The Lungyen Group allegedly violated the Fair Trade Law when selling the “Paishawan Memorial Park”
Chinese Taipei
Case:
The Lungyen Group allegedly violated the Fair Trade Law when selling the “Paishawan Memorial Park”
Key Words:
mausoleum; construction license; false advertising; concealment of important trade information
Reference:
Fair Trade Commission Decision of April 14, 1999 (the 388th Commission Meeting); Decision (88) Kung Tsan Tzu No. 8704476-012
Industry:
Real Estate Industry (6040)
Relevant Laws:
Summary:
A complaint was filed against the Lungyen Group (hereinafter “Lungyen”) for promoting and selling the “Chen Lung Tien Mausoleum” through product brochures before the construction permit for the “Paishawan Memorial Park” was obtained on June 23, 1994. The brochures stated that the license for the construction in question would be obtained before April 1997, yet Lungyen had recently claimed that it would be delayed until the year 2000. Thus Lungyen allegedly made false presentations on its product brochures and concealed the fact that it had not yet obtained the construction permit.
Investigation showed that the construction period
of any given project is a mere estimate. The contractor or the architects can only make
reasonable estimates based on objective conditions prevailing at the time. If construction
is delayed due to changes in laws and regulations or due to other factors not attributable
to the contractor, it would be inappropriate to decide that the contractor made false
presentations simply because the claimed project completion date was different from the
actual completion date.
In the case in question, Lungyen applied for a construction permit on April 7, 1994. The
company estimated that construction would take three years, so it estimated that
application for the license for use would be made in April 1997. On April 11, 1994,
Lungyen published product brochures containing the scope of the construction permit and
the construction timetable, and gave them to its sales personnel for reference. Based on
the prevailing objective conditions during that time, Lungyen did have a basis in claiming
the expected construction completion date and the date when the license for use could be
obtained. Thus it could not be determined that the company made false presentation during
that time.
In addition, pursuant to Articles 3 and 4 of the “Guidelines
Governing Development and Construction of Slope Land of Less than 10 Hectares in Area,”
Lungyen was exempted from applying for a permit for the development of
slope land. However, in the interest of careful review of slope land development projects,
the competent authority requested that Lungyen apply for a development permit in
accordance with the “Regulations Governing Slope Land
Development.” There was no evidence indicating that after
applying for the development permit on May 6, 1994 and after obtaining the construction
license for the Shuang Fuo Tien, Lungyen used “advertisements”
or “other methods communicated to the
public” to cause the public to believe that the license for
use would be obtained in April 1997.
In addition, after receiving the changes to its construction permit on April 30, 1996,
Lungyen immediately published booklets explaining the Chen Lung Tien construction project,
and gave the booklets to its sales personnel for reference. The booklets clearly stated
that the license for use would be obtained in the year 2000. Thus the general public
should not have been misled by the information provided. For members of the general public
who had already pre-purchased the property, the company, beginning in June 1996, also
published progress report on the second phase of the Chen Lung Tien project in its “Lungyen Report,” which was distributed without
charge to the public.
From the above explanations, there was no concrete evidence indicating that Lungyen
violated Article 21, paragraph 1 of the Fair Trade Law (FTL) by its claim of the project
completion date.
Article 21 of the FTL stipulates that an
enterprise shall not provide “false information” to non-specific sectors of the general public, thereby misleading the
consumers in their decisions on trade. If an enterprise uses no advertisement, labeling,
or any other method that is communicated to the public, to either explicitly or implicitly
disseminate relevant product or service information to non-specific sectors of the general
public, it does not fall under the regulation of the FTL even if the information is “capable of influencing the trading counterpart’s
decision on trade.”
Whether a construction permit has to be first obtained before a company
can start “selling” the property
is irrelevant to the application of Article 21 of the FTL, which prohibits the
dissemination of false trade information to the public. The said issue should be regulated
under the laws and regulations governing construction and real estate trade.
In the product brochure, Lungyen did not clearly state whether it had obtained the
construction permit. Claims made in the brochure did not quote any official document
reference numbers to indicate that a construction permit had been obtained. In addition,
the different construction items listed on the progress report only pertained to the main
construction items, and the progress report only stated the time for the “application of the construction permit and license to use.” It could not be determined that the overall presentation implied to the
trading counterpart that the construction permit had been obtained. The company could thus
not be determined to have violated Article 21 of the FTL.
According to the principle of the “legislative reservation”
(Gesetzesvorbehalt), unless otherwise provided by law or by
administrative orders explicitly authorized by law, individuals have the freedom to engage
in business. The case in question related to the sale of built structures. Without clear
authorization from the law, it was inappropriate to restrict the sale of the structures
simply due to the absence of administrative licenses such as construction permits.
As stated above, it was found that Lungyen published the product brochures after applying
for the construction permit; there was no evidence indicating that the company continued
to use the said brochures after applying for the permit the second time. Thus it was
difficult to determine that the company intended to deceive the trading counterparts from
the beginning or thereafter. In addition, the company had taken the initiative to achieve
the contents of the product brochure through design changes after obtaining the permit for
the development of the slope land and before the complaint was filed.
From the above explanations, Lungyen’s “failure to notify its trading counterparts that it had not obtained a
construction permit” did not constitute a violation of Article
24 of the FTL. As for possible damages incurred by the trading counterparts due to
construction delay, remedy may be sought through civil action.
Appendix:
Lungyen Group’s Uniform Invoice Number: 86686395
Summarized by Yang, Chung-lin
Supervised by Pai, Yu-chuang