Newsletter
NEW RULES FOR HANDLING FTL ARTICLE 24 CASES
Article 24 of the FTL is a catch-all provision that prohibits "any other deception or obviously un-fair actions sufficient to affect the orderly con-duct of trade." In order to clarify its scope of application, and to avoid getting the FTC in-volved in too many minor unfair competition cases, on 9 January 2002 the FTC announced the amended Principles Governing the Application of Article 24 of the Fair Trade Law.
The fact of actions being "sufficient to affect the orderly conduct of trade" is now made an essen-tial condition for invoking FTL Article 24. If the actions in question do not meet this criterion, remedies should instead be sought under the Civil Code, the Consumer Protection Law, or other relevant laws.
Application of Article 24 must also conform to the principle of "supplementarity." In other words, Article 24 will only be invoked in respect of actions not covered by other articles of FTL. If an action falls within the scope of a violation defined by another article of FTL, then the FTC need only to consider whether the action con-cerned constitutes the violation so defined, and it is not necessary to also invoke Article 24.
When assessing whether actions are sufficient to affect the orderly conduct of trade, their impact on the overall conduct of trade should be exam-ined. Matters to be considered include the number of victims, the amount and extent of losses caused, whether penalties would have a deterrent effect on other businesses, and whether the deception or obviously unfair actions are directed against specific organizations or groups. Consideration is not limited to actions that have already affected the conduct of trade. In the case of individual, non-habitual trading disputes, civil remedies should be sought, and Article 24 of the FTL does not apply.
"Deception" means an action in the pursuit of trade, directed against a trading counterpart, consisting of either an active attempt to deceive or passive concealment of material trading in-formation, such as to mislead the trading coun-terpart. "Material trading information" means important information relating to a transaction, sufficient to affect decisions concerning the transaction. Whether actions are "misleading" should be judged by the standard of whether there is objectively a reasonable possibility of an ordinary member of the public being led to a false understanding, and the reasonable standard of the judgement capability of the trading coun-terpart being deceived.
The FTC explicitly lists three common types of deceptive action:
1.Impersonating or associating oneself with a trustworthy entity;
2.Dishonest marketing techniques; and
3.Concealing material trading information.
"Obviously unfair action" means conducting competition or commercial transactions by ob-viously unfair means. Three common forms of such activity are:
1.Unfair competitive acts incompatible with the ethics of commercial competition, including:(a)Fraudulently exploiting the fruits of an-other person's labor, for example by taking improper advantage of another's commer-cial reputation; plagiarism; or using the efforts of another to promote one's own goods or services.
(b)Actions to impede fair competition that are intended to harm a competitor, such as improper comparative advertising, or in-dicating to a trading counterpart of a competitor that the competitor is infring-ing one's intellectual property rights.
2.Using methods incompatible with social ethics in the pursuit of trade, such as coercing or harassing a trading counterpart, so as to com-plete a transaction in a situation in which the free will of the trading counterpart as to whether to trade is suppressed.
3.Abuse of an advantageous market position: for instance, where at a time when market mechanisms are unable to operate and there is an imbalance of supply and demand, a busi-ness supplies essential goods or services of low substitutability by means contrary to commercial ethics or to public order and good morals; or where a lack of transparency of information creates obvious unfairness.