Recently there have been serious dis-putes in Taiwan over credit card advertising and medical care. Despite the vast disparity in power between the corporations and the consumers involved, the consumers won without having to stage protests or appeal to the media. Instead, after mediators consulted the Fair Trade Law and the Consumer Protection Law, the corporations were routed. What is going on here? Is Taiwan now a paradise for consumers?
Miss Shih is a 34-year-old civil servant. This spring she decided to buy a new car. After looking around, she found one dealer offering the lowest car loan interest rate. She happily signed the contract and made her down payment. Little did she expect that the actual interest rate would turn out to be two percent higher than that claimed by the dealer. She asked to cancel the contract but the dealer refused. Furious, she threatened to go to the Consumers Foundation. When the dealer heard this, he immediately apologized and returned her down payment.
Justice for consumers
The Consumers Foundation, founded in 1980, was the first institution to become an effective weapon for consumers to protect their interests and stand up against powerful business interests. In many cases, a recalcitrant business person will concede if you just mention the Consumers Foundation.
Unexpectedly however, the foundation-which has 18 years of history behind it and was vital in promoting the passage of the Fair Trade Law and the Consumer Protection Law-announced this year that it is in financial trouble and may have to disband.
Consumers Foundation Chairman Wu Chung-chi stated at the time of the announcement that their expenditures (for staff salaries and publication of their consumer magazine) exceed revenues by NT$1 million per month. The Consumers Foundation fund still has NT$11 million, but if there is no further revenue, the foundation can only operate for another ten months.
The foundation is fully non-governmental. Its revenue comes mainly from its magazine, with a small amount coming from contributions.
Most private organizations rely on corporate donations to stay alive. But the Consumers Foundation has always aimed to protect consumers, and has stood in opposition to business, so business sources of revenue dried up. One staff member reveals that one corporation used to send contributions at the end of every fiscal year. However, three years ago the foundation, acting on behalf of consumers, filed a lawsuit against this firm, and no donations have been received from it since.
The foundation was established in 1980. It was initiated by the Taipei Junior Chamber of Commerce. At that time most of the revenue came from members of the chamber and from business contributions.
"Back then few people even had a conception of what the word 'consumer' means. Most businesses assumed that the foundation would help them find new sales channels for their products. When they discovered that the foundation was spending its time finding fault with them, they rapidly withdrew financial support," recalls Chang Le-chi, former chairman of the Consumers Foundation and now head of the department of nutrition at the Veterans General Hospital in Taipei.
Consequently, the foundation decided to adopt the model of American consumer organizations. It published a magazine to spread consumer consciousness and to earn revenues. It evolved into a "social movement that was willing to take on powerful corporations and the government," establishing a good image with the public.
Defender of the public
In 1981, it was discovered that some businesses in central Taiwan were using food waste (like bones) and leftovers to produce edible oil, and many people had been poisoned. The Consumers Foundation stepped forward to collect money on behalf of victims in order to pay their medical expenses, enhancing its image as a defender of the public interest in the process.
At that time businesses did not even observe the most basic food safety standards, so the Consumers Foundation established a product inspection department. It regularly collected sample products, and compared them, releasing the results to the general public. It is due to the efforts of the Consumers Foundation that today most food products carry expiry or "best-by" dates.
The Consumers Foundation is one of the few private groups in Taiwan that even dares to take on foreign corporations. In 1985, they discovered that Japan-Asia Airlines was using old planes on its Japan-to-Taiwan routes. It asked the airline to replace these planes in order to guarantee flight safety. At first, the Japanese firm haughtily refused. The foundation not only launched a boycott movement in Taiwan, it even worked with Japanese consumer alliances to put pressure on the airline. After half a year of relentless struggle, it finally forced JAA to give in.
Because of this, the foundation, which established a petitions department to assist the public in handling consumer disputes, became seen as the defender of the public, a kind of consumers' "Judge Bao" (a righteous imperial magistrate who always acted in the interests of the people). From 1981 to 1990 they handled roughly 40,000 petitions.
"In the 1980s, as martial law was lifted, there was rising social consciousness, and people began to take note of many problems. However, at that time the government had not established its authority in many areas of life, and the laws had not been adjusted to fit the times. Thus people organized civic groups whose rising power became a force in promoting social reform," says Michael Hsiao, a researcher in the Institute of Sociology at the Academia Sinica and one of the founders of the Consumers Foundation, explaining how the group has been able to exercise influence in society.
In the prosperous 1990s, after years of effort by the Consumers Foundation, the Fair Trade Law and the Consumer Protection Law were passed. These extended formal legal protection to consumers. The number of protest actions organized by the foundation declined, as did complaints about unfairness. Correspondingly, the foundation, having "completed its duties for that stage," took a low profile.
