Taiwan Today

In February 1992, following a year of extensive islandwide publicity, the ROC government began enforc­ing its first Fair Trade Law. One important part of the legislation is aimed at eliminating unfair trade practices, in­cluding false and misleading advertising, to ensure fair competition and protect the interests of consumers.

The regulatory Fair Trade Commis­sion (FTC) announced this February that it had thus far penalized sixty-nine violators of the law since its enactment. Of these cases, fifty involved false or misleading advertisements. According to the FTC, false-ad cases take up such a high percent­age because consumers are more likely to react to these ads and to complain to the government—especially since their claims can now be taken up under the Fair Trade Law.

The FTC's figures do not include vio­lations by companies selling food products, drugs and medical equipment, or cosmetics; the Department of Health (DOH) handles these cases, which include a wide range of false claims. In fact, the DOH handles four times as many cases as the FTC. Some common examples are foods advertised as cures for high blood pressure, diabetes, or cancer; drugs said to boost potency and virility; and cosmetics that promise an end to wrinkles or acne.

A large portion of the fifty FTC cases involved real estate ads. Some develop­ers, for example, made false claims that they were selling apartments in govern­ment-backed housing projects. Others claimed they could easily help buyers se­cure government-subsidized mortgages, which in fact were available only under strict requirements and only after the buyer had signed a contract and made a down payment. More serious were cases in which the buyers discovered, only after moving in, that the floor space of the apart­ment was less than had been advertised.

Deceptive advertising has occurred in a wide range of other areas as well. For example, one company made misleading claims about an exhibition it was sponsor­ing of ancient Chinese terra-cotta statues of soldiers and horses. In advertising statements, the company gave the impres­sion that original, life-size statues uncov­ered from the tomb of China's first emperor in Sian (Xian) were being dis­played in Taiwan as part of a worldwide traveling exhibition. In fact, the statues on display were miniature reproductions.

Another company advertised a "Su­per Automobile, Motorcycle, and Modem Wares Show." Although it suggested that automobiles and motorcycles would be a significant part of the exhibition, in fact they took up only about one-third of the space. People drawn to the show found that most of the displayed products were toys and sundries.

In another case, a company claimed in an advertisement that it could help Tai­wan citizens trying to immigrate to the United States obtain green cards within ninety days. Accompanying the ad was a picture of the ROC president shaking hands with the company's American part­ner. The FTC found that the claim was in­ consistent with U.S. immigration law, which requires green card applicants to first obtain an immigration visa, which in itself can take more than ninety days. The picture in the ad was also judged mislead­ing, since it was taken during a visit by a U.S. trade mission, an occasion that had no connection at all with the company's immigration business.

The Fair Trade Law is already having a positive impact on the advertising business. According to the FTC, the frequency of false and misleading ads has declined gradu­ally. Even advertisers who have not been penalized are deterred by the law's maxi­mum fine of NT$1 million (about US$40,000). Since ad agencies and the media are also subject to liability for dam­ages arising from false ads, they too have become more conscientious. Business ex­ecutives agree that this is the trend.

Richard Lin, general manager of Min Sheng Pao, a mass-circulation Chinese-language daily, says his newspaper is tak­ing a more prudent approach to handling ads. The paper divides all ads into two categories: those prepared by the paper under contract with advertisers and those prepared by ad agencies for their clients. For the former, Lin says, Min Sheng Pao follows a strict four-tiered screening sys­tem to ensure that every ad contains noth­ing objectionable. There are also high standards for agency-placed ads. "We are now quite critical of ads sent in by the ad­vertising agencies," Lin says. "We reject any ads that we feel might mislead the public."

Lin points out, however, that screen­ing of agency ads is sometimes inadequate because of time pressure. "The ad agencies often bring in their ads at the last minute," he says, "leaving us little time to check whether the text is true or not."

