Fair Trade Law Q&A - False or Misleading Advertising

A1:

It is the responsibility of the FTC to investigate false advertising and other unfair competition practices. When there are false advertisements and illegality is confirmed after investigations, the FTC always makes appropriate sanctions to protect trading order and consumer interests. The provisions against false advertising in the country are specified in the regulations of related competent authorities which all act according to their duties and cooperate to crack down on unlawful activities to safeguard consumer interests. The types of cases the FTC transfers to be handled by other competent authorities are as shown in the table below:

	Case Type	Competent Authority
1	Advertisements claiming, suggesting or insinuating products or services as having medical effects	Ministry of Health and Welfare
2	Labeling and advertising for foods, health foods, dairy products, cosmetics and medicines	Ministry of Health and Welfare
3	Healthcare advertisements	Ministry of Health and Welfare
4	Advertisements for human organ banks	Ministry of Health and Welfare
5	Labeling for ordinary products	Ministry of Economic Affairs
6	Labeling for seeds and saplings to be sold	Ministry of Agriculture
7	Labeling and advertising for agricultural chemicals, fertilizers, animal feed, domesticated animal or fowl breeding stock or plant genetic resources, animal medicines and pet foods	Ministry of Agriculture
8	Labeling for agricultural products at wholesale markets, labeling for packaged rice, labeling for traceable agricultural products and labeling and advertising for organic foods	Ministry of Agriculture
9	Agricultural product advertisements, agricultural product labeling at retail markets and packed rice advertisements	Ministry of Health and Welfare
10	Advertisements posted by veterinarians	Ministry of Agriculture
11	Labeling for tobacco and alcohol products and advertisements for alcohol products	National Treasury Administration, Ministry of Finance
12	Advertisements posted by registered private learning centers	Education authorities of special municipalities and counties/cities
13	False advertising regarding employment referral service or employee recruitment	Ministry of Labor
14	False content in training program advertisements or brochures from vocational training institutions	Ministry of Labor
15	Advertisements posted by travel agencies	Tourism Bureau, Ministry of Transportation and Communications
16	False, untrue or misleading advertisements posted by securities or commodity trading firms	Financial Supervisory Commission
17	Advertisements for CPA services posted by individuals who have not obtained CPA status	Financial Supervisory Commission
18	Advertisements involving financial regulations	Financial Supervisory Commission
19	Advertisements for immigration application services	Ministry of the Interior
20	Real estate agent advertisements that are subject to the Real Estate Broking Management Act	Ministry of the Interior
21	Cross-border matchmaking advertisements	Ministry of the Interior
22	Cases that are to be handled by other agencies according to the results of FTC’s consultations with other administrative agencies or the principle of special law prevailing over general law	Other agencies

Relevant article(s) of law: Fair Trade Law, Article 21

A2:

1. As set forth in Paragraphs 1 and 2 of Article 21 of the Fair Trade Law amended on Feb. 4, 2015,"No enterprise shall make or use false or misleading representations or symbols on the matter that is relevant to goods and is sufficient to affect trading decisions on goods or in advertisements, or in any other way make it known to the public. The matter referred to in the preceding paragraph that is relevant to the goods, and is sufficient to affect trading decisions, includes: price, quantity, quality, content, production process, production date, valid period, method of use, purpose of use, place of origin, manufacturer, place of manufacturing, processor, place of processing, or any other relevant item that has touting effects." Paragraph 4 of the same article also stipulates,"The preceding three paragraphs shall apply mutatis mutandis to services provided by an enterprise."
2. In false advertisements, besides using the price, quantity, quality and content of product to attract consumers, businesses also often include information regarding their identities, status and management conditions that are associated with the product and able to affect transaction decision-making. For this reason, the wording"use false or misleading representations or symbols on the matter that is relevant to goods and is relevant to sufficient to affect trading decisions" is now included in Paragraph 1 of Article 21 of the Fair Trade Law. Meanwhile, it can be disputable in administrative remedy practices whether the wording"price, quantity...place of processing" is an exemplification or a list of items when such contents involve the use of false and untrue or misleading representations or symbols. To prevent uncertainty in the application of law and also to make the wording"relevant to goods and is relevant to sufficient to affect trading decisions" more precise, examples are given for the wording"price, quantity...place of processing" in Paragraph 2 of the amended article. Hence, the price, quantity, quality, content, production process, production date, valid period, method of use, purpose of use, place of origin, manufacturer, place of manufacturing, processor, place of processing, etc. denote exemplification. All objects of transactions of economic value and related matters that are not objects of transactions but have the effect of attracting consumers, including an enterprise's identity, status, management condition, relations with other businesses, public interest groups or government agencies, as well as the gifts or prizes to be provided by the enterprise as part of the deal, belong to this category.

