Tuntex Distinct Corp. allegedly violated the Fair Trade Law by false advertisment of the "Tuntex Shanhaikuan" condominium construction project and failure to inform homebuyers of design alterations
Case:
Tuntex Distinct Corp. allegedly violated the Fair Trade Law by false advertisment of the "Tuntex Shanhaikuan" condominium construction project and failure to inform homebuyers of design alterations
Key Words:
false advertisement, layout alterations, increased number of apartment units
Reference:
Fair Trade Commission Decision of July 5, 2001 (the 504rd Commissioners' Meeting); Disposition (90) Kung Ch'u Tzu No. 086
Industry:
Real Estate (6611)
Relevant laws:
Summary:
1. The Fair Trade Commission received a complaint alleging that Tuntex Distinct Corp. (Tuntex) failed to carry out construction according to the designs that Tuntex advertised to homebuyers who purchased apartments in 1993 and 1994. The complaint alleged unfulfilled promises as follows: (1) According to Tuntex's advertisement brochure the condominium compound would be "an independent 20,000-ping sovereign kingdom in its entirety," whereas the resident's manual lists the base area of the compound as 56,142.56 square meters (or about 17,012.9 ping) - 2,987 ping short of the advertised area. (A ping is a unit of measurement equal to approximately 3.3 square meters or 36 square feet.) (2) Junipers, flame trees, pipal trees, and acacia rachiis, among others, failed to be planted along the "NT$300 Million Grand Avenue." (3) Camping and barbecue facilities in the Milan Zone have not been installed, nor has the forestation project claimed in the advertisement shown any sign of beginning. (4) Shopping centers, food and delicacies corridor, and quality goods boutiques supposed to be installed on the first and second floors of the basements of Buildings A and B failed to materialize. (5) The "Clock of Paris" has not been set up. (6) No efforts have been made to construct the "natural lake," the "ocean-view cafe," the outdoor performance platform, and the promenade as advertised for the Athens Zone. (7) Archery and BB bullet-shooting practice ranges have not been constructed. (8) The health clinic has not been set up. (9) Only two of the promised four community buses are in service. (10) The promised "luxurious ocean-facing swimming pool" in the Athens Zone has not been constructed. (11) The "yacht club" and five promised sailboats have not yet materialized. (12) The promised 6,000-ping ocean-view deck in the Athens Zone is located in the Ch'ang-t'an Section of Chungcheng District, an area covering three pieces of land (Lots nos. 883, 888, and 890) owned by the National Property Bureau. Having cleared the land in preparation for development, Tuntex incorporated the area as part of the condominium compound in the advertisement, also an act of false advertising. (13) Beginning 25 January 1995, the construction designs were revised five consecutive times by Tuntex without informing buyers of the pre-sold units in accordance with the FTL. (14) Tuntex failed to build a waterfall according to the design of "a waterfall 30 meters in width and 3 meters in height with an area of nearly 2,000 ping in the Paris Zone, a waterfall that reflects the shining light and shadow of trees . . ." Such misrepresentations were a clear violation of Article 21 of the FTL. 2. The Fair Trade Commission found as follows: (1) Regarding the "Clock of Paris": An on-site investigation confirmed that the "Clock of Paris" had not been installed. Tuntex argued that a folk taboo brought up by many homebuyers prevented the clock from being installed. It cited them as saying that houses should not be opposite a clock and Tuntex would wait until homebuyers' representatives or the community's management committee could come up with a resolution. Nevertheless, that the Clock of Paris has not been constructed is a fact. No evidence has been produced to prove that homebuyers generally hold unfavorable opinions against the installation of the clock, and no management committee has been set up yet. The existing evidence all shows that Tuntex used lavishly illustrated advertisements claiming that "in the plaza there stands a grand stylish clock - the Clock of Paris; the ambience is such that one would feel as if he were in the middle of a Parisian park" - whereas in fact no clock was constructed. The Fair Trade Commission therefore found that the advertisements contained false and misleading representations. (2) Regarding the builder's alleged alteration of construction designs to increase the number of apartment units: Article 24 of the Fair Trade Law stipulates that "In addition to what is otherwise provided for