□ LG Electronics Taiwan Taipei Co., Ltd.

Violates Article 21, Paragraph 1 of the Fair Trade Law Due to False Advertisement【January 12, 2006】 During its 740th Commissioners’ Meeting on January 12, 2006, the FTC determined that the newspaper advertisement of LG Electronics Taiwan Taipei Co., Ltd. (hereafter LG Electronics Taiwan), which had claimed that the company’s high-end variable-frequency air conditioner could provide a “60 percent savings in electricity consumption,” was inconsistent with actual conditions. The advertisement of LG Electronics Taiwan in regard to product quality was a false and misleading representation, and violated Article 21, paragraph 1 of the Fair Trade Law. In addition to ordering the company to stop the aforementioned unlawful conduct, the FTC also imposed a fine of NT$150,000. LG Electronics Taiwan placed an ad of its high-end variable-frequency air conditioner on page E3 of the May 27, 2005 issue of the Apple Daily. To promote the sales of the air conditioner, LG Electronics Taiwan claimed that the product could provide a “60 percent savings in power consumption.” In the ad, however, the calculation of the electric bill was based on a comparison of the power consumptions of the LS-1262VHP and LS-1322F models. For the LS-1262VHP, the minimum power consumption of 265 Watts was used for comparison, while for the LS-1322F fixed-frequency air conditioner, a power consumption of 1175 Watts was used. Air conditioners, however, have different operating characteristics. When the actual room temperature approaches the air-con’s set temperature, a variable-frequency air conditioner lowers the compressor’s rotating speed, while a fixed-frequency air conditioner continues running the compressor until the temperature drops below that specified. LG Electronics Taiwan used dissimilar standards of comparison, and thus the data obtained were irrelevant when used as references for comparing the power consumption and the resulting electric bills. If the two models had been compared using their respective rated power consumption, there would have been a big discrepancy with the “60 percent savings in electrical consumption” claim in the advertisement, which made the ad obviously misleading. Although LG Electronics Taiwan presented to the FTC a report from a test commissioned to the Electronics Testing Center Taiwan (ETC), the test was carried out under the following conditions. Temperatures inside and outside the testing room were allowed to reach the specified level and the air conditioner inside the room was turned off. Then, the air conditioner under test was turned on for measurements. During this time, there was neither a heat source inside the room nor air convection between the inside and outside of the room, and thus heat transfer was minimal. This test method was not only inconsistent with national standards, but also very much different from the way air-conditioners are used in buildings. In its advertisement, LG Electronics Taiwan did not explain that the test method was different from the consumers’ general understanding, and did not provide a suitable explanation regarding the differences between the test results and actual usage conditions. This was sufficient to determine that the advertisement on the quality of the air conditioner was a false and misleading representation, and that the ad violated Article 21, paragraph 1 of the Fair Trade Law. The FTC took into account the motive of LG Electronics Taiwan, the objective, expected improper benefits, degree of damage to trading order, duration of the action, benefits obtained, scale of business, business operations, revenue and market position, whether the competent authority had previously corrected or warned against such acts, the type and number of previous violations, interval of violations, punishments incurred, conduct after the violation, cooperation during the investigation, and other factors. In addition to ordering the company to stop the aforementioned unlawful conduct, the FTC also imposed a fine of NT$150,000.

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