Yangming International Co., Ltd.

Case:

Key Words:

Leidi Diamond, travel card, resale profit

Reference:

Fair Trade Commission Decision of January 5, 2011 (the 1000th Commissioners' Meeting), Disposition Kung Ch'u Tzu No. 100004

Industry:

Other Accommodation Services (5590)

Relevant Laws:

Article 24 of the Fair Trade Law

Summary:

1. The FTC was informed that Yangming (transliteration) International Co., Ltd. (hereinafter referred to as Yangming Co.) had told purchasers of the Leidi Diamond Holiday Tour Package (hereinafter referred to as the Leidi Package) they could buy extra packages at a lower price and resell them to others for profits. The informer thought the sales strategy of Yangming Co. by enticing customers with the resale profit in purchasing extra Leidi packages was inappropriate and was in violation of the Fair Trade Law (FTL).
2. Findings of the FTC after investigation:
   The informer was invited to the FTC to give the details and the customers of Yangming Co. were requested to fill out a questionnaire about their interactions with Yangming Co. 27 people replied and 85% of them admitted that they had never heard of or had any knowledge about the Leidi Package. 96% of them confirmed that Yangming Co. had shown them photocopies of bankbooks of other customers as proof of successful resale cases to increase their confidence in making extra purchases. 70% of them confirmed that Yangming Co. had promised to help them resell the extra packages. To find out the reasons of the ones who purchased extra packages and the number of successful resale cases, the customers were requested to fill out a second questionnaire. 20 people complied and the information given showed 79 extra packages in total had been purchased. 72, or 91%, of them had been purchased with the intention of reselling and only five packages had been resold, making the actual resale rate at merely 6.94%. The results of the questionnaire surveys and the details given by the trading counterpart invited to the FTC were consistent.
3. Grounds for disposition:
   1. Article 24 of the FTL regulates: In addition to what is provided for in this Law, no enterprise shall otherwise have any deceptive or obviously unfair conduct that is sufficient to affect trading order. Hence, when an enterprise promotes its products by showing a limited number of successful resale examples and promising help with resale, it can mislead the trading counterparts into believing there is indeed profit in resale and thus making the transaction decision. Such inappropriate sales approach is apparently a type of deceptive conduct aforementioned. If a large number of trading counterparts fall victim to such deceptive conduct or there is potential that it could affect a large number of people in the future, it is then "sufficient to affect trading order" and is considered in violation of Article 24 of the FTL.
   2. The second questionnaire survey revealed that 91% of the 20 trading counterparts who purchased extra packages did so with the intention to profit from resale. Hence, the possibility of reselling the additionally purchased packages was deemed a major factor in the trading counterparts' transaction decisions. At the same time, as 85% of the trading counterparts had never heard of the Leidi Package or had any knowledge about the market of such products, they could only establish a rough understanding of the characteristics of the product based on the description given by Yangming Co. Meanwhile, Yangming Co. had also verbally promised to help with the resale and showed photocopies of bankbooks as proof of successful resale examples. Such strategies were powerful enough to convince trading counterparts who had never heard or had much knowledge about such products to believe that purchasing extra packages and reselling them could be rather profitable. However, the actual successful resale rate was merely 6.94%. Obviously, Yangming Co. had pushed the trading counterparts to make their transaction decisions by promising to help with the resale and showing insubstantial data as proof but hid the fact that the successful resale rate had been low.
   3. The number of trading counterparts misled by the inappropriate sales strategies of Yangming Co. into believing they could profit from purchasing and reselling extra packages was not small at all and Yangming Co. continued to promote the Leidi Package. Hence, the likelihood that such inappropriate sales strategies could have an effect on a large number of potential trading counterparts existed. The said deceptive conduct could lead to negative impact on social ethics and trading order that free and fair competition depended on. Hence, the conduct was deemed "sufficient to affect trading order" and in violation of Article 24 of the FTL. The FTC therefore applied the First Section of Article 41 of the FTL and ordered the company to immediately cease the unlawful act and imposed on the company an administrative fine of NT$500,000.

Appendix:
Yangming International Co., Ltd.'s Uniform Invoice Number: 80705711

Summarized by:Yung, Hsiang-Yu; Supervised by: Chen,Yuhn-Shan