Luxgen Motor Co.

1112nd Commissioners' Meeting (2013)

Case:

Luxgen Motor Co. violated the Fair Trade Law for posting false and untrue advertisements for its automobile Luxgen 7 MPV

Key Word(s):

Auto, passenger-cargo van

Reference:

Fair Trade Commission Decision of February 27, 2013 (the 1112nd Commissioners' Meeting); Disposition Kung Ch'u Tzu No. 102029

Industry:

Retail Sale of Automobiles in Specialized Stores (4841)

Relevant Law(s):

Article 21 of the Fair Trade Law

Summary:

The FTC received complaints from private individuals alleging that they had received notices, dated April, 2012, from Yulon Motors recalling their Luxgen 7 MVPs to have the back crossbar/bumper installed as was required by the law for small passenger-cargo vans and also to have the third row seats moved to the position in accordance with the original design. However, when purchasing the vehicle from Luxgen Motor Co., Ltd. (hereinafter referred to as Luxgen Motors), a subsidiary of Yulon Motors, and the complainants had not been told that the vehicle was a passenger-cargo van. Besides, the vehicle had not been equipped with the back crossbar/bumper that it should have no matter in the advertisements, flyers, catalog, on Luxgen Motors' company website, or when the vehicle was handed over. In addition, according to the interior space shown in the catalog, the third row seats were foldable to create cargo space. However, according to the law, the position of the third row seats should have been 20 centimeters further forward and there should have been a cross hanging rod over the area between the trunk space and the third row seats. This meant the space of the third row seats would be reduced and the seats would not be foldable any longer. Therefore, false advertising was involved in this case.

Findings of the FTC after investigation:

(1) The vehicle in question was a product that Luxgen Motors had developed on its own under its brand name, manufactured by Yulon Motors, and sold by Luxgen Motors to the five distributors. The distributors were Luxgen Motors Taipei, Luxgen Motors Taoyuan, Luxgen Motors Taichung, Luxgen Motors Tainan, and Luxgen Motors Kaohsiung (all of which hereinafter referred to as Luxgen distributors) who then marketed the vehicle.

(2) The investigation showed that the advertising committee formed by the Luxgen distributors had been responsible for the design and content of the flyer and catalog for the sale of the said vehicle. The said distributors had also paid for the expenses required for advertisement production and marketing. Meanwhile, the vehicles were displayed at the distributorships and consumers signed the purchasing contracts with the distributors who profited from such transactions. Hence, the Luxgen distributors undoubtedly were responsible for the advertising.

(3) Another finding revealed that Luxgen Motors managed and maintained its own website and the wording of "Exclusive agent: Luxgen Motors" was indicated in every catalog it offered. Meanwhile, it was stipulated in the distribution contract signed between Luxgen Motors and the Luxgen distributors that Luxgen Motors was responsible for the overall planning and management of "product" marketing and promotion, including but not limited to design, production and distribution of advertisements and marketing materials, design and execution of advertising and promotion projects and activities, as well as design of advertisements on the websites and through the Internet, electronic or remote-oriented measures and corresponding maintenance. In fact, Luxgen Motors did admit that it was responsible for the market positioning and marketing strategy for the said vehicle and it also reserved the right for its managers to intervene directly. With all the above combined, it was obvious that Luxgen Motors played a dominant role in decision of the contents and production of the said advertisements. It could gain more profit when the sales increased. Therefore, Luxgen was considered the advertiser in this case.

(4) According to Articles 3 and 87 of the Regulations Governing Road Traffic Safety, a small passenger-cargo van is one that weighs less than 3.5 tons or the total number of seats is less than 9, the cargo space behind the last row of fixed seats measures at least 1 cubic meter, and the space for passengers and that for cargo has to be divided with a fixed partition, while metal rails must be installed on the widows of the cargo space.

(5) The photos shown in the flyers and catalog for the Luxgen 7 MPV model had been taken with the crossbar/protection bar either removed or concealed and the third row seats adjusted. The same photos were also posted on Luxgen Motors' website. Such advertising gave consumers the impression that the vehicle needed no crossbars/protection bars, the space of the third row seats was as shown in the photos, and all these features complied with the Regulations Governing Road Traffic Safety. However, the investigation revealed that the automobile in question had been registered with the Ministry of Transportation and Communications (MOTC) as a passenger-cargo van. According to the MOTC, the interior of the vehicle as shown in the photos did not have the partition and metal rails and this did not comply with MOTC's regulations on the specifications and equipment of small passenger-cargo vans. At the same time, if the actual space for goods in the back was less than 1 cubic meter, it would also be incompliant with the MOTC's regulations for such vehicles. The investigation also showed that the interior arrangement of the vehicle could endanger the safety of passengers.

(6) Meanwhile, the catalog for the vehicle in question contained the wording of "the only ‘Easy Flex' design among vehicles of the same class, allowing convenient folding of the third row seats to create flexible, spacious and even room for goods…," Furthermore, a photo of two bicycles placed in the space after the third row seats were folded was shown in the said catalog. This gave consumers the impression that the third row seats could be used for passengers or completely folded to create the space for two bicycles. However, the result of the FTC investigation also revealed that after the vehicle in question had been recalled and modified, the third row seats had been restored to the condition originally designed and they could no longer be folded all the way to the recess area to create the even space for goods as shown in the photos.

