Criminal
judgment regarding suspected violation of the Fair Trade Law by Amway Taiwan
Co., Ltd.
Chinese
Taipei
Case:
Criminal judgment regarding suspected violation of the Fair Trade Law by
Amway Taiwan Co., Ltd.
Key Words:
Comparative advertising, distributor (multi-level marketing), women's hose
Reference:
Taipei District Court Criminal Judgment (88) Yi Tzu No. 3103
Industry:
Import and Export Trade Industry (5603)
Relevant Laws:
Articles 22,
37, and
38 of
the Fair Trade Law
Summary:
- The summary of prosecution:
Amway Co. Taiwan Ltd. (Amway Taiwan) is a domestic multi-level marketing company,
and is an "enterprise" under the Fair Trade Law. General Manager
Liu Ming-hsiung is responsible for promotion and development of local sales.
In order to compete for market of women's hose, Amway Taiwan produced the
document "Analysis and Comparisons of Hosiery Market" (the "comparison
table") as a reference for its marketers and distributors while promoting
its product. Included in the table were comparisons between Amway's products
with that of De Paree Corporation (De Paree) which were not fairly or objectively
made. By falsely comparing its products with denier numbers to De Paree's
products for which no denier numbers were given, and characterizing De Paree
as a company that produced "inferior" products or products "lacking
denier numbers," Amway had deliberately concealed the positive information
regarding De Paree in a manner that could mislead consumers sufficient to
damage De Paree's business reputation. Therefore defendant Liu Ming-hsiung
is held to have violated Articles 22 and 37 of the Fair Trade Law, and defendant
Amway Taiwan should be punished under Article 38 of the same law.
- The defendants' reply:
Defendant Liu Ming-hsiung argued as follows: As general manager of Amway Taiwan,
he is responsible for overall operating policies, but does not necessarily
personally oversee every single internal matter. As a company with yearly
revenues of 4.5 billion New Taiwan Dollars, it is necessary to establish different
departments to serve the needs of various industry sectors. The comparison
table in question was produced by the marketing department as a reference
to position Amway's women's hose on the market; it was an internal briefing
providing information on overall market conditions. As Amway sold hundreds
of products, it is not necessary for the general manager to personally prepare
the briefing and to take care of the market positioning matters for each product.
The defendant, Liu Ming-hsiung, had no knowledge of the comparison table,
and therefore does not meet the standard for "the person engaging in
the conduct" under Articles 22 and 37 of the Fair Trade Law.
The defense raised by Amway Taiwan is summarized as follows: The comparison
table in question was produced by the marketing department as a reference
in developing positioning and pricing strategies for Amway's women's hose;
it was an internal briefing providing information on overall market conditions.
Samples upon which the comparisons were made were chosen from the product
available on the market in all price ranges. Information on materials and
specifications were taken from the manufacturers' own labeling information
and then used as the basis for designing pricing and product positioning strategies.
The distributors in the operations department do not have this comparison
table. This type of internal document definitely cannot be categorized as
"advertising." Moreover, Amway in fact did not engage in the conduct
of "disseminating" false advertising. According to the witness Hsu
Li-ping, she acquired the comparison table from an unacquainted customer during
a business occasion at the bank where she worked. They happened to chat about
women's hose and the customer took a copy of the comparison table from her
purse. Since the witness was interested, she took that only copy home without
any attempt from the unacquainted customer to sell her hose. It can be argued
that her acquisition of the table was not the result of any sale activities
on the part of Amway; therefore, Amway Taiwan, should not be treated as having
engaged in any unlawful sales or dissemination activities, and does not meet
the requirements for punishment under Article 22 of the Fair Trade Law.
- The prosecutor's accusation was based on the testimony of witnesses Hsiao
Yuan-yu and Liu Chuan-hsun and the affidavit of Hsu Li-ping, as well as the
investigation of the Commission. However, three legal requirements need to
be satisfied before establishing a violation of Article 22: (1) The person
engaging in the conduct must have in fact stated or disseminated the false
information; (2) the statement or dissemination of such must be for the purpose
of competition; and (3) the conduct referred to must be sufficient to injure
the business reputations of others. After investigation, the Commission did
hold that the defendants had produced the comparison table, that the table
was for the purpose of competition, that the defendants did make false statements
therein, and further that it had the actual effect of damaging the business
reputation of the complainant. All of the above seem to conform to the given
requirements for establishing violation. Nevertheless, the Commission had
some reservations about whether the comparison table was in fact an advertisement
or document intended for external distribution. In addition, Hsiao Yuan-yu
only testified to the fact that she got the comparison table from Liu Chuan-hsun;
Liu Chuan-hsun testified that he got it from his wife Hsu Li-ping, and Hsu
Li-ping's affidavit only stated that she got it from a customer. These witnesses
can only prove that the comparison table came from a business customer, but
whether or not Amway distributed the table for the purpose of competition
remains unknown. Following subpoena, Hsu Li-ping testified: "I work at
a bank, and one day I was talking to a customer, and we happened to chat about
women's hose. The customer produced the table for anyone who was interested
to read. I didn't know what business the customer was in; she just took out
the table and said that anyone could make a copy if they were interested."
The witness Hsu Li-ping clearly stated that the customer didn't try to sell
any hose, and she didn't know what business the customer was in. Therefore,
whether the customer was indeed an Amway distributor or employee was still
questionable. Moreover, the fact that the customer produced only a copy rather
than a large number of the comparison table for duplicating purpose revealed
that the customer did not intend to disseminate them; and the fact that the
customer did not bring any hose to the bank also indicated that the customer
was not engaged in selling them. It can be said that the table was produced
merely for the information of interested parties in the course of a conversation,
which still does not meet the aforementioned legal requirements of dissemination
for the purpose of competition. If the customer had been an Amway distributor
or employee, she surely would have taken that opportunity to sell the Amway
product. Since she didn't, it is hard to assume that she was a member of Amway,
and her activity of circulating the comparison table should be deemed as been
conducted by Amway. Therefore it seems somewhat baseless for the prosecutor
to rely only on one copy of a comparison table to maintain that the defendant
Liu Ming-hsiung or the defendant company was making false statements or disseminating
false information for the purpose of competition. In addition, investigation
also had shown that there was no other direct evidence sufficient to prove
that the defendants were guilty of the aforesaid conduct. Thus in light of
the above explanation, the two defendants cannot be proven guilty of criminal
conduct and are adjudged innocent.
Appendix:
Amway Taiwan Co. Ltd.'s Uniform Invoice Number: 84308897
De Paree Corporation's Uniform Invoice Number: 84252654
Summarized by Ch'iu Shu-fen
Supervised by Hsu Chao-ying
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