Potato Cafe

Case:

Key Words:

104 entrepreneur website, franchise

Reference:

Fair Trade Commission Decision of February 15, 2007 (the 798th Commissioners' Meeting); Disposition (96) Kung Ch'u Tzu No. 096041

Industry:

Restaurants (5610)

Relevant Laws:

Article 21(1) of the Fair Trade Law

Summary:

1. This case originated from a complaint letter stating that Yang, Shuang Mao of Potato Cafe placed false franchising advertisement of its "Potato Cafe Baked Cheese Potatoes" and " "French Japanese Donut" on 104 Entrepreneur Website. The complainant also submitted a complaint regarding four issues in the advertisement, which were franchiser’s business organizational type, franchiser’s overseas franchising status, franchiser’s technical support and material supplies, and another enterprise’ name used in the contract by the franchiser.
2. Findings of FTC after investigation:
1. With regard to the technical support and material supplies of the franchiser, the franchising advertisement claimed that the franchiser had "technical support and superior material supplies from multiple countries; and with strategy alliance, the best product and backup services are provided to the franchisees." However, Yang admitted that the enterprise did not have any foreign technology transfer or license of production development. He merely used email and free consultation to inquire about relevant technology with foreign companies. In addition, the enterprise only took the general procurement procedure to purchase foreign materials through online orders.
2. Yang’s enterprises was subject to exclusive venture but was described as a "company" in the advertisement due to the standard format provide by 104 Entrepreneur Website. Yang did not have the intention to mislead. As for the franchiser’s actual franchising status, it was found that only one Thai business joined the franchise (only technology transfer) of Potato Cafe. However, Yang did develop new product based upon Thailand’s food culture. Therefore, Yang tried to express in the advertisement that this enterprise possessed the ability to develop different flavors inspired by different countries. Such representation was not false, untrue or misleading. Lastly, as for the name of another enterprise used in the contract by the franchiser, it shall be an issue subject to the legitimacy of the subject of the contractual behavior. The Fair Trade Law shall not apply.
3. Grounds for disposition:
1. The representations regarding the technical support and material supplies stated in the franchiser’s advertisement were not consistent with the facts and beyond the acceptable degree of the general trading counterparts. Such representations therefore violated Article 21(1) of the Fair Trade Law governing false, untrue and misleading representations or symbols.
2. After considering the motive, purpose and anticipated improper profits of the unlawful acts of Yang, Shung Mao of Potato Cafe; the degree and duration of the unlawful acts' harm to market order; the benefits derived on account of the unlawful acts; the scale, operating condition and market position of the enterprise; 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, in accordance with the fore part of Article 41 of the Fair Trade Law, ordered Yang to immediately cease the unlawful acts and imposed an administrative fine of NT$120,000.

Appendix:
Potato Cafe’s Uniform Invoice Number: 98721426

Summarized by Hung, Ying-Chieh; Supervised by Sun, Ya-Chuan