When consumers see phrases like “Nourishment from XXX,” “Fresh from XXX,” “Directly Imported from XXX,” or “Renowned Brand from XXX” in advertisements or on product packaging, they often associate such products with specific qualities, origins, or values, thus fostering more trust and even a stronger desire to purchase. These words not only influence consumer perception, but also subtly create the psychological implication that the product has irreplaceable characteristics. However, if such descriptions are factually inaccurate or intentionally misleading about the product’s origin or quality, would such marketing practice be lawful?

According to the Fair Trade Act, any misrepresentation or misleading advertisement of the property, origin, quality, or other aspects of goods may be considered an unfair conduct. For instance, falsely implying that a product originates from a certain country, exploiting consumer trust in renowned brands with false association, or even fabricating positive user reviews may all violate Section 21 of the Fair Trade Act.

False statements not only infringe on the consumers’ right to know, but also disrupt fair competition in the market. Once detected, businesses may face investigations and penalties from the authorities, including corrective orders and fines, which can harm a business’s reputation and operation. Furthermore, dishonest advertising can erode consumer trust in the brand, affecting its long-term development. Therefore, businesses should exercise discretion in marketing practices by avoiding deceptive language or exaggerated descriptions. Honest, transparent, and lawful communication about products is not only a corporate responsibility, but also essential for building consumer trust and securing a stable customer base in a competitive market.

1. Regulations Under Article 21 of the Fair Trade Act

According to Article 21, paragraph 1 of the Fair Trade Act, enterprises shall not make false or misleading representations or statements regarding matters related to goods that may affect transactional decisions through advertisements or other methods accessible to the public. If an enterprise violates the aforesaid regulation, according to Article 42 of the Fair Trade Act, the competent authority may order the enterprise to cease and rectify its behavior within a limited period of time. Also, fines ranging from TWD50,000 to TWD25,000,000 (approximately USD1,550 to USD772,500) may be imposed. Continued non-compliance may result in additional fines of TWD100,000 to TWD50,000,000 (approximately USD3,100 to USD1,550,000) for each instance of non-compliance until the corrective measures are implemented.

What constitutes “matters related to goods that may affect transactional decisions”? Under Article 21, paragraph 2, these include the price, quantity, quality, content, production process, production date, expiration date, method of use, purpose of use, place of origin, manufacturer, place of manufacturing, processor, place of processing, and any other matters with promotional effects.

Among these, quality and content are more abstract, while price and dates are measurable indicators. False advertisements frequently involve misleading statements about quality and content, such as obvious discrepancies between advertisement visuals and actual products, exaggerated product effects, falsely claiming specific certifications, or promotional texts inconsistent with the actual real estate projects, etc. Additionally, if an enterprise falsely claims that its products come from a certain region or country, the Fair Trade Commission (FTC) will also regard this as an untrue representation of the quality or content of the product and impose penalties in accordance with Article 21 of the Fair Trade Act. The following section will examine relevant cases.

2. Overview of the FTC Administrative Penalty Cases

(1) Misrepresentation of Goods as “Directly Imported from a Certain Country”

In such cases, businesses often rely on partial connections to a country—such as importing via a company in that country or sourcing partial product components from that country—as the basis for claims like “Directly Imported from XXX.” For instance, in the FTC Decision No. 104011, the respondent claimed that their molybdenum for automobile engines was “Directly Imported from the UK,” with product barcodes beginning with “5.” However, the FTC clarified that the prefix of a barcode does not indicate the country of manufacture or production. Additionally, while the product was imported through a UK company, the UK company itself sourced the product from South Africa. Therefore, the product originated in South Africa, not the UK, and the respondent’s claims violated Article 21, paragraph 1 of the Fair Trade Act.

In the FTC Decision No. 099085, the respondent registered the trademarks “Archico” and “Ou-Mu” in 2003 and 2005, respectively, and sold “Archico” motor oil. Some of the motor oils were directly imported from France, while others were repackaged products of motor oils from other French and U.S. companies. However, the respondent claimed that the motor oil was “Archico Ou-Mu French Legend Lubricant” and “from France with a hundred years of history,” which misled consumers to believe that “Ou-Mu” was a French brand with a hundred years of history. Such claims constituted false and misleading statements about product quality and content, violating Article 21, paragraph 1.

(2) Registering Trademarks Similar to Foreign Brands and Misrepresenting Origin

Branding is not a quick or easy task, and a good brand reputation is often closely tied to product quality. However, some businesses employ imitation or deceptive practices to mislead consumers into believing that their products originate from well-known foreign brands. The FTC penalizes such actions under Article 21, paragraph 1 as well.

For example, in the FTC Decision No. 102043, a Taiwanese company registered a trademark identical to the U.S. brand AEROSOLES in 2009, despite not distributing any products from the brand, and referenced “AEROSOLES, originating from a U.S. brand established in 1987” in its advertisement. This was found to be in violation of Article 21 of the Fair Trade Act.

In the FTC Decision No. 101114, the respondent used “UPSOAR” as its own trademark on Taiwan-made products but claimed that they were from “Germany’s renowned manufacturer UPSOAR,” thus potentially misleading consumers into believing the products were German-made. This constituted false or misleading representation, violating Article 21 of the Fair Trade Act.

(3) Misrepresentation of Business as “Introduced from a Foreign Country”

Local businesses are often found using false advertising terms such as “Japan’s No. 1” and “imported from Japan”, taking advantage of the strong reputation of well-known Japanese brands in certain markets. For example, in the FTC Decision No. 095103, a Taiwanese company without authorized partnership with any Japanese company falsely claimed to be a donut store “introduced from Japan, boasting 50 flavors,” despite only importing certain raw materials from Japan. The FTC determined that the fact of “importing certain raw materials” and the claim of “business introduced from Japan” were substantially different, and deemed the claims as false and misleading under Article 21 of the Fair Trade Act.

(4) Misrepresentation of Products as “High-Tech Goods from a Certain Country”

In the consumer market, the place of origin of a product frequently serves as an important factor for consumers in judging quality. For example, German automobiles are often recognized as durable and high-quality, while Swiss knives and watches made in Switzerland have a reputable image of precision and innovation. In the FTC Decision No. 098160, a TV shopping company claimed that its products were “high-tech goods from Japan” and “exported to Japan,” but failed to provide relevant contracts or technical licenses as evidence. Consequently, the FTC found these claims to be false and misleading under Article 21 of the Fair Trade Act.

3. Conclusion

The cases above illustrate businesses penalized by the FTC for false claims regarding the origins of products, such as being directly imported or introduced from abroad, or recognized as a well-known brand in a foreign country. Businesses should abide by advertising and marketing practices that are consistent with the facts, and not exaggerate or mislead consumers, in order to establish a reputable business standing. Such practices are not only beneficial to the company itself, but also essential for fostering a fair and transparent market environment.

Co-written December 7, 2024 by Gary Kuo, Partner; Andrew Lei, Attorney-at-Law; Shin Chiang, Researcher.

For more information about the Fair Trade Act, please contact us at gkuo@winklerpartners.com or alei@winklerpartners.com.