May 2022
Aaron Chen and Julian Lai
The Fair Trade Commission (hereinafter, the “FTC”) rendered the Gong-Chu-111019 and 111020 Dispositions of April 21, 2022, concluding that Kuobrothers Corp. (hereinafter, “Kuobrothers”) and its fully-owned Mobix Corp. (hereinafter, “Mobix”) improperly used the brand names of others through its search engine optimization (SEO) technology to cause the consumers who are looking for specific brand names on search engines to erroneously believe that Life Mart and Pcone operated by such companies carry products bearing such specific brands in order to increase the click-through rate of their own websites. Since this is an obviously unfair act sufficient to undermine trading order and violates Article 25 of the Fair Trade Act (hereinafter, the “Act”), Kuobrothers was fined NT$2 million and Mobix NT$800,000.
Grounds of the FTC’s findings
According to the FTC, when Kuobrothers and Mobix leveraged the SEO technology, as long as consumers looked for specific brand names on their online stores they operate such as Life Mart and Pcone, even if products bearing the specific brands are not sold on the online stores, the SEO technology still actively generates a specific marketing webpage for search engines such as Google. Therefore, if a consumer searches a specific brand such as OO on Google, the search results will trigger specific marketing webpages such as “the OO that everyone is buying is available at Life Mart” or “information concerning recommended and hot selling brands such as OO is organized by Pcone”. Following the consumer’s click on such webpages, the consumer will be directed to the online stores such as Life Mart and Picone. However, the consumer enters the online stores only to find that goods bearing such specific brands are not sold on such online stores.
According to the dispositions, Kuobrothers and Mobix improperly used the names of other businesses through the SEO technology to increase their click-through rates. This not only misleads the consumers that look for specific products but also intercepts the traffic of the websites of the businesses concerned and reduces the trading opportunities of the relevant websites where such goods are actually offered for sale, thus resulting in the effect of unfair competition. In addition, such companies had no intention of taking precautions against the possibility of misinformation and tolerated misinformation to occur only to enhance their own potential trading opportunities. If the above conduct is not regulated, this may cause other competitors to follow suit in the future, making it more difficult for consumers to distinguish the authenticity of the information presented in search results, which will further threaten the order of competition in the e-commerce market and undermine the interests of consumers. Therefore, this constitutes an obviously unfair act that undermines trading order in violation of Article 25 of the Fair Trade Act.
Points to note in this case
In the past, the FTC mostly targeted the conduct of businesses that improperly use the names of their competitors in keyword advertising and held that such conduct violates Article 25 of the Act. This case does not involve any direct use of the competitors’ names by Life Mart or Pcone in keyword advertisements. Instead, the actors used web programming to have their systems generate false marketing webpages for search engages such as Google by using specific brand names to increase the consumers’ visits to their own websites. It is noteworthy that such conduct of increasing the click-through rate of its own website by indirectly using the brands or names of others through programming is still likely to be regarded by the FTC as an act of unfair competition under Article 25 of the Act.