February 2024
Oli Wond and Sally Yang
The Taipei High Administrative Court rendered a judgment on September 28, 2023[1], overturning the Gong-Chu-Zi-111073 Disposition of the Taiwan Fair Trade Commission (hereinafter referred to as the “TFTC”) dated September 13, 2022. The relevant facts and the reasons for the judgment in this case are as follows.
I. Facts of the Case
Xia Yu International Business Co., Ltd. (hereinafter referred to as “Xia Yu”) published an advertisement on a social media platform for a “free leather care technique course” (hereinafter referred to as the “controversial advertisement”), claiming “no tuition fees,” “no burden of material, tool, and venue fees,” etc. After citizens lodged complaints, it was revealed that Xia Yu required trainees to sign a training contract and issue an NTD 500,000 promissory note as training fees during interviews.
After an investigation, the TFTC determined that the controversial advertisement did not disclose the restrictions that signing a contract required to participate in the course, and the requirement to issue a promissory note, agree to a mandatory service period and accept punitive liquidated damages. This lack of disclosure prevented the public from understanding the related cost burdens from the controversial advertisement and violated Article 21 of the Fair Trade Act, which prohibits “misleading or deceptive representations about services that are sufficient to affect transaction decisions.” As a result, Xia Yu was fined NTD 150,000 (hereinafter referred to as the “Original Disposition”).
Xia Yu was dissatisfied with the TFTC’s original disposition and brought an administrative action in the administrative court, seeking to set aside the Original Disposition. However, the Taiwan Taipei District Court’s Administrative Litigation Division ruled that the controversial advertisement aimed to increase opportunities for transactions with potential vocational trainees and contract manufacturers, potentially excluding opportunities for competitors and causing harm to competing industries, thus resulting in unfair competition. The court ruled against Xia Yu, upholding the Original Disposition (hereinafter referred to as the “Original Decision”). Xia Yu was dissatisfied and appealed.
II. Taipei High Administrative Court’s Judgment
After reviewing the case, the Taipei High Administrative Court’s Administrative Litigation Division rendered a judgment to annul the Original Decision and revoke the TFTC ‘s Original Disposition. The summary of the judgment is as follows:
1. According to the Original Disposition, Xia Yu attracted others to undergo training and established a specific labor relationship by providing training courses. The contracts signed between Xia Yu and the trainees are part of a labor contract. The controversial advertisement was, in fact, a disguised recruitment advertisement. Therefore, the business was not engaged in competition under the Fair Trade Act, and those participating in recruitment were not “trading counterparts” in teaching services, which was not the focus of unfair competition under the Fair Trade Act.
2. Whether the recruitment methods and conditions in this case, which may have utilized the recklessness and inexperience of those attracted by the advertisement to enter into contracts lacking honesty and fairness, fall under the so-called “job trap” and involve illegal activities, are not within the core purpose of the Fair Trade Act (such as maintaining competition order). Instead, the competent authority for labor contracts should determine how to deal with the controversial advertisement.
3. In conclusion, regarding the application of Article 21 of the Fair Trade Act to the issue of false advertising, the Original Decision was erroneous and contrary to the law. The TFTC’s Original Disposition is incorrect in determining whether Article 21 of the Fair Trade Act applied to false advertising in this case.
III. Conclusions
The objects of regulation under the Fair Trade Act, as stated in Article 1, aim to “maintain trade order and consumer interests, ensure freedom and fair competition, and promote economic stability and prosperity.” The question arises whether the focus should be on regulating the “competition order” itself or whether the scope of regulation should be expanded to encompass multiple values and purposes. This issue has long been debated in policy and academia. With the continuous innovation and changes in business and economic models in recent years, the scope of regulation under the Fair Trade Act is expected to remain a core question in how competition policy should be enforced.
In this case, whether a business using false recruitment advertisements to attract job seekers does not involve “harm to the competition market order”? Or does it use such information asymmetry to attract labor inputs, thereby hindering effective competition? It remains a topic worthy of continued discussion. The TFTC decided at its meeting in November 2023 that it would appeal the Taipei High Administrative Court’s decision[2], indicating that the TFTC still considers it necessary to intervene and regulate such advertising patterns under the Fair Trade Act.
For business operators, whether the advertising activities are for “course products” or “training and talent recruitment,” it is recommended to provide comprehensive and complete information to avoid violating Article 5 of the Employment Service Act and Article 21 of the Fair Trade Act. This will also help mitigate the risks of investigation and administrative penalties from the Ministry of Labor and the Fair Trade Commission.
[1] The 112-Jian-Shang-Zi 64 Decision of the Taipei High Administrative Court.
[2] Point 7 (1) of TFTC’s 1673rd commission meeting minutes dated November 1st, 2023.
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