furthermore, the scope of circulation of the cash vouchers was very narrow and the duration of time for using the vouchers was short, and they affected the consumers' judgments on values, as a voucher must be used in a specific week and a consumer must purchase the product of a certain brand. However, Hui Kang Co. Ltd. did not disclose in its advertisement the conditions stated in the vouchers – these facts would indeed result in consumers' misperceptions towards the value of the vouchers. As the representations of the cash vouchers in the advertisement of Hui Kang Co. Ltd. were false, untrue and misleading, Hui Kang Co. Ltd. was found in violation of Article 21(1) of the Fair Trade Law.
   2. Although the advertisement related to this case published the sentence of "please refer to the instructions printed on the cash vouchers for the effective date and the rules of using the cash vouchers," the consumers only learnt about the conditions after they acquired the cash vouchers and their consumption; they could not learn about the conditions at the time of reading the advertisement. The representations of the contents of the original advertisement were still false, untrue and misleading. Hui Kang Co. Ltd. drew the consumers to consume again through using the cash vouchers and did not adequately disclose substantial trade information to them. Such a means of advertising not only led the consumers to misconception at the first transaction, but also made the competitors of the Hui Kang Co. Ltd. to lose their trading opportunities with the consumers who went to Wellcome to consume for the second time. The advertisement related to this case, in this way, also caused adverse effects on market order.
3. Grounds for disposition:
   1. As Hui Kang Co. Ltd. in this case published the advertisement about the sale activity, "with every NT$ 200 of purchases, the customer gets cash vouchers to the value of NT$ 200 for free" and did not simultaneously disclose in the advertisement any substantial trading information, the conditions and period for the use of the cash vouchers, it was found that the representations of the contents of the free gifts were false, untrue and misleading and Hui Kang Co. Ltd. was found in violation of Article 21(1) of the Fair Trade Law.
   2. After considering the motive, purpose and anticipated improper profits of the unlawful acts of Hui Kang Co. Ltd.; the degree and duration of the unlawful acts' harm to trading order; the benefits derived on account of the unlawful acts; the scale, operating condition and market position of the enterprise; whether or not the types of unlawful acts involved in the violation have been corrected or warned by the Central Competent Authority; the types and numbers of and intervals between past violations, and the punishment for such violations; the remorse shown for the acts and attitude of cooperation in the investigation; and other factors, the FTC ordered Hui Kang Co. Ltd. to immediately cease the aforementioned unlawful acts on the day after actually receiving the Disposition in accordance with the fore part of Article 41 of the Fair Trade Law, and Hui Kang Co. Ltd. Ltd was imposed with an administrative fine of NT$ 400,000.

Appendix:
Hui Kang Co. Ltd.'s Uniform Invoice Number: 22662257

Summarized by Chen, Tsh-hsiang; supervised by Yeh, Tien-fu