Cheng An Construction Co., Ltd.

Case:

Key Words:

presale house, public facilities, trading information

Reference:

Fair Trade Commission Decision of October 29, 2008 (the 886th Commissioners' Meeting), Disposition Kung Ch'u Tzu No. 097145

Industry:

Buildings Construction (4100)

Relevant Laws:

Article 24 of the Fair Trade Law

Summary:

1. This case originated from a consumer's complaint transferred from the Yilan County to the Commission. The facts of the case are abbreviated as follows: Four consumers ordered presale houses from Cheng An Construction Co. Ltd. (hereinafter referred to as "Cheng An Company") in 2005 for the construction project of "Tama City – Yu-Ching Palace." They later found out that in the sales process, Cheng An Company appeared to hide trading information, such as public facilities of a presale house, and the share of the areas. The company involved in violation of Article 24 of the Fair Trade Law.
2. Findings of FTC after Investigation:
   Cheng An Company admitted that the six lands in the construction case for the construction project of "Tama City–Yu-Ching Palace" was owned by the entire householders of the property. Also, householders utilize the public facilities within the lands such as the courtyards, parking space, carriageways, and passageways, though the sizes of the areas of the public facilities that were used by each householder were different. However, the findings of FTC after investigation showed that the sales and purchase agreement of the real estate in this case failed to clearly disclose the items, shares, and calculating of allocations of the public facilities to each co-owner. The agreement did not specify relevant information, such as the summary of each household's share of the areas of public facilities either. Although Cheng An Company claimed that at the time of selling the construction project, it had stated to purchasers the shares of the areas of the common parts of the presale houses, and the proportion of the shares of such areas by means of showing the purchasers the master plan of the entire area of the property, and plans of proposals. The FTC inspected the plans and found out that these plans failed to clearly and completely disclose the information such as the public facilities, and the method of calculating the proportion of the shares of said areas. As these plans were professional diagrams used in architecture, it was indeed difficult to expect the general public, who has no professional knowledge of architecture, to become familiar with the complete information of the common parts by merely basing marks of these plans or the oral explanations of the salesmen. These facts were sufficient for the Commission to believe that Cheng An Company hid vital trading information, and such an act was a deceptive and was sufficient to affect trading order.
3. Grounds for Disposition:
   As disclosure of information on public facilities of a presale house is an important trading requirement, and real estate is durable goods for consumers, each purchaser is to thoroughly consider the future increment and the utilization benefit of a presale house before purchasing any houses. If the purchasers were familiar with the fact beforehand, which was that their shares of the public facilities such as the courtyards and the parking space that were exclusively used by other households, their wills of making buying decisions would be affected. Accordingly, the fact that Cheng An Company sold the presale houses for the construction project of "Tama City – Yu-Ching Palace" and failed to disclose in the sales and purchase agreement the public facilities, the share of the areas, and the method of calculating the proportion, showed that the company obviously took advantage of the disadvantageous position over the trading counterparts with asymmetrical information. Consequently, its act was deceptive and sufficient to affect trading order, and hence violated Article 24 of the Fair Trade Law. The Commission ordered the company to cease the unlawful act and imposed an administrative fine of NT$ 200,000 on it in accordance with the fore part of Article 41 of the Fair Trade Law.

Appendix:
Cheng An Construction Co. Ltd.,'s Uniform Invoice Number: 27488124
Summarized by Tseng, Chiu-Chen; Supervised by Hung, Hsiu-Hsing