False advertising
Two years ago, Citibank, in order to promote its credit cards, held a promotion in which credit card holders could travel to Macao for only NT$1800. The activity was going full blast when some consumers accused Citibank's advertising of misleading people into believing that everyone could take advantage of this offer. In fact, it was necessary to sign up for a drawing. As many people failed to be selected despite repeatedly entering, consumers felt deceived.
With the help of the Consumers Foundation, citizens appealed to the Fair Trade Commission, the government agency in charge of enforcing the Fair Trade Law. The FTC judged that the Citibank ad was misleading and violated the law. This multinational corporation immediately issued a public apology, and compensated tens of thousands of card holders.
The Fair Trade Law was enacted in 1992. In fact, the original intent of the law was to ensure fair competition between businesses. There was originally no direct connection to consumers.
Nevertheless, consumers found several provisions of the law useful-such as article 21 which governs false advertising, or article 23 which is related to multi-level direct sales groups. At that time the Consumer Protection Law had not yet been passed. Therefore, many consumers saw the Fair Trade Law as an official channel through which they could seek mediation or redress. The Consumers Foundation referred many cases to the FTC under this law.
According to 1995 statistics of the FTC, in the first three years that the Fair Trade Law was implemented, the FTC handled 4294 suspected violations. Punishments were meted out in 300 instances. Of these, more than half were cases of false advertising, and 10 percent were cases of fraudulent "pyramid schemes."
"In the past, businesses thought of advertising as a way to attract customers, so they exaggerated and blew smoke as much as they could. They figured that if consumers believed the ads, that was their own problem. Over time, most people came to believe that advertising is completely deceptive," says Chang Le-chi. After norms were established under the Fair Trade Law, consumers had another weapon to defeat the deceptive tactics of advertisers, and to force them to take seriously the claims they make to consumers.
Responsibility without wrongdoing
The Consumer Protection Law was passed in 1994. Formulated with the interests of consumers in mind, it created a formal legal umbrella to protect the rights of consumers. It was on the basis of this law that the Executive Yuan established the Consumer Protection Commission.
The judgment recently rendered in a dispute over medical care provides insight into the potential power of the Consumer Protection Law. Tan Chang-lan, a woman living in Taipei, gave birth to a baby in Mackay Memorial Hospital in 1994. The newborn child had a deformed right arm. She believed that this was a result of the doctor forcefully pulling the child when she was having a difficult delivery. The following year, she went to Taipei District Court and accused the hospital of malpractice. However, she lost her lawsuit.
She then filed a civil suit. She demanded that the hospital compensate her for financial costs incurred as a result of her child's injury. The case carried on until the beginning of the next year. Finally, presiding Judge Tsai Hui-ju decided in favor of the plaintiff on the basis of the Consumer Protection Law. It was decided that Mackay would have to accept "responsibility" though "without wrongdoing." That is to say, even though there was no wrongdoing, the hospital still had to compensate the plaintiff with NT$1 million.
This was the first time that medical care was considered to come within the scope of the Consumer Protection Law. This has rewritten relations between doctors and patients, putting medical institutions and professionals in the position of commercial providers of medical services, while patients in turn are seen as consumers receiving a service in exchange for payment.
Judge Tsai decided that while medical service is not a product per se, it is intimately connected to public health and safety. The stated intent of the law she applied is to "protect consumer rights and interests, promote consumer safety, and raise the quality of life for domestic consumers." On this basis, the judge decided that the law also applied to medical care.
This was also a precedent for applying the compensation formula of "responsibility without wrongdoing" to a dispute over medical care. "This formula is one of the special features of the Consumer Protection Law," says Hanson C.C. Chiang, vice-chairman of the Consumers Foundation. Because modern products and services are so complex and varied, when problems arise, it is often difficult to prove exactly who is at fault.
For example, if an electrical device explodes, even specialists are hard pressed to be sure if it is the responsibility of the manufacturer or the user. However, when it is certain that the consumer has suffered harm and needs assistance, there must be compensation. Because businesses profit from consumers, the responsibility for compensation falls on their shoulders.
Chiang says that "the losses that institutions suffer from this can be partially absorbed through insurance. The problem is, this type of system still does not exist in our domestic medical network."
Although this decision drew a strong reaction from the medical community, consumers now enjoy even more weapons to protect their interests.
"For a long time now, the balance of power in medical relationships has been extremely unequal. In the past, in medically related lawsuits, members of the public were in a weak position. In some cases, family members with nowhere to turn were so angry they did things like carrying the coffin in protest to the hospital or even physically threatening the doctor." Himself part of the medical care system, Chang Le-chi argues that in the past the tradition of doctors covering up for each other left consumer protection groups feeling powerless. But this case can now serve as a precedent.
