LG Electronics Taiwan Taipei Co., Ltd.

Case:

Key Words:

inverter washing machine, false and untrue comparative advertisement, water consumption

Reference:

Fair Trade Commission Decision of March 30, 2011 (the 1012nd Commissioners' Meeting), Disposition Kung Ch'u Tzu No. 100040

Industry:

Retail Sales of Electrical Household Appliances in Specialized Stores (4741)

Relevant Laws:

Article 21(1) and 24 of the Fair Trade Law

Summary:

1. LG Electronics Taiwan Taipei Co., Ltd. (hereinafter referred to as LG Co.) was reported to have posted a false and untrue comparative advertisement about inverter washing machines in sales outlets. The advertisement compared LG inverter washing machines with Panasonic inverter washing machines and indicated that the water consumption of the latter was higher that the former. It was in violation of Articles 21 and 24 of the Fair Trade Law (FTL).
2. Findings of the FTC after investigation:
   (1)In the said advertisement, the water feeding mechanisms of LG and Panasonic inverter washing machines were listed in contrast. It indicated that "Brand P: single water feeding" and "LG: water feeding in three stages" and the word "BEST" was printed in one of the LG columns. However, the investigation revealed that the water feeding mechanisms of all inverter washing machines marketed domestically were all "water feeding in two stages." The ones with "water feeding in three stages" were the washing machines of vertical types, not the inverter models. LG confessed that the indication in the said advertisement was an act of negligence by its employees who had the information printed in the advertisement without confirmation in advance.
   (2)The said advertisement also listed the water consumption measurement criterion for issuance of the water-saving label – the measured value had to be 20L/Kg according to the JIS C9606 Standard. The advertisement displayed the "DD Inverter Washing Machine Water Consumption Comparison Table" in which the water consumption levels of the 14Kg and 15Kg inverter washing machines from Panasonic (without indicating the models) were shown as "18.7L/Kg" and "17.4L/Kg" respectively, whereas in the fields for the LG inverter washing machines of the same capacities were labeled "18.5L/Kg" and "16.2L/Kg" in contrast. A "crown" icon and the "BEST" sign were also placed in the said columns to show that the LG models saved more water. Nevertheless, a finding of the investigation showed that during the period the said advertisement was posted, Panasonic was also marketing other inverter washing machines of the capacities of 14Kg and 15Kg and their water consumption levels were respectively "13.78L/Kg" and "12.97L/Kg", both lower that the LG models referred to in the said advertisement.
3. Grounds for disposition:
   (1)The said advertisement carried the headline "Good Cleaning Strength and Super Water-saving Capacity Make Key Considerations in Choice of Inverter Washing Machines" in blown-up and bold prints. In the contrast table, the water feeding mechanisms of LG and Panasonic inverter washing machines were compared. It indicated "Brand P: single water feeding" and "LG: water feeding in three stages" and the word "BEST" was printed in one of the LG columns. This gave consumers the impression that the water feeding in the LG inverter washing machines referred to in the advertisement took place in three stages and these machines were better than those made by Panasonic. The truth is that the water feeding mechanisms in all the inverter washing machines LG Co. marketed in Taiwan fed water in the machines in two stages, not three stages. According to the advertisement, the water feeding mechanism was closely related to detergent solution and cleaning capacity. However, t LG, as the advertiser, failed to fulfill the obligation of verifying the authenticity of the said statement and wrongfully advertised its washing machines as equipped with a mechanism that fed water in the machine in three stages, which was not true. The conduct misled trading counterparts into believing that the LG inverter washing machines actually fed water into the machine in three stages. It was therefore false, untrue and misleading, and in violation of Article 21 (1) of the FTL.
   (2)Again, before making the said advertisement, LG Co. did not really investigate the consumption levels of the 14Kg and 15Kg inverter washing machines made by Panasonic and the "DD Inverter Washing Machine Water Consumption Comparison Table" in the advertisement indicated that the water consumption levels of LG inverter washing machines were lower than the Panasonic inverter washing machines of equivalent capacities, while during that period Panasonic actually had other models that consumed less water than that was referred to in the advertisement. Apparently, when making the comparison in the said advertisement, LG Co. selectively neglected the Panasonic inverter washing machines that used less water. This could mislead trading counterparts into buying LG products due to their belief that LG products were better than those from Panasonic. As a result, Panasonic, as one of the market competitors of LG, could thus lose trading opportunities. It was obviously unfair conduct detrimental to proper commercial trading order and market competition and in violation of Article 24 of the FTL.
   (3)According to the above facts and considering the degree of damage caused by the unlawful act of LG Co. and the duration of the unlawful act, the company's business scale, management condition, market status, and its level of cooperation during the investigation, the FTC acted in line with the first section of Article 41 of the FTL, ordered the company to immediately cease the unlawful act, and also imposed an administrative fine of NT$150,000 for its violation of Article 21 (1) and an administrative fine of NT$400,000 for its violation of Article 24 of the same law. The fines totaled NT$550,000.

Appendix:
LG Electronics Taiwan Taipei Co., Ltd.'s Uniform Invoice Number: 22553217

Summarized by: Lai, Chien-Sheng; Supervised by: Chi, Hsueh-Li