Relevant article(s) of law: Fair Trade Law, Article 21

A3:

The wording"in any other way make it known to the public" refers to direct or indirect dissemination of information to be read or heard by unspecified consumers or the general public, including setting up signs, distributing business cards, holding product (service) presentations, the provision of information to be posted by the media, issuing written messages to make an enterprise known to the public, posting information in publications to be publicly sold, giving out promotional information to consumers, distributing product use manuals to professionals to spread messages to the public, etc.

Relevant article(s) of law: Fair Trade Law, Article 21

A4:

The"representations or symbols" stated in Article 21 of the Fair Trade Law refer to texts, language, sounds, graphs, marks, numbers, images, colors, shapes, actions, objects or any other messages or concepts able to express or convey commercial value.

Relevant article(s) of law: Fair Trade Law, Article 21

A5:

Article 21 of this Law provides that "no enterprise shall make or use false or misleading representations or symbol as to price, quantity, quality, content, production process, production date, valid period, method of use, purpose of use, place of origin, manufacturer, place of manufacturing, processor, or place of processing on goods or in advertisements, or in any other way making known to the public."

The term "false" means any representation or symbol that is inconsistent with facts, and where the deviation would be unacceptable to a significant number of the general or relevant public, and would lead to misunderstanding or incorrect decisions.

Relevant article(s) of law: Fair Trade Law, Article 21

A6:

Article 21 of this Law provides that "no enterprise shall make or use false or misleading representations or symbol as to price, quantity, quality, content, production process, production date, valid period, method of use, purpose of use, place of origin, manufacturer, place of manufacturing, processor, or place of processing on goods or in advertisements, or in any other way making known to the public."

The term "misleading" means any representation or symbol that would cause a significant number of the general or relevant public to misunderstand or make incorrect decisions, regardless of whether such representation or symbol is consistent with facts.

Relevant article(s) of law: Fair Trade Law, Article 21

A7:

1.The factors to be considered in determining whether a representation or symbol is false or misleading are as follows:
(1) The determination of whether a representation or symbol is false or misleading shall be based on the basis of the general public exercising an ordinary degree of care.
(2) Where the content of a representation or symbol is manifested by comparison or especially distinctive means, and where the major part that is especially distinctive could easily form the primary factor contributing to a consumer's transaction decision, the especially distinctive major part may be observed independently in making the determination.
(3) Where a representation or symbol, observed in isolation, is factual, but the overall impression and effect it delivers, when observed in combination, is sufficient to cause concern about misunderstanding or erroneous decisions by counterparts involved in a relevant transaction, it shall be deemed misleading.
(4) The representation or symbol with respect to the content of critical transaction information is disproportionally arranged in its layout, position, and font size, as to cause concern on the misunderstanding or erroneous decisions by counterparts in a relevant transaction.
(5) The representation or symbol with respect to the conditions of burden or limitation does not fully disclose such conditions as to cause concern on the misunderstanding or erroneous decisions by counterparts in a relevant transaction.
(6) A representation or symbol objectively having multiple reasonable interpretations shall not be deemed false as long as one of the meanings is true. However, this shall not apply when the intent to mislead is plainly obvious.
(7) The degree of discrepancy between the representation or symbol and the actual conditions.
(8) Whether the content of the representation or symbol is sufficient to affect the trading counterparts possessing ordinary knowledge and experience to make reasonable judgment and trading decisions.
(9) Effect on the economic interests of competing enterprises and trading counterparts.

2. The level of difference between a representation or symbol and the actual condition may be determined in accordance with the opinions of the competent authority of the industry in concern or objective and just professional institutions.

