Jardine Fast Food Restaurants (Taiwan) Ltd.

Case:

Key Words:

promotional advertisement, reasonable expected demand

Reference:

Fair Trade Commission Decision of May 19, 2010 (the 967th Commissioners' Meeting); Disposition Kung Ch'u Tzu No.099061

Industry:

Other Foods and Beverage, Tobacco Product Retailers (4729)

Relevant Laws:

Paragraph 1 of Article 21 of the Fair Trade Law

Summary:

1. On February 22, 2010, Jardine Fast Food Restaurants (Taiwan) Ltd. (hereinafter Jardine Restaurant Group) launched the "One Dollar for an Extra one" advertisements on TV, online, and in newspapers. However, the very next day, on February 23, 2010, some of the branches already ran out of supplies and consumers were not able to purchase the advertised Triple Crunch Zinger Sandwich meal. False advertising was suspected. The FTC took the initiative and investigated.
2. Findings of the FTC after investigation: Beginning on February 22, 2010, Jardine Restaurant Group advertised on TV, online, in newspapers, and at its stores the "One Dollar for an Extra one" promotion. There would be special offers on certain meal combinations on each day of the week. When customers purchased one of these combinations, they could pay one extra dollar to get an extra portion of the main item of the combination. However, by noon the next day on February 23, 62 stores already ran out of the Triple Crunch Zinger Sandwiches. By dinnertime, 113 stores were out of supplies and the shortage continued until the 24th. Jardine Restaurant Group claimed that the shortage was due to that the demand for the Triple Crunch Zinger Sandwiches that day was 10 times that of normal sales at lunchtime and they ran out of bread. The FTC's investigation discovered that, based on Jardine Restaurant Group's normal stock preparation and promotion experiences, it should have been able to predict significant increase of demand because of the special offer on February 23. However, the supply failed to meet the actual demand significantly.
3. Grounds for Disposition:
   1. Since Jardine Restaurant Group did not indicate in its promotional advertisements that there would be quantity limits, consumers naturally had the impression that the special offers would continue to be provided during the promotion period. Yet, on February 23, 49.2% of the 126 KFC stores were out of supplies at lunchtime while the shortage reached as high as 89.6% at dinnertime. The shortage of special offer items continued on February 24. Jardine Restaurant Group was apparently unable to provide the special offer products as advertised, and the public or concerned customers found the number and the percentage of stores that ran out of supplies difficult to accept. The advertisements were misleading and could result in consumers' wrong decision. The conduct was in violation of Paragraph 1 of Article 21 of the Fair Trade Law.
   2. With its stock preparation practice and experience, Jardine Restaurant Group should have been able to foresee the increase of demand and prevent the shortage. However, the stock of the bread needed to make the sandwiches was only slightly over one third of the expected sales, or 1.47 times of the quantity prepared when there were no special offers. The increase was insignificant and obviously incompatible with the expected 400% growth in demand for the sandwiches. As a matter of fact, it could not even meet the 175% growth rate in demand for fish burgers when a similar promotional offer was given in 2009. The FTC therefore found it difficult to believe that Jardine Restaurant Group had prepared the reasonable quantity to meet the expectable demand. As an advertiser, Jardine Restaurant failed to fulfill its obligations and was imposed a fine of 100,000 NT dollars.

Summarized by: Cheng, Shih-Yu Supervised by: Chi, Shueh-Li

Appendix:
Jardine Fast Food Restaurants (Taiwan) Ltd.'s Uniform Invoice Number: 97161500