Cheng An Technology Co., Ltd.

Case:

Key Words:

shock absorption, safety equipment

Reference:

Fair Trade Commission Decision of April 12, 2011 (the 1014th Commissioners' Meeting), Disposition Kung Ch'u Tzu No. 100050

Industry:

Other Basic Metal Manufacturing Not Elsewhere Classified (2499)

Relevant Laws:

Article 24 of the Fair Trade Law

Summary:

1. Yilan County Government forwarded consumer disputes filed with various county/city governments against Cheng An Technology Co., Ltd. (hereinafter referred to as Cheng An Co.) and requested the FTC to investigate. The company had held fire hazard prevention presentations, allegedly being commissioned by the government, and used them as opportunities to push its LPG bottle shock absorbers.
2. Findings of the FTC after investigation:
   (1)The sales approach of Cheng An Co. was divided into three stages:
   (i)The company gained access to some venues and its salespeople began to distribute advertising flyers and raffle tickets to attract people to the fire hazard prevention presentation.
   (ii)In addition to introducing the functions of the shock absorbers, Cheng An Co. also mentioned the special offer packages during the presentation.
   (iii)As soon as someone filled out the special offer card or when the presentation was over, with or without the attendees expressing their interest in having shock absorbers installed, salespeople would follow them home and pushed them into buying the shock absorbers.
   (2)Results of the FTC's questionnaire survey:
   (i)57.89% of the people confirmed that Cheng An Co. had held gas safety presentations; 36.84% of the people confirmed that Cheng An Co. had indeed claimed that presentations had been organized by government agencies or public welfare organizations.
   (ii)63.16% of the people confirmed that raffles had been conducted; 57.89% of the people confirmed that Cheng An Co. had made the offer of buying one and getting one free; 52.63% of the people confirmed that Chang An Co. had announced free installation would be offered to a limited number of buyers.
   (iii)52.63% of the people confirmed that they had made the purchase decision because the unrelenting bombardment, coaxing, threat and forced installation and refusal to uninstall by the salespeople from Chang An Co. made them think compulsory installation was a government policy.
   (3)The FTC uncovered at a business office of Cheng An Co. what appeared to be instructions for the company's salespeople in which there were detailed descriptions of sales approaches such as intentional withholding of prices.
3. Grounds for disposition:
   (1)When inviting people to a presentation, Cheng An Co. deliberately concealed its true identity and its purpose of the presentation: People received flyers and raffle tickets with no showing of the identity of Cheng An Co. When they arrived at the presentation, they still had no idea about the company's identity and the purpose of the presentation was to sell products.
   (2)At the presentation, Cheng An Co. lied about the prices of the products. The shock absorber was NT$4,000 a piece but the company claimed it was NT$7,900 a piece and the company would give the special offer of buying one and getting one free to a limited number of people. Sometimes the company even never mentioned that the products had to be purchased.
   (3)The salespeople of Cheng An Co. followed people home to push sales and people eventually decided to buy as their free will was under strong pressure.
   (4)Within two years, various county and city governments received a total of 105 petitions filed over consumer disputes with the said company. Cheng An Co. admitted it had started in 2007 to sell through the said approach all around Taiwan. On average, it had held four presentations a day and each session had about 10 people attending. Each month, it was able to sell 150 to 360 LPG bottle shock absorbers, with the sales totaling about NT$1,200,000. Apparently, the said inappropriate sales approach was strong enough to affect trading order.
   (5)To sell its LPG bottle shock absorbers, Cheng An Co. deliberately concealed its identity and enticed people, who were psychologically unprepared, with raffles to attend the company's presentations during which it lied about the prices of the products. Then the company's salespeople followed people home to push sales and forced them into making purchasing decisions as their free will was under strong pressure. The entire sales approach was deceptive and obviously unfair conduct that was able to affect trading order and in violation of Article 24 of the Fair Trade Law. The FTC imposed on the company an administrative fine of NT$4,000,000.

Appendix:
Cheng An Technology Co., Ltd.'s Uniform Invoice Number: 28302441

Summarized by: Tsai, Tsung-Yung; Supervised by: Sun, Ya-Chuan