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:

Articles 21(1) and 24of the Fair Trade Law

Summary:

  1. A complaint was filed against the Lungyen Group (hereinafter Lungyen) for promoting and selling the Chen Lung Tien Mausoleumthrough product brochures before the construction permit for the Paishawan Memorial Parkwas 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.

  2. 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 advertisementsor other methods communicated to the publicto 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.

  3. Article 21 of the FTL stipulates that an enterprise shall not provide false informationto 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 counterparts decision on trade.

    Whether a construction permit has to be first obtained before a company can start sellingthe 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 permitdid 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 Groups Uniform Invoice Number: 86686395

Summarized by Yang, Chung-lin

Supervised by Pai, Yu-chuang


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