Samsung Electronics Ltd., OpenTide Ltd. and Suntory International Ltd.

Case:

Samsung and 2 other companies violated Article 24 of the Fair Trade Law for concealing their identity and pretending to be private citizens and making deceptive comparisons of products from other enterprises online

Key Word(s):

Word of mouth, stake, blog writer

Reference:

Fair Trade Commission Decision of October 31, 2013 (the 1146 Commissioners' Meeting); Disposition Kung Ch'u Tzu No.102184

Industry:

Telephones and Cellular Phones Manufacturing (2721)

Relevant Law(s):

Article 24 of the Fair Trade Law

Summary:

1. The members of the Economics Committee of the Congress raised the question at the 6th Meeting of the 3rd Session of the 8th Legislators that "recently, a foreign telecommunications business hired a group of non-professionals through a Hong Kong public relations company to post articles online under the name of sharing their experiences with products from domestic manufacturers. Such practice involved false advertisements to attack domestic manufacturers who were competitors of the said foreign telecommunications product maker. Could the current Fair Trade Law be applied to stop such new online marketing practices? The Fair Trade Commission ought to investigate such new marketing practices and sanction the business in question and the Hong Kong public relations company which offered its help to the business." The FTC therefore initiated an ex officio investigation after looking into the case and its related information, including different websites and "the Journalist" magazine.
2. Findings of the FTC after investigation:
   

   The FTC's investigation revealed that between 2007 and 2012, during which period Samsung and OpenTide Taiwan renewed the contract every year, and the two companies would consult and determine the number of statements to be released to the public. According to the actual rate of accomplishment and execution, OpenTide Taiwan would report to Samsung the overall operations, results of handling of critical issues, major topics of the week, number of statements released, achievements in Viral management, outlines of positive and negative responses, the operation plan for the following week on weekly and monthly bases for Samsung to be updated on the developments, as well as actions to be taken in response to marketing crises. The approaches included hiring a large number of bloggers and appointing company employees to post comments on the website Mobile 01 and other online discussion platforms to help market Samsung's products. The comments included those on new product test results, to neutralize negative information about Samsung's products, to compare products from competitors by pointing out their imperfections, and to heat up related discussion. The blog writers were required to publish a certain number of articles to boost the visibilities of the targeted product. Sales & Profit International Co. was once commissioned to take charge of such operations shortly in 2012.

3. Grounds for disposition:
   

   (1)

   According to their habits of use of online information for shopping reference, blog readers are likely to trust the experience of other consumers when shopping for certain products. Under such circumstances, whether such blog writers are hired by businesses or they have a stake in the business, their articles will definitely have an effect on the perception of online readers about the products they recommended or those from competitors that they compare and thus affect the purchase decisions of these readers. In this particular case, the comments were posted by bloggers, and thus consumers usually would not associate them with any business entity and the reliability of the comments was therefore increased. Likewise, competitors could not rule out the possibility that such comments did come from consumers. Consequently, competitors in the market had no choice but to respect the freedom of speech of online users to avoid offending consumers and choose not to retort. At the same time, unable to prove that the comments were linked to a competing business, they could not resort to administrative or judicial measures as they usually did in normal disputes arising from business competition. Therefore, the inappropriate marketing practice in this case constituted deceptive conduct likely to affect trading order and in violation of Article 24 of the Fair Trade Law.

   (2)

   After assessing the business revenues obtained by Samsung and 2 other companies involved through the unlawful act, the motive, the management condition of these companies, their market status, number of violations in the past, remorse, and attitude of cooperation throughout the investigation, the FTC, acted according to the first section of Article 41(1), ordered Samsung and the relevant entities to immediately cease their unlawful act, and imposed administrative fines of 10 million NTD on Samsung, 3 million NTD on OpenTide Taiwan, and 50,000 NTD on Sales & Profit International Co.

Appendix:
Samsung Electronics Ltd.’s Uniform Invoice Number: 84899112
OpenTide Ltd.’s Uniform Invoice Number: 28681442
Suntory International Ltd.’s Uniform Invoice Number: 24477118

Summarized by Chen, Jen-Ying; Supervised by Chi, Hsueh-Li