Weight loss and hair care
"Before the implementation of the Consumer Protection Law, the government had to establish specific individual laws to protect consumers' interests," says Hwang Horng-chyuan, director of the Department of Research and Planning at the Consumer Protection Commission (CPC). For example, product quality was governed by a 1965 product inspection law. In the 1970s, when problems cropped up over cosmetics, pesticides, and food safety, a series of laws-the cosmetics control regulations, the pesticide control regulations, and the food safety control regulations-had to be passed one after the other.
"However," says Hwang, "the scope of these laws was very narrow, and the regulatory agencies were at a very low level, so they could not comprehensively protect the interests of consumers."
The Consumer Protection Law gave the government the authority to establish the CPC, and the government also extended the consumer protection net downward. Local governments established consumer service centers and consumer protection officers. These can handle disputes on the spot by providing legal advice, accepting appeals, or investigating violations of the law, and they also promote consumer education. These took over most of the basic functions of the Consumers Foundation. As a result, the foundation adjusted its orientation from social movement to service provider, offering advice and assistance in making appeals. Because it was no longer in the vanguard, people got the mistaken impression that it was becoming less and less active.
Recently, the CPC has acquired a major new weapon for consumer protection work. It won the support of the Executive Yuan to begin planning a "consumer life center."
Explaining the rationale behind the center, Hwang Horng-chyuan states that consumer behavior and issues are increasingly complex. Presently the CPC and its branches have only limited manpower and funding, so they are having only limited effect. "Take for example product inspection. We do not have any facilities of our own for product testing. When problems arise, we have to appeal to other agencies, such as the Bureau of Commodity Inspection and Quarantine of the Ministry of Economic Affairs, or the National Laboratories of Food and Drugs of the Department of Health."
Thus, learning from the experience of consumer agencies in other countries, the CPC hopes to become a larger organization with comprehensive resources. "In France there is a consumer research institute, in Germany there is a product testing foundation, and Sweden has a national bureau of consumer protection. All of these are large, national-level consumer protection and research centers that have been in operation for a long time," says Hwang. He makes particular mention of Japan's "Citizen Life Center," which has been in operation for 30 years and has an annual budget in excess of 3 billion Yen. "It is obvious to anyone that Japanese people have a certain level they expect from products and services. You cannot overlook the contribution made by their Citizen Life Center in this regard."
It is anticipated that Taiwan's consumer center will formally begin operations in three years. Its structure is based on these other organizations. It will include among its main functions product inspection, handling of appeals, consumer surveys and research, and promotion of consumer education. It is expected to have an annual budget of NT$500 million. In the first year the government will provide NT$400 million, with the other NT$100 million coming from public donations. Over time, the government contribution will decline, and the institution aims to become completely independent.
Consumer resources
These new resources appear to increase the threat to the existence of the Consumers Foundation. Control Yuan member Lee Shan-yi wonders whether the government really needs to establish a consumer life center. "These tasks have been done by private groups for a long time. It would be better to subsidize them directly," says Lee, an attorney, former chairman of the Consumers Foundation, and a member of the Fair Trade Commission. "Although government agencies have the power of the state behind them, it is difficult for them to escape the political influence of large corporations. Therefore they are less able to win public confidence."
At the same time, "though the organizational structure and functions of the consumer life center are similar to those of the Consumers Foundation, it gets NT$500 million, whereas the foundation operates on only NT$10 million. Isn't that overdoing it a bit?" says Wu Chung-chi, who is also a professor in the Department of Economics at National Taiwan University. Such an enormous budget is bound to be wasteful.
In terms of operating costs, says Wu, although the financial resources of the Consumers Foundation are limited, they currently maintain nearly 40 full-time staff, whose major duties include editing and publishing the magazine, appeals, and inspection. Moreover, says Wu, "we mainly rely on volunteers for our manpower. For example, we have nearly 1000 volunteers, and more than 400 scholars of various specialties on 19 committees which provide specialized consulting services on issues such as public policy, housing, motor vehicles, travel, and medical disputes."
"The Consumers Foundation must adapt itself to social change, alter its functions, and change its status." Chang Le-chi argues that there can't be too many consumer protection groups, so long as they can cooperate with each other and concentrate their forces when necessary. "Some functions that require more manpower or money, such as product inspection or consumer appeals, can be left to the government. The foundation, meanwhile, can play a role monitoring the government."
In fact, many of the resources of the Consumers Foundation have already been siphoned off by other groups. Chang says that current trends in consumer issues are increasing specialization, fragmentation, and diversification. Besides the foundation, there are many civic organizations that have been founded that focus on single issues, such as the women's consumer foundation that she organized.
"There are some issues of particular concern to women, such as children's education, sexual discrimination in the marketplace, and even industries such as weight loss, cosmetics, and hair care, that require more in-depth discussion," she says. Although at present she has only the most rudimentary facilities, she is used to operating with a single desk and a single telephone. She has already sponsored several seminars and handles appeals through the Internet.