Grounds for disposition:

Luxgen Motors and Luxgen distributors had the advertising photos for the vehicle in question taken with the crossbar/protection bar either removed or concealed, the third row seats adjusted, Besides, it claimed that "Easy Flex" was incorporated in the folding design of the third row seats with a picture showing 2 bicycles placed in the vehicle behind the folded third row seats in its advertisements. Consequently, it was a false, untrue and misleading representation with regard to the content of the product in violation of Article 21(1) of the Fair Trade Law. Acting according to the first section of Article 41(1) of the same law, the FTC imposed an administrative fine of NT$800,000 on Luxgen Motors, NT$300,000 on each of the Luxgen distributors, namely Luxgen Motors Taipei, Luxgen Motors Taoyuan, Luxgen Motors Taichung, Luxgen Motors Tainan, and Luxgen Motors Kaohsiung, NT$1.5 million in total.

Appendix:
Luxgen Motors' Uniform Invoice Number: 28435456
Luxgen Motors Taipei's Uniform Invoice Number: 24367766
Luxgen Motors Taoyuan's Uniform Invoice Number: 24367365
Luxgen Motors Taichung's Uniform Invoice Number: 24367490
Luxgen Motors Tainan's Uniform Invoice Number: 24368955
Luxgen Motors Kaohsiung's Uniform Invoice Number: 29014572

Summarized by Lin,Chia-Te; Supervised by Chi,Hsueh-Li

! : For information of translation, click here

(1)	The vehicle in question was a product that Luxgen Motors had developed on its own under its brand name, manufactured by Yulon Motors, and sold by Luxgen Motors to the five distributors. The distributors were Luxgen Motors Taipei, Luxgen Motors Taoyuan, Luxgen Motors Taichung, Luxgen Motors Tainan, and Luxgen Motors Kaohsiung (all of which hereinafter referred to as Luxgen distributors) who then marketed the vehicle.
(2)	The investigation showed that the advertising committee formed by the Luxgen distributors had been responsible for the design and content of the flyer and catalog for the sale of the said vehicle. The said distributors had also paid for the expenses required for advertisement production and marketing. Meanwhile, the vehicles were displayed at the distributorships and consumers signed the purchasing contracts with the distributors who profited from such transactions. Hence, the Luxgen distributors undoubtedly were responsible for the advertising.
(3)	Another finding revealed that Luxgen Motors managed and maintained its own website and the wording of "Exclusive agent: Luxgen Motors" was indicated in every catalog it offered. Meanwhile, it was stipulated in the distribution contract signed between Luxgen Motors and the Luxgen distributors that Luxgen Motors was responsible for the overall planning and management of "product" marketing and promotion, including but not limited to design, production and distribution of advertisements and marketing materials, design and execution of advertising and promotion projects and activities, as well as design of advertisements on the websites and through the Internet, electronic or remote-oriented measures and corresponding maintenance. In fact, Luxgen Motors did admit that it was responsible for the market positioning and marketing strategy for the said vehicle and it also reserved the right for its managers to intervene directly. With all the above combined, it was obvious that Luxgen Motors played a dominant role in decision of the contents and production of the said advertisements. It could gain more profit when the sales increased. Therefore, Luxgen was considered the advertiser in this case.
(4)	According to Articles 3 and 87 of the Regulations Governing Road Traffic Safety, a small passenger-cargo van is one that weighs less than 3.5 tons or the total number of seats is less than 9, the cargo space behind the last row of fixed seats measures at least 1 cubic meter, and the space for passengers and that for cargo has to be divided with a fixed partition, while metal rails must be installed on the widows of the cargo space.
(5)	The photos shown in the flyers and catalog for the Luxgen 7 MPV model had been taken with the crossbar/protection bar either removed or concealed and the third row seats adjusted. The same photos were also posted on Luxgen Motors' website. Such advertising gave consumers the impression that the vehicle needed no crossbars/protection bars, the space of the third row seats was as shown in the photos, and all these features complied with the Regulations Governing Road Traffic Safety. However, the investigation revealed that the automobile in question had been registered with the Ministry of Transportation and Communications (MOTC) as a passenger-cargo van. According to the MOTC, the interior of the vehicle as shown in the photos did not have the partition and metal rails and this did not comply with MOTC's regulations on the specifications and equipment of small passenger-cargo vans. At the same time, if the actual space for goods in the back was less than 1 cubic meter, it would also be incompliant with the MOTC's regulations for such vehicles. The investigation also showed that the interior arrangement of the vehicle could endanger the safety of passengers.
(6)	Meanwhile, the catalog for the vehicle in question contained the wording of "the only ‘Easy Flex' design among vehicles of the same class, allowing convenient folding of the third row seats to create flexible, spacious and even room for goods…," Furthermore, a photo of two bicycles placed in the space after the third row seats were folded was shown in the said catalog. This gave consumers the impression that the third row seats could be used for passengers or completely folded to create the space for two bicycles. However, the result of the FTC investigation also revealed that after the vehicle in question had been recalled and modified, the third row seats had been restored to the condition originally designed and they could no longer be folded all the way to the recess area to create the even space for goods as shown in the photos.