TIPS® Taiwan Intellectual Property Special Limitations on Unfair Promotion Activities –Gift and Prize
With vigorous competition, business enterprises engage in various promotions to
stimulate the customers’ purchase desires. However, promotions may raise unfair
competition issues if they go beyond the extent allowed by the law and regulations.
The Taiwan Fair Trade Commission (TFTC) may impose sanctions on promotions
that have anti-competition effect. This article will examine the limitations on a few
common types of promotions, i.e. gift and prize.
The difference between a gift and a prize in a promotion activity is that the
gift-given is certain and a prize is given on a random basis. Besides, sometimes the
seller may give customers certain discount for the promotion purpose. In regulating
the promotion activities, a discount is considered as a gift too by the TFTC. The
Taiwan Fair Trade Law does not prohibit any promotion by gift- or prize-giving;
however, if the gift or prize constitutes "inducement," it is likely to violate Article 19
(3) of Fair Trade Law, which prohibits unfair competition by coercion, inducement
with interest, or other improper means on the trading counterparts. TFTC
promulgated a "Regulatory Principles for Cases Concerning Promotion by Means of
Gifts and Prizes (the Regulatory Principles)," setting forth a standard for determining
to what extent the gift- or prize- giving activity constitutes “inducement” as referred
in Article 19(3) of the Taiwan Fair Trade Law.
1. Gift
(1) For a product less than NT$ 100 (about US$ 3), the value of the gift shall
not exceed NT$ 50 (about US$ 1.5).
(2) For a product more than NT$ 100, the value of the gift shall not exceed 1/2
of the selling price of the product.
However, the TFTC has a special method in determining “1/2 of the selling price
of the product.” What the Taiwan Fair Trade Commission means is that the value of
the gift shall not exceed half of the total value of the products the custom gets. For
example, if the qualified purchase is US$ 10, and the customer gets a free gift whose
value equals to the qualified purchase (US$ 10). Then the value of the gift (US$ 10)
is half of the selling price of the products the customer gets (selling price of the
qualified purchase + the selling price of the gift = US$ 20). This means the gift
given can be up to the same value of the qualified purchase. So, "buy one, get one
free" is allowed.
2. Prize
The total annual value of prizes given at prize--giving activities held by business
is limited as follows:
(1) For business whose annual sales for the previous accounting year exceeded
US$ 30 million, the maximum shall be US$ 6 million.
(2) For those whose annual sales for the previous accounting year exceeded
US$ 8 million but was less than US$ 30 million, the maximum shall be 1/5
of such sales amount.
(3) For those whose annual sales for the previous accounting year was less than
US$ 8 million, the maximum shall be US$ 1.5 million.
Moreover, when a business conducts a prize--giving activity, the value of the
highest prize shall not exceed 120 times the base monthly labor wage rate
promulgated by the Council of Labor Affairs, Executive Yuan, which is currently
NT$ 15840 (about US$ 530).
Any gift- or prize-giving activity exceeding the amount set forth in the
Regulatory Principles constitutes “inducement” and violates Article 19 (3) of the
Taiwan Fair Trade Law. According to Article 36 of Taiwan Fair Trade Law, the
TFTC may issue a cease and desist order, order to correct the illegal act, or order to
adopt other correcting measure. Failure to comply with TFTC’s order or any
re-occurring violation will result in criminal penalties.
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