In addition, among the appeals accepted by the Consumers Foundation, the most common, such as housing, automobiles, or travel, now have different private groups to serve the public. For example groups such as the "Mother Tsui Rental Center" and the "Travel Quality Guarantee Association" have appeared. Some more aggressive victimized consumers have even organized themselves. The Internet is the most convenient tool for doing so. Thus for example, the "Automobile Consumer Protection Association" operates through the Internet, providing purchasers with information.
A one-man protest
In fact, the roles played by consumer protection groups are not limited to handling inspections or appeals. Raising consumer awareness and education are also important tasks.
Though the consuming power of the Taiwan public has grown, consumer consciousness has weakened. Public passivity-which can verge on cold unwillingness to cooperative-frustrates consumer groups. Three years ago 64 people were killed in a fire in the Welcome restaurant in Taichung (which did not meet fire safety codes). Yet many more people have been killed in a series of KTV and restaurant fires since. Most consumers simply are not careful to insure that the places they patronize are safe.
Early this year, the two major cable TV operators, Rebar and Koo's Group, could not reach agreement on purchasing programming rights from each other. As a result, hundreds of thousands of cable TV subscribers across Taiwan lost many of their original channels. The subscribers had already paid, but weren't getting what they had paid for, which was clearly a violation of their rights.
Yet, though the cable war raised a ruckus-even central government officials repeatedly intervened to get the two sides to compromise and consumers loudly criticized the corporations-in terms of practical action, the consumer response was disheartening.
For example, an elected official established a "cable TV consumer protection alliance." He called upon consumers to boycott the banks, stores, and restaurants operated by the two big corporations involved. But there was virtually no support for this. The CPC, which received hundreds of complaints from consumers, urged consumers to organize themselves. According to the Consumer Protection Law, if a group of at least 20 consumers could get together, the CPC could then file a class-action lawsuit to demand compensation. In the end, however, only a single consumer came forward.
Alternative consumption
Another fundamental goal in terms of consumer education-one that is being pursued by consumer organizations worldwide-is to change consumption habits. The goal is to alter values to conform as much as possible to environmental protection principles, treating resources and wildlife as precious even going as far as simplifying lifestyles.
"Modern consumer products are more and more dazzling, and there are more and more sales traps. We can't keep up with business operators," says attorney Hanson Chiang. This vice chairman of the Consumers Foundation feels that the consumer's position is growing ever weaker. This is especially the case in the face of high-technology products. While consumer groups can raise consciousness and provide information, the individual must also help: "You have to ask yourself whether you really need to consume so much."
The three pillars of any solution to consumer problems will always be consumer awareness, self-monitoring among businessmen, and protection by the government or consumer groups. The Consumers Foundation plans to play a bigger role in upgrading consumer education and raising consciousness. But we ourselves must also think carefully about how we behave as consumers.
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When spending power increases, so does temptation. Will the interests of Taiwan consumers be protected?
p.111
Consumers can "trust their noses" for products like fish and meat. (left, photo by Pu Hua-chih) But for processed foods in fancy packaging, people have to rely on government and the experts.
p.112
Most people who have lived in rented apartments in the city probably know what it feels like to check out the "red notices" (advertising rooms for rent) on local bulletin boards.
p.113
Supermarkets and hypermarkets are gaining ground fast in Taiwan. With cart after cart of goods, consumption may unwittingly go over the line to gluttony.
p.115
Large private and public corporations often enjoy monopolies or oligopolies. When they conspire to raise prices, the government and consumer groups are powerless, and the little guy can only grin and bear it.
p.117
An economic exchange involves more than just money; it could even be a matter of life and death. The government, consumer groups, and consumers themselves have to cooperate in order to insure that people get what they pay for.
Consumers can "trust their noses" for products like fish and meat. (left, photo by Pu Hua-chih) But for processed foods in fancy packaging, people have to rely on government and the experts.
Consumers can "trust their noses" for products like fish and meat. (left, photo by Pu Hua-chih) But for processed foods in fancy packaging, people have to rely on government and the experts.
Most people who have lived in rented apartments in the city probably know what it feels like to check out the "red notices" (advertising rooms for rent) on local bulletin boards.
Supermarkets and hypermarkets are gaining ground fast in Taiwan. With cart after cart of goods, consumption may unwittingly go over the line to gluttony.
Large private and public corporations often enjoy monopolies or oligopolies. When they conspire to raise prices, the government and consumer groups are powerless, and the little guy can only grin and bear it.
An economic exchange involves more than just money, it could even be a matter of life and death. The government, consumer groups, and consumers themselves have to cooperate in order to insure that people get what they pay for.