Chan Wang Construction Co., Ltd. violates the Fair Trade Law by making false and misleading representations for the pre-construction advertisement regarding the mezzanine design of condos "Hsin Ti Lai Heng No. 65 Chin Tsuan Hsin Ti"

Case:

Key Words:

pre-construction sale, sample house, mezzanine, false advertisement

Reference:

Fair Trade Commission Decision of August 12, 2004 (the 666th Commissioners' Meeting); Disposition Kung Ch'u Tzu No. 076

Industry:

Real Estate Investment (6611)

Relevant Laws:

Article 21 of the Fair Trade Law

Summary:

A complaint was filed accusing Chan Wang Construction Co., Ltd. (hereinafter called "Chan Wang Construction") of using false and misleading representations regarding the mezzanine design in the advertisement for the pre-construction condos of "Hsin Ti Lai Heng No. 65 Chin Tsuan Hsin Ti" in violation of Article 21(1) of the Fair Trade Law (FTL).
Findings of the Fair Trade Commission (FTC) after investigation:
The floor plans of the bottom floor and the upper mezzanine floor (furniture allocation figure) of the buildings "Hsin Ti Lai Heng No. 65 Chin Tsuan Hsin Ti" were printed, published and disseminated after review by Chan Wang Construction. According to the field investigation by FTC, the two bedrooms illustrated in the upper mezzanine floor design were the main bedroom and the Japanese style room of the sample house of the building in question.
Grounds for disposition:
1. The advertisements (on the floor designs and the sample house) of Chan Wang Construction were sufficient to mislead the consumers into believing that the buildings in question had been granted approval to build one level mezzanine when or after the delivery of the condos, that the use of such mezzanine would be legal, and therefore, they could use more space with a lower price. If the price is a consumer's concern, he/she might enter into a transaction with the respondent. However, according to the construction license along with its appendix and the engineering drawings, there was no record of the mezzanine design in the building in question. Based on the Bureau of Public Works of the Taipei City Government, the floor plan approved by the original construction license was not categorized as a high ceiling design; therefore, no mezzanines may be additionally built. The modified and approved floor design was a high ceiling design; however, it was still not approved to build mezzanines. The floor plan (furniture allocation figure) contained in Chan Wang Construction's advertisements was conspicuously different from the modified and approved floor design. Building the mezzanines was likely to be in violation of the law. Therefore, if a purchaser adds a mezzanine by himself or herself according to the advertisement [upper floor design (furniture allocation figure)] after acquiring the usage license, he/she would violate the Construction Law, and the mezzanine shall be reported and demolished pursuant to the law. Chan Wang Construction's advertisement was inconsistent with the implemented floor plan, and the construction was deemed an illegal construction by the construction authority. Therefore, it was determined that Chan Wang Construction had made false, untrue and misleading representations in the advertisement regarding the content of the property.
2. According to the Bureau of Public Works of the Taipei City Government, neither the original floor design nor the modified one presented by Chan Wang Construction was granted the permission to build mezzanines. Before the construction was complete, Chan Wang Construction might still apply to change the design with the Bureau, although the approval on the application would depend on the content of the change. As for whether the advertisement of the pre-construction condos was false, untrue or misleading shall be judged based on the objective circumstances when the advertisement was made (e.g., the advertiser's ability to deliver, the laws and regulations). If the advertiser of the pre-construction condos already foresees or has reason to know that the property will not be consistent with the advertisement, then the advertisement is false and untrue or misleading. When the advertisement of "Hsin Ti Lai Heng No. 65 Chin Tsuan Hsin Ti" was first published, a legal application was filed and the construction was approved; however, no permit was given to build additional mezzanines. Therefore, whether Chang Wang Construction re-applied to change the design to add the mezzanine design and whether the Bureau of public Works of the Taipei City Government permitted its application would make no difference to the fact that Chang Wang Construction had made false and misleading representations in the advertisement regarding the content of the property. Additionally, based on the trading characteristics of pre-construction buildings, consumers often get to understand the content of the construction through the advertisement and employ it as a reference to decide whether or not to enter into the transaction. Therefore, advertisements have obvious influence on the competition of sales of pre-constructions buildings. To the knowledge of the public, representations in the advertisements shall be consistent with the facts. To prevent consumers from being misled by false, untrue or misleading advertisements, business operators may not be exempted from the liabilities by the statement "for reference" in the advertisements. Thus, whether the construction in question was not designed for mezzanines according to the construction license, or the sales persons had never stated that it was a legal mezzanine design, would make no impact on the fact that the respondent had made false and misleading representations regarding the mezzanine design in the advertisement of the pre-construction condos of "Hsin Ti Lai Heng No. 65 Chin Tsuan Hsin Ti."
3. After weighing Chan Wang Construction's motivation, purpose, expected improper benefit, the duration of impairment to the trading order, its cooperation in the investigation, FTC ordered the respondent, under the forepart of Article 41 of the FTL, to immediately cease its unlawful acts and imposed an administrative fine of New Taiwan Dollars (NT$) 1,000,000.

Appendix:
Chan Wang Construction Co., Ltd.'s Uniform Invoice Number: 12953919

Summarized by Taur, Rong; Supervised by Chen, Yuhn-Shan

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