in this Law, an enterprise shall not engage in other deceptive or obviously unfair acts capable of affecting trading order." Point 2 of the "Resolution aimed at reprimanding constructors who unilaterally change compartment design for the purpose of increasing the number of unsold apartment units" passed by the 155th Commissioners' Meeting provides, ...Developers who unilaterally change designs without informing the original homebuyers are engaging in obviously unfair conduct that disrupts the trading order. They are taking advantage of the homebuyers' paid installments, since the buyers are left with no choice but to accept the changed design. Although they may have grounds for changing the design, developers must still consider the possible harm done to homebuyers. If, as a result of their own miscalculations of market supply and demand, they indeed find it necessary to change the advertised layout of unsold units to increase the number of apartment units so as to boost their marketing edge, they should inform the original buyers and give them the option of expressing consent, rescinding the contract, demanding reduced prices, or adopting other conciliatory measures. If homebuyers are not given such options before the advertised layout is revised, the developers are in violation of Article 24 of the Fair Trade Law. The construction project in question was granted two construction licenses - Construction Licenses (82) Nos. 213 and 262 issued by the Keelung City Government. Five amendments were registered for License No. 213. Layout revision was registered in the first amendment, and the number of apartment units was increased by 341 units from 1,192 to 1,533. Four amendments were registered for License No. 262. A change to the number of units was registered in the first amendment, increasing the number by 341 from 1,383 to 1,737. The attached advertisement of the Tuntex Shanhaikuan contains only the floor plans of the ground floor of every apartment building in the construction project except for the Long Island Zone. Comparing the floor plans with those of the finished apartments, the Fair Trade Commission found that Buildings L and M of the Paris Zone have six apartment units on each floor, up from the four units in the original plan. The buildings have 16 floors each, so the total number of extra units is 64. Building L and M are within the base area licensed under License No. 213. When both buildings were completed, the constructor applied for a "utilization license" for 1,575 apartment units. That would put the increased number of units at 325. After deducting the 64 units for residential use as mentioned above, the remaining increase belongs to the underground floors where offices and shops are located. The Fair Trade Commission's report of a visit to Keelung City Government, documentation of construction license amendment reviews, and the report on successive amendments attest to the changes in the construction designs. As seen from the above, Buildings L and M have 64 more apartment units than the advertised number. The expected living quality of the homebuyers has thus been compromised and their interests harmed. The developer's conduct thus violated Article 24 of the Fair Trade Law. (3) As for other charges regarding "an independent 20,000-ping sovereign kingdom," "Junipers, flame trees, pipal trees, acacia rachiis along the 'NT$300 million Grand Avenue,'" "camping and barbecue facilities and forestation project in the Milan Zone," "shopping centers, delicacy corridor, and boutiques on B1 and B2 of Buildings A and B in the Milan Zone," "the natural lake, the cafe, the outdoor performance deck and the promenade," "archery and BB bullet-shooting practice sites," "the health clinic," "community buses," "the luxurious swimming pool," "the yacht club-to-be and the promised five sailboats," the "6,000-ping ocean-view platform in the Athens Zone," and "the 2,000-ping waterfall in the Paris Zone," there is no definitive proof for the Fair Trade Commission to find that the advertising claims were false or misleading. 3. In summary, Tuntex's advertisement of the "Clock of Paris" was found to be a false and misleading representation, in violation of Article 21 of the Fair Trade Law. Tuntex also violated Article 24 by changing its advertised apartment layouts, which was an obviously unfair act capable of disrupting trading order. As the illegal conduct occurred before the Fair Trade Law was amended, Tuntex was ordered to cease the illegal conduct pursuant to the pre-amended Article 41 of the same Law. Appendix: Tuntex Corporation Ltd.'s Uniform Invoice Number: 72065570 Summarized by Wu, Hung-Guan; Supervised by Yeh, Ning