RT Mart

1375th Commissioners' Meeting (2018)

Case:

RT Mart violated the Fair Trade Law by falsely announcing forthcoming price increase of toilet paper to promote sales

Keyword(s):

Toilet paper, sales promotion

Reference:

Fair Trade Commission Decision o March 14, 2018 (the 1375th Commissioners' Meeting); Disposition Kung Ch'u Tzu No. 107004

Industry:

Other Retail Sale in Non-specialized Stores (4719)

Relevant Law(s):

Article 25 of the Fair Trade Law

Summary:

1. On February 23, 2018, the media reported that toilet paper producers would increase toilet paper prices by 10 to 30% in mid-March. The news triggered psychological responses and caused consumers to panic and rush to purchase toilet paper. The event was even reported by international media. The FTC therefore initiated an ex officio investigation to find out whether the intended toilet paper price increase was in violation of the Fair Trade Law and to sanction related businesses for illegally disclosing incomplete information and taking the opportunity to promote sales or cause consumers to rush to purchase toilet paper. At the same time, the FTC also sent staff members to understand the condition of toilet supply at various hypermarkets.
2. Findings of the FTC after investigation:
   The investigation revealed that RT Mart International Co., Ltd. (hereinafter referred to as RT Mart) was the culprit that sent the toilet price increase message to the media and caused the public to rush to purchase toilet paper. To make the public know about the company's promotional toilet paper sale from February 23 to 27, 2018, RT Mart sent a message drawn up by the company saying that "toilet paper prices to go up 30% for sure and sales at stores escalated five folds" to different media through the cell phones of the company's public relations personnel and company email account. The message sent by RT Mart was titled "toilet paper prices to go up 30% for sure" and the text also indicated the likely time point and margin of the price increase. Then, the promotional toilet paper sale from February 23 to 27 was mentioned along with the claim that the company would continue to stick to its low price policy. In other words, RT Mart first announced the unproven message of major toilet paper producers having decided to raise the prices of toilet paper. Then the company mentioned the promotional sale with the obvious intention of using the opportunity to attract consumers to purchase toilet paper at its outlets. Meanwhile, the chronological order of related news articles released and traffic of searches for information associated with toilet paper on the Internet also indicated RT Mart was the culprit responsible for the sudden disorder in the toilet paper market.
3. Grounds for disposition:
   (1) The message from RT Mart carried the wording of "the increase of prices of toilet paper from ?ell-known' toilet paper producers won't be just 1 or 3% but 10 to 30%" and "the price increase will happen as soon as mid-March or before April at the latest." However, toilet paper producers had never conducted any price negotiation with RT Mart. The time point and margin of the price increase were ungrounded and RT Mart was unable to present any proof to support its claim that the price increase would achieve 30%. At the same time, the evidence provided by RT Mart and toilet paper producers also clearly indicated RT Mart had released the false information to mislead consumers to achieve the company's purpose of promoting sales of toilet paper.
   (2) The FTC inquired RT Mart's competitors and toilet paper producers to understand the business practices in the industry. In the past, the period around the Chinese New Year had been a slow season for sales of toilet paper, making the rush purchase of toilet paper this time an exceptional phenomenon. To cope with the sudden disorder in the toilet paper market, retailers had to resort to emergency measures of accepting orders, and they also received a lot of complaints from customers. Meanwhile, toilet paper producers found themselves not having enough stock and had to ask their employees to work overtime to meet the sudden escalation of demand. As a result, their production costs went up. In contrast, consumers' normal shopping behavior was disrupted and they had to spend extra time and transportation expenses to buy toilet paper. Physical channel of sales did not have enough toilet paper in stock and consumers switched to online stores to buy toilet paper. However, toilet paper is bulky and logistics businesses' delivery schedule arrangements for other products were thus messed up by the rush. In response, they had to send out more vehicles and use more manpower. As a consequence, their operating costs were jacked up. In other words, the release of the false message about toilet paper price increase by RT Mart caused manufacturers, competitors and consumers to suffer unexpected cost increases or disadvantages. The impact on trading order in the market was serious.
   (3) RT Mart released the false toilet paper price increase message to mislead consumers and promote the company's sales of toilet paper. The practice created a sudden supply-demand imbalance in the toilet paper market. It was deceptive conduct sufficient to affect trading order in violation of Article 25 of the Fair Trade Law. Therefore, the FTC imposed an administrative fine of NT$3.5 million on the company.