Relevant article(s) of law: Fair Trade Law, Article 21

A8:

1. According to Paragraph 1 of Article 21 of the Fair Trade Law,"No enterprise shall make or use false or misleading representations or symbols on the matter that is relevant to goods and is sufficient to affect trading decisions on goods or in advertisements, or in any other way make it known to the public." Paragraph 4 of the same article also stipulates that the regulation applies mutatis mutandis to services provided by an enterprise. When violation of this regulation is confirmed, the Fair Trade Commission may act according to the first section of Article 42 of the Fair Trade Law and sanction the offender.
2. The Fair Trade Commission determines the party to be responsible for a false advertisement according to the results of its investigation, who the actual provider of the product or service advertised is, how the content of the advertisement is decided or who supervises the production and use of the advertisement, who provides the funds needed to produce the advertisement, the name of the enterprise, business logo and URL indicated in the advertisement, the contract signer, invoice issuer, the party actually responsible for the sales and advertising activities and the processes of such activities, the overall impression of trading counterparts, and who the profits from sales go to.

Relevant article(s) of law: Fair Trade Law, Article 21

A9:

Article 21 states that the advertising agent and the advertising medium shall be held jointly and severally liable. It refers to circumstances where the advertising agent and the advertising medium create, design or disseminate, or publish a misleading advertisement, in spite of the fact that the agent or medium knows or should have known that such an advertisement is misleading. The purpose of the article is to require the advertising industry to filter out false or misleading advertisement as many as practically possible. Thus the Article is applicable only to the extent where the advertising industry has the possibility to control the situation and make the necessary filtering.

Since the advertising media industry will only be held jointly and severally liable for damages, without any criminal and administrative liabilities and since the matters of joint and several civil liabilities are within the jurisdiction of the courts, the applicability of Article 21(5) on the advertising agent and advertising media industry will be determined by the courts.

Relevant article(s) of law: Fair Trade Law, Articles 21, 30

A10:

The"should have known" stated in Article 21 of the Fair Trade Law refers to situations in which an advertising agency or media operator can easily obtain knowledge about something as a result of its expertise if it just pays some attention.

Relevant article(s) of law: Fair Trade Law, Article 21

A11:

1. Liability for joint compensation:
   As specified in Paragraph 6, Article 21 of the Fair Trade Law, "The endorser set forth in the preceding paragraph shall refer to any person or organization, other than the principal of the advertisement, who expresses opinions, trust, findings, or results of personal experiences with regard to the goods or services". It is also set forth in the second half of Paragraph 5 of the same article that where any endorser provides any testimonials that he knows or should have known to be likely to mislead the public, he shall be jointly and severally liable with the principal of such an advertisement for damages arising therefrom. However, endorsers that are not celebrities, specialists or organizations shall be held jointly and severally liable with the advertiser for only up to 10 times the reward they have received from the advertiser.
2. Administrative liability:
   According to Article 21 of the Fair Trade Law and the Fair Trade Commission Disposal Directions (Policy Statements) on the Use of Endorsements and Testimonials in Advertising, even if an endorser is not an "enterprise" as defined in Subparagraph 3, Article 2 of the Fair Trade Law, if he or she works with the advertiser and knowingly provides false testimonials in an advertisement, the conduct also meets the description of acting "jointly and intentionally in the commission of an act in breach of duty under administrative law". Under such circumstances, the endorser and the advertiser shall both be subject to administrative penalties for violation of regulations against false advertising.
3. Inseparability of the liability of the endorsers and advertiser of an advertisement
   (1) If related special laws exist, they shall prevail over the Fair Trade Law and false advertising for products or services governed by such special laws shall be under the jurisdiction of the competent authorities of the industries of concern. The Fair Trade Law shall apply to advertisements for all other products and services not governed by special laws.
   (2) The testimonials provided by endorsers in an advertisement are considered to be an inseparable part of the advertisement; therefore, the advertiser of such an advertisement and the endorsers shall be subject to the same law and the corresponding liability of both shall be determined accordingly.
   (3) For example, according to the conclusion of a number of consultations between the Fair Trade Commission and the Ministry of Health and Welfare (originally the National Health Administration, Executive Yuan), a false advertisement found in violation of health regulations (food, medicine, cosmetics and health foods) shall be under the jurisdiction of the Ministry of Health and Welfare. In such a case, the testimonials provided in the advertisement are an inseparable part of the advertisement and, therefore, shall be subject to related health regulations and the health authority shall assess the administrative liability of the advertiser and endorsers.

Relevant article(s) of law: Fair Trade Law, Article 21

A12:

As prescribed in Article 21 of the Fair Trade Law, whether or not an advertisement is "false" or "misleading" is determined by evaluating whether the content is likely to cause trading counterparts to have misunderstandings or make wrong decisions. Therefore, even if an endorser has not received any money or product as a reward, he or she will still be held liable for the false advertising conduct as specified in Article 21 of the Fair Trade Law.

