Yousenmei Purification Technology

1388th Commissioners' Meeting (2018)

Case:

Yousenmei Purification Technology violated the Fair Trade Law in marketing its energy water machine

Keyword(s):

Energy water machine, energy water machine filter, raffle activity

Reference:

Fair Trade Commission Decision of June 13, 2018 (the 1388th Commissioners' Meeting); Disposition Kung Ch'u Tzu No. 107042

Industry:

Manufacture of Other Domestic Appliances (2859)

Relevant Law(s):

Article 25 of the Fair Trade Law

Summary:

1. The FTC received an email from an informer complaining about Yousenmei Purification Technology Co., Ltd. (hereinafter referred to as Yousenmei Purification Technology). The informer went shopping in a department store and participated in a raffle activity. Later, the informer was notified by Yousenmei Purification Technology that he had won an alkaline energy water machine (hereinafter referred to as the product in question) worthy of 32,000 NT dollars (the same currency applies hereinafter) and the informer had to pay 3,800 dollars of advertising fee. The informer thought Yousenmei Purification Technology was in violation of the Fair Trade Law. Meanwhile, in August the same year, the media reported that an energy water machine company cooperated with local fruit venders to hold raffle activities. Consumers who were notified of winning energy water machines thought the prizes were free of charge, but they were requested to pay a 3,800-dollar advertising fee and thought it was a scam. Since both cases were similar and the offender was the same company, the FTC consolidated them as a single case and look into the case.
2. Findings of the FTC after investigation:
   The FTC first verified with the stores holding the raffle activities with Yousenmei Purification Technology and the energy water machine supplier, and at the same time requested Yousenmei Purification Technology to provide its statement at the FTC. Then, the FTC visited and interviewed the raffle winners and found out Yousenmei Purification Technology organized four "Lotto + Raffle" activities with stores between November 2016 and July 2017. Each activity was divided into two stages. The first stage was "making extra purchases based on Lotto ticket numbers {the items to be purchased additionally decided according to Lotto ticket numbers}" and the second stage was "free gifts (a raffle held to draw out winners of free household appliances.)" Most of the energy water machine winners expressed they would not have agreed to have the machine installed if they had not been notified of their prize winning.
3. Grounds for disposition:
   (1) Regarding the "making extra purchases based on lotto ticket numbers" in the first stage, according to Taiwan Lottery Corporation, the issuer of Lotto tickets, based on the number of tickets Yousenmei Purification Technology gave out and the actual number of people participating in each raffle, there had to be at least two to three store manager prize winners. Yet Yousenmei Purification Technology claimed there was no winner. Under such circumstances, it was doubtful whether the company really provided the prizes. In the meantime, there had to be over one hundred feedback prize (the product in question) winners, a lot more than the 20 prizes offered, but the company was unable to produce the list of feedback prize winners. The FTC called and interviewed the people notified of their prize winning and having the energy water machine installed, it found out that most of them expressed they had never checked the raffle results. Some consumers even revealed that they had checked the raffle results and found out they had not won any prizes but were still notified of their prize winning. Apparently, Yousenmei Purification Technology took advantage of people's mentality of hoping to be lucky in raffle activities, held the raffles to get the personal information of consumers and then called them on the phone to push the product in question on these people.
   (2) As for the "free gifts" in the second stage, they were given out indeed. However, Yousenmei Purification Technology organized the raffles primarily to market energy water machine accessories. The energy water machines were made the feedback prizes, but winners had to pay 3,800 dollars. In other words, the prizes were not free of charge. Then, when installing the machine, the employees of Yousenmei Purification Technology would talk the people into buying filters. Therefore, the FTC concluded that Yousenmei Purification Technology used raffles to give low-price products as the bait, took advantage of consumers' mentality of feeling good about being lucky but concealed the purpose of pushing the company's products to achieve the objective of selling energy water machines and filters.
   (3) Yousenmei Purification claimed on the raffle tickets that an energy water machine was worthy of 32,000 dollars. However, the FTC's investigation showed the company's purchase price was far lower than 32,000 dollars. Obviously, Yousenmei Purification Technology exaggerated the value of the product in question to mislead people to have wrong expectations of the quality of the product as well as develop the mentality of feeling lucky about their prize winning. After installing the machines, Yousenmei Purification Technology's employees then would try to promote the company's filter change package. It was then when these people learned about the cost of filter change for the first time, but they had no way of comparing filter prices and were caught in information asymmetry. When interviewed, over 90% of the prize winners expressed they would not have purchased the product if they had not been notified of their prize winning. For this reason, the FTC concluded that the overall practice adopted by Yousenmei Purification Technology to market energy water machines and filters was deceptive and obviously unfair conduct sufficient to affect trading order in violation of Article 25 of the Fair Trade Law. Therefore, citing the first section of Article 42 of the same Law, the FTC imposed an administrative fine of 200,000 dollars on the company.