The China Economic News Service (CENS), one of Taiwan's largest trade magazine publishing companies, has also become stricter in evaluating ads since the implementation of the Fair Trade Law. Edward Tseng, senior vice general man­ager, says CENS publications, which cover machinery, furniture, lighting, and trans­portation equipment, now refuse to accept any advertising that says a product is pat­ented or meets national quality standards, unless the advertiser can provide certifi­cates backing up these claims.

CENS also includes a protective clause in all advertising contracts that clears it of legal responsibility if an ad is found to violate the Fair Trade Law regarding ei­ther patent rights or false advertising. Cli­ents are also held liable for any damages that CENS might have to pay if it is charged with joint responsibility for an ad making false claims.

Before H. N. Liu, owner of a Taipei design studio, will create ads for medical products or equipment, she asks clients to back up their claims with documents issued by a local public health agency. Liu also insists on certification when clients claim, for example, that a beverage can al­leviate fatigue.

Despite the Fair Trade Law's positive effects on the industry, false and misleading ads are still widely seen in print and on television and radio. The chief hindrance to further progress is the law's restrictive scope. It allows the FTC only limited au­thority over any advertising that falls un­der the jurisdiction of another agency or ministry. This is why, for example, the DOH generally regulates medical, food, and cosmetic ads. Yeh Huey-ching, an FTC deputy director, explains: "We step in only when false ads are so serious as to impede fair competition."

Unlike the Fair Trade Law, the DOH's advertis­ing rules provide no penalties against the media for print­ing false or mis­leading ads. The administration only advises that ads making cura­tive claims be ac­companied by a health agency cer­tificate. This is changing, however, since the government recently promulgated a Pharmaceutical Affairs Law, which provides for penalties against media that carry false ads. The law stipulates that medical ads can be printed only after they are approved by a govern­ment health agency. Media violating this provision can be fined NT$10,000 to NT$50,000(about US$400 to US$2,000). Fines can be imposed successively until the media in question discontinue the un­authorized ad.

In general, Taiwan's broadcast in­dustry carries much less false advertising than the print media. The Government Information Office (GIO), a Cabinet-level agency, helps by providing advertising guidelines for television and radio. In addition, the producers of all TV ads, except those using only picture cards or slides, must submit their materials for GIO ap­proval. Radio stations must keep all ad materials, including the audio tape and script, for fifteen days for reference.

Although the Fair Trade Law has helped considerably in the print media, enforcement of the law could still be im­proved. As a manager at one of Taiwan's largest newspapers says: "Without strict enforcement, any good law is useless." The FTC commonly cites insufficient man­ power as a major reason for its failure to be more effective. When the commission was formed, its staff needs were set at 242, but so far the work force numbers only 180. The DOH also complains of be­ing understaffed.

A more fundamental factor behind Taiwan's inability to check false advertising is the absence of any industry-wide self-regulation. There is currently only one industry group, the Association of Accredited Advertising Agencies, also known as 4-A, which upholds strict adver­tising standards. According to J. Walter Thompson Managing Director Raymond So, who is also chairman of the associa­tion, 4-A regularly convenes to discuss how to raise the quality of local advertis­ing. It also imposes sanctions against any member agency that produces false or misleading ads. The association, which now has twenty-nine members, sets strict membership requirements. Only compa­nies that provide full-range advertising services and have billings in excess of NT$100 million (about US$4 million) a year can qualify.

"Our members seldom commit any serious violation of the Fair Trade Law," So says. "The ad agencies that design and produce false ads are mostly cottage companies. These small agencies, which are estimated to number some five hun­dred, are scattered all over Taiwan, and their clients are generally small manu­facturing and service companies." As long as such a large portion of the ad agencies are not active participants in self-regulation, the public will play an important role in helping eliminate false advertising. As consumers become more aware of their rights and more willing to file complaints, advertisers, ad agencies, and the media will all have to think twice when it comes to questionable claims about products and services.—Osman Tseng (曾慶祥) is a senior journalist based in Taipei.