Hsian Chan Construction Co., Ltd. made false advertisement in selling “Lung Men Ching Tian” pre-sale houses and violated Article 21 of the Fair Trade Law

Chinese Taipei

Case:

Key Words:

Pre-sale house, decoration

Reference:

Fair Trade Commission Decision of December 22, 2005 (the 737th Commissioners’ Meeting), Disposition Kung Ch’u Tzu No. 094138

Industry:

Buildings Construction (3901)

Relevant Laws:

Article 21 Paragraph 1 of the Fair Trade Law

Summary:

1. The Fair Trade Commission (FTC) received a complaint from the public, indicating that the complainant has seen a huge red banner was hang at the reception center of Hsian Chan Construction Co., Ltd. (hereinafter referred to as Hsian Chan) “Lung Men Ching Tian” pre-sale house on September 16, 2004. The said banner was printed with the wordings “Free Decoration of NT$ 500,000 for Upfront Payment of NT$ 300,000”. The complainant thereupon walked into the reception center to talk over the matters of house purchase. After going through several negotiations, the complainant has finally bought unit A8 at the price of NT$ 4,500,000 on September 23, 2004. On the same day, the complainant paid NT$ 100,000 deposit and signed draft agreements (discovered later that these were formal agreements), agreeing to settle the remaining NT$ 200,000 upfront payment on October 7, 2004. The total upfront payment was NT$ 300,000. However, the complainant discovered later that the agreements did not state about free decoration, and thus has notified Hsian Chan Company about this omission. On September 30, 2004, the complainant sent a legal attest letter to Hsian Chan Company, requesting Hsian Chan Company to include the free decoration into the agreement. However, on October 6, 2004, Hsian Chan Company sent a legal attest letter and replied that “...the house that you have bought is not included in the promotion (the promotion was for houses of NT$ 5,800,000, free decoration of NT$ 500,000 for upfront payment and deposit of NT$ 300,000). Moreover, our company had never gave you any promise that the price of NT$ 4,500,000 included free decoration,...”. Therefore, there is a suspicion that Hsian Chan Company has deceived consumers with false advertisement.
2. Upon investigation, the FTC found that Hsian Chan Company made the red banner advertisement printed with “a celebration of more than 60% sales÷ free decoration of NT$ 500,000 for upfront payment of NT$ 300,000” and billboard advertisements of “free decoration of NT$ 500,000 for upfront payment of more than NT$ 300,000” for the “Lung Men Ching Tian” pre-sale house at issue from September 1, 2004 to September 30, 2004. The aforementioned advertisements indicated “free decoration of NT$ 500,000 for upfront payment of NT$ 300,000 (or above)”, without disclosing any terms and restrictions of this promotion. From objective viewpoint, such conduct was sufficient to mislead consumers into believing that the promotion of free decoration of NT$ 500,000 for upfront payment of NT$ 300,000 or above was applicable to all houses in the construction project at issue. The complainant signed pre-sale house sales and purchase agreement for unit A8 at a total price of NT$ 4,500,000 with Hsian Chan Company, and paid NT$ 100,000 deposit during the said advertised promotion period. The complainant agreed to settle the remaining NT$ 200,000 upfront payment on October 7, 2004. However, Hsian Chan Company did not give the free decoration of NT$ 500,000 afterward and explained to the complainant that the promotion of “free decoration of NT$ 500,000 for upfront payment of NT$ 300,000 or above” was only applicable for unit being promoted (that was A7). The buyers of other units should pay decoration expenses according to the price list and submitted notifications to Hsian Chan Company for approval if they needed decorations. This situation was not consistent with the advertisements at issue in which only “free decoration of NT$ 500,000 for upfront payment of NT$ 300,000 or above” was stated and without any disclosures of terms and restrictions for this promotion.
3. Grounds of Disposition:
   1. Hsian Chan Company argued that it has placed announcement of “free decoration of NT$ 500,000 for upfront payment of NT$ 300,000” promotion in the sales folders of “Lung Men Ching Tian” pre-sale house at the reception center. The staffs at reception center would present the promotion plan to customers whenever the customers had asked about “free decoration of NT$ 500,000 for upfront payment of NT$ 300,000”. Furthermore, the list of price negotiation and agreement with the complainant did not state the total price had included decoration. In addition, the sales board at the reception center has clearly indicated that the promoted unit was unit A7, the buyer of the said unit should pay NT$ 5,800,000 as listed in the price list for a decorated unit. In other words, the buyer should pay upfront payment of NT$ 300,000 and total price of NT$ 5,800,000 for a decorated unit. However, it was found that Hsian Chan Company did not announce the promotion plan openly so that the public can learn about the plan and hence know the terms and restriction of the said promotion plan. Even though the list of price negotiation and agreement did not mention the free decoration, but it is still unable to exempt Hsian Chan Company from its responsibility of making false or misleading representation in the advertisements. In addition, the unit A7 illustration board at the reception center given by Hsian Chan Company showed only the wordings “Layout Plan for First (Second, Third, Forth) Floor of Unit A7”, hence it is still difficult to say there was clear evidence showing that unit A7 was the promoted unit in the advertisements. Furthermore, even if as described by Hsian Chan Company that the promotions plan of the advertisement at issue was only applicable to unit A7, but the “List of Lung Men Ching Tian Buyers” provided by Hsian Chan Company showed that unit A7 was sold on September 5, 2004. Nevertheless, Hsian Chan continued to publish the said promotion advertisement until September 30, 2004. It is obvious that such conduct was sufficient to mislead a substantial number of public into believing that the promotion activity of “free decoration of NT$ 500,000 for upfront payment of NT$ 300,000 or above” was valid during the advertised period.
   2. Taken into consideration the motivation, purpose and expected improper benefit of the unlawful acts of Hsian Chan Company; the degree and duration of the act’s harm to market order; benefits derived on account of the unlawful act; scale, operating condition, sales volume and market position of the enterprise; whether or not the type of unlawful act involved in the violation has been the subject of correction or warning by the Central Competent Authority; types of, number of, and intervening time between past violations, and the punishment for such violations; remorse shown for the act and attitude of cooperation in the investigation, and other factors, therefore, a fine of NT$ 180,000 is imposed on Hsian Chan Company according to the anterior paragraph of Article 41 of the Fair Trade Law.

Summarized by Feng, Yu-Wei;
Supervised by Shen, Li-Yu

Appendix:
Hsian Chan Construction Co., Ltd.’s Uniform Invoice Number: 80379808