Yungshin Pharm Ind. Co. Ltd.

Case:

Key Word(s):

Toothpaste, gift giving

Reference:

Fair Trade Commission Decision of January 8, 2014 (the 1157th Commissioners' Meeting)

Industry:

Manufacture of Cleaning Preparations (1930)

Relevant Law(s):

Article 19(iii) of the Fair Trade Law

Summary:

1. The complaint from Hawley & Hazel Chemical (Taiwan) Co., Ltd. (hereinafter referred to as "Hawley & Hazel") was summarized as follows: Hawley & Hazel purchased Yunnan Baiyao Toothpaste (100g) sold by Yungshin Pharm Ind. Co., Ltd. (hereinafter referred to as "Yungshin") at AMart at a price of NT$168. The gift attached was a travel package worth NT$120 (contains 30g Yunnan Baiyao Toothpaste, dual effect sensitive toothbrush, and interdental brush), exceeding 1/2 of the product's price. This was suspected a violation of Article 2(1) of the FTC's principles for handling gifts and prizes and a violation of Article 19(iii) of the Fair Trade Law.
2. Findings of the FTC after investigation:
   

   (1)

   Yungshin became an agent of Yunnan Baiyao Group Co., Ltd. for the product Yunnan Baiyao Toothpaste in April 2012, and was a new entrant in the toothpaste market. Yungshin held the gift giving promotion in contention from July 2012 to January 2013. Yungshin's distributor Vanguard Hyunion Corp. was responsible for supply the product to AMart. According to the statement from AMart, when the promotion started in July 2012, Vanguard Hyunion offered "buy 100g get 60g free," but changed the gift to a "travel package" in August 2012 stating that they were short of the original gift. The package of the product in contention included the words "Yungshin Pharm," "free travel package," and "gift worth NT$120." The information on the gift was already printed when Yungshin provided the product to Vanguard Hyunion. Hence, the FTC believed that Yungshin should be responsible for the gift giving conduct in contention.

   (2)

   In the statement by Yungshin, the reasonable market price of the toothpaste (100g) was NT$230 (retail price in distribution channels varied from NT$168 to NT$278). Using this for calculation, the reasonable market price for a 30g tube of toothpaste was NT$69. If this amount was deducted from NT$120, the value of the toothbrush and interdental brush in the travel package was NT$51, which did not exceed 1/2 of the product's actual sales price of NT$168. The toothbrush and interdental brush was purchased by Yungshin from Yeong Hung Trading Co., Ltd. (hereinafter referred to as "Yeong Hung"), in which the unit cost of each item in the gift included: Shallop dual effect sensitive tooth brush NT$5.8, Shallop interdental brush NT$4, toothbrush case NT$8.5, and hot foil stamping on the packaging NT$0.1058. Hence, the actual cost of the gift would be NT$20.6058, for which Yungshin produced invoices issued by Vanguard Hyunion, which was also lower than 1/2 of the price of the product in contention.

3. Grounds of disposition:
   

   (1)

   The FTC found that after AMart acquired the product from Vanguard Hyunion, the price was set by AMart based on its business operations. The price of NT$168 for the product that consumers saw was part of a short-term promotion held by AMart and was not decided by Yungshin. Furthermore, Yungshin did not have any direct trading relationship with consumers. Means for "inducement with interest" referred to in Article 19(iii) of the Fair Trade Law still required the company to cause a trading counterpart(s) of competitors to do business with "itself." Observing cases of gift giving violations of the FTC over the years, the party holding a gift giving promotion always had direct trading relationships with consumers they intend to attract. Hence, the gift giving promotion of Yungshin did not violate Article 19(iii) of the Fair Trade Law.

   (2)

   Yungshin printed the text "gift worth NT$120" on the packaging of the product in contention. The FTC found after investigation that the unit price of a toothbrush and interdental brush of Yeong Hung were NT$30 and NT$19. As mentioned above, the price of a 30g tube of Yunnan Baiyao Toothpaste was roughly NT$69, and adding the price of the toothbrush case and its contents, the price of the gift was roughly NT$120. Yungshin conducted a market survey that found prices of travel packages between NT$79 and NT$160, which had an average price of NT$120, showing that Yungshin did not put a false statement about the value of the gift on the package.

Appendix:
Yungshin Pharm Ind. Co. Ltd.'s Uniform Invoice Number: 56065601

Summarized by Tseng, Huei-Yi; Supervised by Lin, Gin-Lan