C.S.M. Engineers S.E.A. Pte Ltd. [CSM] brought a suit against Ruey Chieh Enterprise Co. [Ruey Chieh] alleging that it violated the provision that an enterprise shall not for the purpose of competition make any false statements which are likely to cause damage to another person's business reputation
Chinese Taipei
Case:
C.S.M. Engineers S.E.A. Pte Ltd. [CSM] brought a suit against Ruey Chieh Enterprise Co. [Ruey Chieh] alleging that it violated the provision that an enterprise shall not for the purpose of competition make any false statements which are likely to cause damage to another person's business reputation
Key words:
damage to business reputation, tender bidding, chimney
Reference:
Taiwan High Court Judgment (86) Shang Yi No.3209
Industry:
Civil Engineering Industry (4501)
Relevant Laws:
Article 22 of the Fair Trade Law
Summary:
As of 30 September 1996, Wu Chia-p'eng [the defendant, Wu] was the responsible person of Ruey Chieh and knew that his company was competing with CSM in the bidding for the chimney construction at Formosa Plastic Corporation's [FPC's] Mai Liao sixth naphtha cracker FP power plant. After FPC awarded the bid to CSM, Wu sought to cause FPC to cancel the bid, and thus preventing CSM from contracting for the chimney construction. Knowing that an enterprise shall not for the purpose of competition make any false statements which are likely to cause damage to another person's business reputation, Wu, for the purpose of competition, deliberately addressed a letter, in the capacity of the responsible person of Ruey Chieh, to FPC dated 10 May 1996 in which he stated:
“(1) The bidding for chimney Nos. 1 through 4 at Taiwan Power Company's Taichung power plant...was awarded to Tileman U.K. in 1988, which later went bankrupt and was acquired by a Hong Kong company, Hopewell. The chairman of the project, Mr. Richard Hoare was fired. The project was then handled by Hopewell...who dispatched personnel from Hong Kong to complete the project, but the construction quality was very poor. (2) Mr. Hoare, after being 'fired', set up CSM in 1990...”
It was alleged that such false statements were likely to cause damage to CSM's business reputation and hinder competition in the market's trading order.
The defendant did not deny that he had issued the letter to FPC, that the text and wording therein were his own, or that he and the plaintiff were competing in the FPC chimney construction bidding when he addressed the letter to FPC. The main points in defendant's said letter were:
(1) The plaintiff's company did not have any experience in building chimneys; (2) Richard Hoare was fired by his company for bidding at low prices or for his inability to estimate costs; (3) the quality of the chimneys constructed by Hopewell, Hoare's former employer, was poor; (4) the company represented by the defendant had good quality construction products and extensive experiences.
According to the content of the defendant's letter to FPC and the timing of its issuance, the letter was intended to cause FPC to cancel the bid award, and thus preventing CSM from contracting for the chimney construction. If the bid award had been canceled due to the defendant's false statement, Ruey Chieh could then have obtained the bid. It was established that the plaintiff and Ruey Chieh were in competition when the defendant addressed the letter to FPC. The plaintiff did not argue with respect to point (1) raised in the defendant's letter that the plaintiff did not have any experience in building chimneys. Therefore, there is no ground to claim such a statement is untrue. Regarding point (2) on Mr. Hoare's being fired for bidding at low prices or for his inability to estimate costs, the "return giving" Tileman issued to Hoare reads "...the person who has resigned...Hoare," which means Hoare resigned and was not fired. Apparently, the defendant intentionally used "fired" to diminish the stature of Hoare. Though the defendant argued he did not intend to damage the reputation of the plaintiff, according to the public's understanding, "fired" refers to an involuntary discontinue of employment, while "resign" refers to a voluntary one. The two terms differ in meaning. The defendant intended to make the point that Hoare was fired because his company suffered losses due to either his bidding at low prices or incorrect estimates. Such phrasing certainly produced a negative impression about Hoare and damaged his reputation. Regarding the point on the poor quality of the chimneys that Hopewell delivered for the Taichung project, the defendant expressed that he had heard the allegation from Taiwan Power Company, and that he did not have any proof. In addition, Hopewell obtained the chimney construction bid from its acquisition of Tileman U.K., who obtained the bid through Hoare's representation in the bidding. Thus, the phrasing of the defendant's allegation could be interpreted as follows: Hoare once chaired a construction project that was suspected of poor quality; as Hoare had incorporated CSM, CSM's construction quality might be questionable. The defendant denied violating Article 22 of the Law because he did not make any false statements regarding the plaintiff's company. The defendant's denial was not accepted. It was found that the defendant's unfounded statements to the FPC regarding the plaintiff's business, made for the purpose of competition in bidding, violated the Law, that the violation was clearly established, and thus a fine penalty was imposed.
Summarized by Lai, Chia-ch'ing
Supervised by Hsu, Chao-ying
Appendix:
C.S.M. Engineers S.E.A. Pte Ltd.’s Uniform Invoice No.: 97162016