Family Spa Enterprise Co.

1232nd Commissioners' Meeting (2015)

Case:

Family Spa violated the Fair Trade Law for posting false advertisements claiming itself as “the largest manufacturer and wholesaler in the country” and “having in business for 20 years”

Keyword(s):

False advertising, use of superlatives, time of establishment

Reference:

Fair Trade Commission Decision of June 17, 2015 (the 1232nd Commissioners’ Meeting), Disposition Kung Ch’u Tzu No. 104042

Industry:

Wooden Containers Manufacturing (1404)

Relevant Law(s):

Article 21 of the Fair Trade Law

Summary:

1. Family Spa Enterprise Co. posted an advertisement in Apple Daily claiming itself as “the largest manufacture and wholesaler in the country” without providing objective statistics, such as sales figures or survey results, to support the statement. In the same advertisement, the company also applied the wording of “special thanks sale to celebrate the 20th anniversary” and “having been in business for 20 years” which was inconsistent with the information indicated in its business registration. False advertising was therefore suspected.

2. Findings of the FTC after investigation:

   (1)	Family Spa paid for the said advertisement, provided Apple Daily with the information to be posted in the advertisement and approved the design of the advertisement before it was posted. Therefore Family Spa was without doubt the advertiser of the advertisement in question.
   (2)	The claim of company being “the largest manufacturer and wholesaler in the country” gave the public the impression that the company had the biggest business scale among all market competitors or it offered the largest selection. Family Spa, a family-owned business with branches all around the country, made such a claim but could not provide objective statistics to prove that it was “the largest in the country.” Obviously, the claim was groundless.
   (3)	The wording of “special thanks sale to celebrate the 20th anniversary” and “having been in business for 20 years” gave the public the impression that the company had been in operation for two decades. However, business registration records indicated Family Spa International Development Co., Ltd. was founded on Aug. 10, 2004 and dissolved on Dec. 4, 2007. Further, Family Spa was established on Dec. 3, 2007 and started operation from then on. Even though Family Spa provided newspaper clippings showing the company had already been in business on as early as Dec. 10, 2003, the proved entire period was still far from 20 years. Generally, consumers would make more positive associations with the quality of product or service of a business with a history. Therefore, the length of time a business had been in operation could have an effect on consumers’ judgment of its product or service quality and could lead to the making of transaction decisions. Hence, businesses have the obligation to be truthful about its history when appealing to consumers through advertising. Although the company contested the claim of 20 years of history was based on the fact that its operator had begun to work in the said business at around 1996, one person’s work experience could not be associated with the business reputation of Family Spa International Co., Ltd. or Family Spa Enterprise Co., Ltd. In other words, it was not enough to prove the company had been in operation for 20 years.

3. Grounds for disposition:

   (1)

   Family Spa claimed in the advertisement that the company was “the largest manufacturer and wholesaler in the country” without objective statistics, such as sales figures or survey results, to support the statement. However, such a claim could cause consumers to have wrong perceptions or even make wrong decisions. It was a false, untrue and misleading representation in violation of Paragraph 1 of Article 21 of the Fair Trade Law.

   (2)

   The wording of “special thanks sale to celebrate the 20th anniversary” and “having been in business for 20 years” in Family Spa’s advertisement was not consistent with the facts. It could cause trading counterparts to have mistaken perceptions and to make wrong decisions. Therefore, it was a false, untrue and misleading representation in violation of Paragraph 1 of Article 21 of the Fair Trade Law.