Tong Yi Water Co., Ltd.

Case:

Tong Yi Water violated the Fair Trade Law for its water purifier marketing practices

Key Word(s):

Water purifier, water purifier filter, raffle

Reference:

Fair Trade Commission Decision of October 8, 2014 (the 1196th Commissioners' Meeting); Disposition Kung Ch'u Tzu No.103117

Industry:

Manufacture of Other Domestic Appliances (2859)

Relevant Law(s):

Article 24 of the Fair Trade Law

Summary:

1. Taichung City Government discovered that the name of a private citizen who had filed a complaint with it was not on the list of Sea-of-Flowers-in-Shinshe raffle prize winners posted on the website of Tong Yi Water Co., Ltd. (hereinafter referred to as Tong Yi Water) but the said private citizen had been informed of winning a water purifier. Tong Yi Water did acquire the consent of people informed of winning a purifier before installing it; however, after installation, the company would push those people to make a purchase of 2- or 3-year filter supply. In other words, Tong Yi Water had probably used the raffle as a pretext to market the filters and was suspected in violation of Article 24 of the Fair Trade Law.
2. Findings of the FTC after investigation:
   

   According to Taichung City Government and Tong Yi Water, Tong Yi Water had set up a stand in the Shinshe Delicacy Section during the Sea of Flowers in Shinshe activity organized by Taichung City Government and the Council of Agriculture of the Executive Yuan and conducted a raffle. The raffle tickets distributed at the time did not carry the name of the raffle organizer and it had nothing to do with any government agency. Tong Yi Water did have the receipts of purchases of the raffle prizes the company offered but was unable to provide evidence that it had actually bought the scooter, smartphone, tablet computer and electronic rice cooker indicated on the ticket as the raffle prizes. Messages left by private citizens on the Facebook wall of the organizer of Sea of Flowers in Shinshe showed that the prize for every person informed of winning was a water purifier and each person agreed to have the water purifier installed had to pay 10% of the value of the water purifier (the fee according to Tong Yi Water was to cover the company's expenses for operating the activity and had nothing to do with prize winning tax). Tong Yi Water did provide the list of winners of other prizes but none of those winners was on the winner list posted on the company’s website. Meanwhile, the company supplying the purifiers to Tong Yi Water testified that the cost of a purifier was far cheaper than the 10% fee paid by people who had agreed to have the purifier installed. After installing the purifier, Tong Yi Water pushed a package deal of replacement filters on these people. Only until then were the people told the cost of the filters. In other words, these people had agreed to have the purifier installed without knowing the price of the replacement filters in advance.

3. Grounds for disposition:
   

   (1)

   When an enterprise conducts a raffle and informs people they have luckily won the prizes without actually performing the drawing or without disclosing that the aim of the raffle is to sell certain products or services to attract people to participate in a promotional activity unknowingly, such marketing approaches will put consumers in a relatively disadvantageous position because of the information asymmetry in between.

   (2)

   Tong Yi Water conducted the raffle in an activity organized by government agencies to make the public believe the raffle was associated with a government agency or organization. Then the company informed people with no intention of making purchases that they had won prizes and took advantage of their aleatory attitude to obtain their personal information. Even those who were not listed on the prize winner list were informed of winning prizes. Then the company lied about the value of the purifier to make people under information asymmetry think it was worthwhile to pay a small fee to have the purifier installed or even agree to purchase the consumable parts (filters). The overall marketing practice was deceptive and obviously unfair conduct able to affect trading order and in violation of Article 24 of the Fair Trade Law. Therefore, the FTC cited the first section of Article 41(1) of the same law, ordered the company to cease the unlawful act and also imposed on it an administrative fine of NT$100,000.

Appendix:
Tong Yi Water Co., Ltd.'s Uniform Invoice Number: 54595788