Although marketers are unsure of how they will be affected, they are concerned that ad claims will have to be more conservative and they may be vulnerable to lawsuits.
In the past, the lack of ad regulation encouraged many marketers to use blatant puffery and sometimes outright lies about product perfomance and, without legal protections, consumers often found themselves vulnerable. The Consumer Foundation R.O.C., Taiwan's largest organized consumer group, in fact, processed more than 50,000 consumer ad complaints last year.
That may change, however, as the government issued new regulations in January that give consumers more recourse than ever before regarding false ad claims. Meetings to determine "follow-up regulations," designed to clarify questions and establish guidelines, start this week but won't be complete for at least six months.
"It's hard to tell how much impact the law has on us [yet]," said James S. Chen, assistant general manager of Kaulin Mfg., an industrial sewing machine manufacturer.
Outlining general principles about product liability, the regulations would hold marketers liable for compensation for defective goods and services even if there is no negligence. Earlier, negligence had to be proved.
Of most concern to marketers, however, is the new rule that marketers must insure the acccurancy of ads and that advertising will now be considered "an invitation to contract" rather than a "solicitation."
Legal experts said that means that whatever marketers now claim in ads becomes part of a contract if a consumer accepts the offer in the ad by buying a product. Advertisers, legally obligated to make sure that promises are carried out, would face a fine of up to three times the consumers' claimed damage.
Previously, Taiwan's civil law stated that advertising is only a "solicitation to contract," which meant advertisers had no legal responsibility for its ad claims, even false or exaggerated ones.
For the first time, registered consumer organizations are also now authorized to inspect products, judge the accuracy of ad claims and make public announcements if the products are found defective or dangerous to public health. They may also seek collective damages.
Introducing product liability without a clear definition could result in a lot of unnecessary lawsuits, said Kuo Young-Hsiung, assistant secretary-general of the Chinese National Federation of Industry.
Toyota Fon-Tien Motor Co. also thinks the law will result in more conservative ad claims.
President Co., a major food advertiser, believes mounting bills for compensation, lawsuits and liability insurance will hurt profits, forcing retail price hikes.