Supreme Administrative Court’s Recent Decision on Misleading Ad

“False or misleading representations” made or used on goods or in advertisements are proscribed by Article 21 of Taiwan’s Fair Trade Act if such representations are “rendered on matters pertinent to the goods and able to affect trading decisions.”

According to a set of explanatory guidelines provided by the Fair Trade Commission (“FTC”), typical examples of false or misleading expressions include those that contain “No. 1,” “champion,” “the maximum,” “the biggest,” or other term of superlative degree to describe the advertised matter in the absence of probative data, and expressions that assert a specific effect (usually a medical effect) in the absence of a scientific or experimental support. Given people’s unlimited imagination on words, how Article 21 should be applied in specific cases has always been a matter of great concern to the industries.

For example, an unconditional offer is one of the usual suspects of misleading advertising.  But what if an unconditional offer is followed by a question mark which again is followed by an exclamation point (i.e. “?!”)?  And what if such an expression with “?!” is further followed by a restrictive statement hidden somewhere in the same advertising text?  These questions were brought before the Supreme Administrative Court (SAC) recently.  The Court’s answers are not in the advertiser’s favor.  Asia Pacific Telecom Co., Ltd. v. FTC, 108 Pan 232, SAC (May 2019).

FTC’s Ruling

This case started with an ex officio investigation of the FTC, which led to the discovery that a telecommunication company was advertising a newly launched combo plan via electronic media with a catchy headline reading “NTD 999 per month for unlimited urban calls, cell phone calls plus internet, to the same or other networks alike?!” (The reader should not take the sentence as a quotation from a customer response; the quotation marks were absent in the advertisement.)

However, the combo plan did not really allow unlimited calls.  In the lower part of the ad, there was a clause giving restrictions on the maximum phone numbers dialed monthly, and the free-minutes limit outside the network and region, etc.  In another version of the ad, the restrictions were replaced with a simple reminder “Please Contact our Stores.”  Both the restrictions and the reminder were printed in much smaller font if compared with the disputed headline. 

Based on the above facts, the FTC held that the telecom company violated Article 21 of the Fair Trade Act. Meanwhile, the FTC commented in the ruling: “adding ‘?!’ to the expression at issue was at best an advertising technique to attract consumers’ attention. It did not actually remind the consumer to further notice and review the restrictions to the plan.”  Hence, the telecom company was fined NTD 600,000 by the FTC. 

SAC’s Judgment

The case was eventually appealed to the SAC before the telecom company lost in the previous appellate instances. Without much surprise, the SAC upheld the FTC’s ruling, as petitioners’ win-rate at SAC level is traditionally not high.  Regardless of the verdict, it is the SAC’s elaboration of the requirements of Article 21 in the context of this debatable case that the local IP community found particularly inspiring.

Initially, the SAC indicated that the question of whether an advertisement is likely to mislead a trading counterpart to form a false perception or decision shall be determined based on a comprehensive consideration of all factors related to the ad, including, for example, whether the disputed expression involves information critical to the transaction, the font size of the expression, the space and position the expression holds in the entire layout of the ad, whether the expression is emphasized, etc.  This part of holding was actually a reiteration of the above-mentioned existing FTC bylaw that renders guidelines on how to determine an ad is misleading. 

Further, the SAC indicated:

To examine whether an advertisement is false or misleading, it is only necessary to consider whether the disputed expression has diverged from the actual situation to such an extent that a related trading counterpart with common knowledge and experience will be affected when shaping his or her judgment and trading decision.

While it is true that freedom of expression should be allowed in advertising, an advertisement is still misleading if its (unwarranted) asserted effect or benefit is highlighted in such a way that the advertisement is likely to give rise to consumer misconception, since such advertising poses a threat to an orderly market by taking advantage of consumers and placing peer traders at a competitive disadvantage.

Even if the consumer is likely to access full information at a later stage through either a salesperson’s notification or the consumer’s own participation in the transaction, these possibilities should play no role in the issue of whether the advertiser has deployed a misleading advertisement influencing the market; these possibilities shall not be used to release the advertiser’s liability, either.

Under the above criteria, the SAC held that the telecom company’s plan was misleadingly expressed in the advertisement. The restrictions and the reminder “Please Contact Our Stores” in the same ad, on the other hand, were found by the SAC as hardly noticeable by the general consumer, given the inconspicuous position and the disproportionately small font size of these wordings if compared with the problematic expression.  As such, the SAC upheld that the “affecting trading decisions” test was satisfied; hence a violation of Article 21 of the Fair Trade Act.

It is interesting to note that the SAC did not directly comment on the inclusion of “?!” in the disputed expression.  However, one may sense a strong overtone in the SAC decision that it sided with the FTC’s opinion on this issue; that is, the combination of “?” and “!” were not good enough as a reminder of the restrictions imposed on a seemingly unlimited expression.  Branders should be alerted to this signal.