The law prohibits trade promotion acts aimed at unhealthy competition. — Illustrative Image/ File Photo

In order to attract the purchasing power of the user, a few enterprises have introduced the extremely attractive trade promotion “guise”. And this may exceed limits, thus leading to legal violations.

The law prohibits trade promotion acts aimed at unhealthy competition. Therefore, before launching the trade promotion “guise”, it would be prudent for enterprises to make sure their forms of trade promotion are not in the “blacklist “ as follows:

To organise trade promotions, but not be truthful about the prizes;

To use a fake trade mark or cause confusion over goods and services to deceive customers;

To discriminate against customers at different trade promotion areas in the programme;

To offer goods to customers for trial use, and request them to return goods of the same type by the rival enterprises which they may be using;

To use medicinal drugs, including those already permitted to be circulated for trade promotion, except in the case where the trade promotion is conducted for the trader; 

To abuse the belief, lack of knowledge, and lack of experience of the customer in order to conduct trade promotions conducted for the personal benefit of a trader, individual or an organisation;

To create direct comparison between its services and goods, and the services of any trader, organisation or individual for the purpose of unhealthy competition;

And any other trade promotion activities forbidden by law;

The trade promotion programme must be implemented lawfully, truthfully, officially, and transparently, and should not infringe on the legal interest of the users, any other trader, organisation or individual.

Therefore, the enterprise implementing the trade promotion must ensure favourable conditions for winning customers to receive the prize, and be obligated to settle clearly and rapidly all complaints in relation to the trade promotion program (if any). In addition, the enterprise still has to ensure the quality of goods and services promoted, and goods, services used for trade promotion.

The enterprise needs to pay attention to the maximum increase as well the maximum decrease in cost of goods and services used for trade promotion.

Normally, the material value of goods or the maximum decrease in price applied to goods and services for trade promotion will not exceed 50 per cent of the price of goods and services prior to the trade promotion, except otherwise prescribed by law.

The enterprise is authorised to apply the following trade promotion forms, but it has to guarantee the observance of general regulations on trade promotion as well separate regulations of every principle:

To supply goods samples and service samples to customers for trial use, free of charge;

To give gifts to customers, and supply services without any financial transactions, and not attached with the purchase and sale of goods and supply of service;

To sell and supply services at a price lower than the price of goods and services supplied previously;

To sell goods, and supply services attached with a purchase coupon and service use coupon;

To sell goods and supply services attached with a prize-winning coupon to customers and choose the winner according to regulations and prizes already announced;

To sell goods, they can offer services linked with trade promotions that have an element of chance associated with them;

To organise regular customer programmes;

Trade promotion for goods, services via internet and other electronic means.

PLF LAW FIRM