The advertisement “Hsin Ti Lai Heng No. 61 Pao Tsuan Hsin Ti” building of Chu Ta Construction Ltd. Inc., is false and sufficient to adversely affect trading order, in violation of Fair Trade Law

Chinese Taipei

Case:

Key Words:

house with mezzanine, custodian agreement

Reference:

Fair Trade Commission Decision of June 16, 2005 (the 710th Commissioners' Meeting); Disposition Kung Ch’u Tzu No. 094068

Industry:

Real Estate Investment (6611)

Relevant Laws:

Article 21 and Article 24 of the Fair Trade Law

Summary:

The complainant in this case indicated that in the advertisement of “Hsin Ti Lai Heng No. 61 Pao Tsuan Hsin Ti” by Chu Ta Construction Ltd. Inc. (hereinafter referred to as Chu Ta Construction Company), there is a photograph of a house with elevated ceilings and being redecorated into interlayer house, furthermore, the salesperson claimed “the area of one ping can be used as of two pings”, that is the area of use can be expanded. In June 2004, the complainant signed real property sales and purchase agreement with Chu Ta Construction Company. However, the aforementioned Company indicated that the complainant “must fully pay ‘the agreement signing payment’ before they can take home the agreement.” Later, the complainant received the sales and purchase agreement sent by Chu Ta Construction Company, at that time, the complainant discovered that the second construction on the building at issue is illegal and may be torn down by the government building administration agency.
Upon investigation, the Fair Trade Commission found: Chu Ta Construction Company has received occupancy permit for the building “Hsin Ti Lai Heng No. 61 Pao Tsuan Hsin Ti” in January 2004. However, according to the floor plans and explanations of occupancy permit, the second to fourth floor is not designed with mezzanines. Any extension of mezzanine constructed without approval shall be considered as a violation of Building Code and classified as squatter. Secondly, although the statement “printed on May 12, 2003” is found on the advertisement in this case, but it is not sufficient to prove that Chu Ta Construction Company has not used the aforementioned advertisement in June 2004. However, Chu Ta Construction Company argued that the advertisements at issue were only used in March and April of 2003, but unable to present any publication or advertisement that was used between April 2003 and the end of 2004. Moreover, the complainant insisted that he/she has bought the house after seeing the aforementioned advertisement in June 2004 and in practice, it is very rare to find any consumers that will refer to an advertisement of more than one year when thinking of buying a house. In addition, it is found that the complainant and another purchaser have stated jointly that after they have signed real property sales and purchase agreements with Chu Ta Construction Company, Chu Ta Construction Company told them the Company will have custody of the signed agreements before they pay the“agreement signing payment” or total price payment.
Grounds of disposition:
1. With regard to the false advertisement of mezzanine designs: Chu Ta Construction Company has published a photograph of duplex apartment in the advertisement of “Hsin Ti Lai Heng No. 61 Pao Tsuan Hsin Ti” building and taken the buyers to look around the two-floors decorated apartment. Such advertisements and the finished apartment are sufficient to mislead consumers into believing that the building at issue has met the relevant building laws. And then, the consumers were also misled to think that the space of use for the small area could be doubled with a mezzanine designed. However, the Public Works Department of Taipei City Government does not approve the design and construction of mezzanine for this building. Any addition of mezzanine without approval is considered as a violation of the relevant building laws. Although Chu Ta Company argued that the buyers have signed on the real property sales and purchase agreement acknowledging that they understood about the risks of design and construct mezzanine, but the representation or symbol in the advertisement of the product must consistent with the fact, therefore, the enterprises may not argue that they are not liable for the content of the advertisement as they have added and corrected explanations in the advertisement or agreement. Therefore, the advertisement at issue of Chu Ta Construction Company was sufficient to mislead consumers into thinking that the mezzanine design for the building at issue is a permissible construction and then they can have larger space of use at a lower price. In addition, the construction of the aforementioned designed mezzanine has violated the Building Code and there is a worry of being reported and torn down. Although Chu Ta Construction Company has shifted the risk and responsibility of mezzanine design to the buyers, but the Company’s responsibility of providing false advertisement cannot be excluded. Therefore, with regard to the mezzanine design, the advertisement of Chu Ta Construction Company has false and misleading representation, in violation of the provision of Article 21 (1) of the Fair Trade Law.
2. With regard to the custody of real property sales and purchase agreement: After signing the real property sales and purchase agreement, Chu Ta Construction Company requested the buyers to make a certain amount of payment (depending on circumstances, it may be the balance beyond down payment or the amount beyond down payment and loan amount) before handing over the aforementioned agreements to the buyers on the ground of temporary custody for the aforementioned agreement,. Chu Ta Construction Company, through the aforementioned arrangement, has advantage of receiving partial payment for the sales; the buyers were compelled to pay the remaining balance as soon as possible, and furthermore the buyers were unable to exercise their rights prior to paying the aforementioned amount. With the vantage position in trading, Chu Ta Construction Company took advantage of the buyers’ comparative disadvantage in trading; such conduct obviously is unfair and sufficient to adversely affect trading order, in violation of Article 24 of the Fair Trade Law.
3. Taking into consideration of the motive, purpose of the respondent in committing unlawful acts, anticipated inappropriate profits, the degree and duration of the acts’ harm to trading order, benefits derived from the conducts, scale of operations, operating condition, market position, past violations, substantial evidence of repentance after being found in violation and the cooperativeness during the investigations, Chu Ta Construction Company is ordered to cease the aforementioned illegal act immediately together with an imposition of an administrative fine of NT$1,600,000.

Summarized by Yang, Chung-Lin;
Supervised by Chen, Yuhn-Shan

Appendix:
Chu Ta Construction Ltd. Inc.’s Uniform Invoice Number: 80307869

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