Relevant article(s) of law: Fair Trade Law, Article 21

A13:

1. The party responsible for a false advertisement is the advertiser. An advertiser will be considered to be in violation of the law and held responsible accordingly only when he or she knows or should have known that the claims provided in the advertisement were false. An endorser has not produced the advertisement and, theoretically, should not be responsible for the illegality of the false advertisement. However, if he or she knew or should have known the testimonial to be provided in the advertisement was false and still provided the testimonial, the endorser will be held jointly liable with the advertiser to compensate for damages thereof incurred. In other words, an endorser who is not the producer of the advertisement will be considered to be in violation of the law for false advertising only when he or she "knows or should have known" the advertisement to be misleading.
2. Whether an advertisement endorser "knows or should have known" is determined in accordance with the concrete facts and evidence of each case. For example, if an endorser describes the result of his or her personal use of the product in a video game or MP3 player advertisement and the findings of investigations prove otherwise, it will meet the description that the endorser "knows or should have known" the testimonial to be untrue. Again, if an endorser gives his or her testimonial according to data and information provided by the advertiser without verification in advance, he or she will be requested to present related evidence and the case will be evaluated accordingly.

Relevant article(s) of law: Fair Trade Law, Article 21

A14:

The Fair Trade Commission may order a business found to be in violation of Article 21 of the Fair Trade Law to cease and rectify its conduct or take necessary corrective measures within a given period as well as impose an administrative fine of between NT$50,000 and NT$25 million. If the business fails to cease and rectify or take necessary corrective measures within the given period, the Fair Trade Commission may continue to order it to cease and rectify its conduct or take necessary corrective measures within a given period as well as impose an administrative fine of between NT$100,000 and NT$50 million each time until the business ceases and rectifies its conduct or takes necessary corrective measures.

Relevant article(s) of law: Fair Trade Law, Article 21 and 42

A15:

1. Enterprises posting comparative advertisements involving representation or symbols associated with products of their own and other businesses must ensure the content is consistent with reality and make comparisons that are just and objective and according to the same standards.
2. In comparative advertising, an enterprise should ensure that the contents of its advertising conform to the statements and representations regarding its own and other enterprises' merchandise, and approach comparative advertising on the basis of fair, objective, and similar comparative benchmarks.
3. Businesses engaging in comparative advertising that includes false and misleading representations or symbols in relation to their own products may be in violation of Article 21 of the Fair Trade Law:
   (1)Using false or misleading representations or symbols to describe the products of other enterprises;
   (2) Comparing products released at different time points or of different grades;
   (3) Adopting different standards or conditions for the same products;
   (4) Using data that lack objectivity or standards with insufficient credibility or quoting data to make inappropriate statements or interpretations;
   (5) Using doubtful, conjectural or subjective statements to compare to make comparisons;
   (6) Claiming overall superiority based on partial excellence or presenting only the better aspects of their own products and intentionally concealing the better aspects of the products of other enterprises to create an unfair comparison outcome;
   (7) A representation or symbol claims the effect of a product (or service) without any scientific theory or experimental basis.
   (8) Making other comparisons that are deceptive or obviously unfair.
4. Businesses stating or distributing false information in comparative advertisements to achieve the purpose of competition and damaging the reputation of specific or unspecific businesses by so doing may be in violation of Article 24 of the Fair Trade Law.

Relevant article(s) of law: Fair Trade Law, Article 21 , 24 and 25

A16:

1. When an enterprise uses the slogan "going-out-of-business sale" to attract customers without specifying the beginning and end of such a sale and continues to do business for months with no sign of closing down, the reason for the sale as advertised is inconsistent with reality. If it is a false representation, such a business may be in violation of Article 21 of the Fair Trade Law.
2. When an enterprise uses the slogan "clearance sale" to attract customers but in effect there is no clearance involved and, instead of lowering prices, intentionally raises the marked prices before discounts are given, the conduct may be in violation of Article 21 of the Fair Trade Law.
3. When properties being marketed are advertised as in locations "three minutes from the Dinghao business area in Taipei" but it is impossible to reach the Dinghao business area in Taipei within three minutes under normal traffic conditions, such an advertisement may be in violation of Article 21 of the Fair Trade Law.

Relevant article(s) of law: Fair Trade Law, Article 21