Smartking Digital Cultural and Creative Co., Ltd.

1288th Commissioners' Meeting (2016)

Case:

Smartking Digital violated the Fair Trade Law by falsely claiming purchases of the company's books for children and teaching software would be subsidized by the government

Keyword(s):

Unlawful marketing approach, government subsidy, teaching software

Fair Trade Commission Decision of July 13, 2016 (the 1288th Commissioners' Meeting); Disposition Kung Ch'u Tzu No. 105077

Industry:

Real Estate Development Activities (6700)

Relevant Law(s):

Article 25 of the Fair Trade Law

Summary:

1. Some media reported that the salespeople of Smartking Digital Cultural and Creative Co., Ltd. (hereinafter referred to as Smartking Digital) falsely claimed that purchases of the company's books for children and teaching software would be subsidized by the government. The false claim was made in order to attract consumers to purchase the products during a parent-child activity held in Taichung in June 2015. Therefore, the FTC initiated an ex officio investigation to find out whether the company had engaged in any unlawful marketing practice by claiming purchases of its products would be subsidized by the government.
2. Findings of the FTC after investigation:
   During the aforementioned activity, a salesperson, surnamed Yan, of Smartking Digital told consumers that subsidies would be provided for purchases of the books for children and teaching software. In a meeting for consumers to file appeals with consumer protection officers conducted in Nantou County, he also said that the company and the Parenting Association would provide subsidies for purchases of the said products. Meanwhile, another salesperson, Mr. Mai, of Smartking Digital told consumers that purchases of the company's products would be subsidized because the products had been rated as outstanding teaching materials by the government. Therefore, the prices were cheaper. Later, when giving its statement at the FTC, Smartking Digital admitted that the company had no cooperative relations with the Parenting Association and the latter never provided any subsidies to its sale of the said products. The claim was actually made with the purpose to attract people to attend the activity so that the company could obtain potential customers' personal information which the company's salespeople could use in the future to promote its products. For this reason, the company listed the Parenting Association and other public interest groups as the organizers in the fliers it handed out at the venue of the activity to attract consumers to attend. That was why the salespeople of the company thought there were subsidies from the government and the Parenting Association and further told consumers the products were cheaper because of government subsidies. With the abovementioned as the factual basis of this case, it could be proven that the salespeople of Smartking Digital had indeed falsely claimed there were government subsidies in order to promote the company's products.
3. Grounds for disposition:
   1. As a matter of fact, neither the government nor the Parenting Association or any public interest group provided any subsidies for purchases of Smartking Digital's books for children and teaching software. However, as the salespeople used the said claim to promote the company's products, consumers would have the impression that "the contents of books and software approval by the government must be better" and "the prices would be higher if there were no subsidies" when they made transaction decisions accordingly. In other words, Smartking Digital took advantage of consumers' confidence in government credibility and their tendency to grasp the opportunity when there were discounts because of government subsidies to market its products. It was a deceptive practice using unlawful sales promotion means to mislead consumers into making purchases. The salespeople of Smartking Digital lied about purchases of the company's books for children would be subsidized to mislead consumers into buying the products and, as a result, most trading counterparts were affected. Based on the above facts, the FTC concluded that the conduct of Smartking Digital was able to affect trading order in violation of Article 25 of the Fair Trade Law.
   2. After assessing the sales of Smartking Digital in 2015, the motive and purpose behind the unlawful act, the duration of the unlawful act, the violation being the first ever, the company's cooperativeness throughout the investigation and its promise to reinforce personnel training, the FTC cited the first section of Article 42, ordered the company to immediately cease the unlawful act and imposed on it an administrative fine of NT$150,000.

Appendix:
Smartking Digital Cultural and Creative Co., Ltd.'s Uniform Invoice Number: 2460404

Summarized by:Wu, Meng-Zhou; Supervised by: Chiou, Shwu-Fen