Huang Hsiang Construction Corporation

Case:

Key Words:

deposit, general list of unit shares, common property

Reference:

Fair Trade Commission Decision of July 13, 2011 (the 1027th Commissioners' Meeting), Disposition Kung Ch'u Tzu No. 100124

Industry:

Real Estate Development Activities (6700)

Relevant Laws:

Article 24 of the Fair Trade Law

Summary:

1. The FTC's staff visited the site of the "Huang Hsiang Yu Ding (transliteration)"housing project of Huang Hsiang Construction Corporation (hereinafter referred to as Huang Hsiang Corp.) on December 9 and 14, 2010 and discovered there were no contract copies and the general list of unit property shares available. The salespeople claimed that the contract had not been printed yet and requested the FTC staff to pay a deposit of NT$30,000-50,000 as the proof of their purchase intention. As the conduct was in violation of Article 24 of the Fair Trade Law (FTL), the FTC therefore initiated an ex officio investigation.
2. The investigation revealed that there had been homebuyers visiting the presale project site of "Huang Hsiang Yu Ding"before the end of September, 2010 and paid deposits for units despite that the contract and the general list of unit property shares had been unavailable.
3. Grounds for disposition:
   (1)According to Article 24 of the FTL: "In addition to what is provided for in this Law, no enterprise shall otherwise have any deceptive or obviously unfair conduct that is able to affect trading order."Since presale homes are not yet completed, the relevant information accessible to homebuyers is limited when they sign the transaction contract. Undoubtedly, the developer (builder) has the advantage with regard to related information. Therefore, if the developer demands homebuyers to pay a deposit in order to view the contract for presale homes or fails to disclose the general list that shows the property share of each unit and makes it available to the public by distribution or free access, there is the possibility of violation of Article 24 of the FTL.
   (2)When selling the presale homes of the "Huang Hsiang Yu Ding"housing project, Huang Hsiang Corp. did not make copies of the contract publicly available to homebuyers. On the contrary, it demanded homebuyers to pay a deposit in order to view the contract, putting an uncertain number of homebuyers in a disadvantageous position with restricted access to contract-related information and the risk of having their deposits confiscated unless they continued with the transaction. Moreover, the provisions stipulated in the real estate contract for the "Huang Hsiang Yu Ding"project had been standard contract terms formulated singlesidedly by Huang Hsiang Corp. Homebuyers had to pay a deposit before reading them, while they were already in a disadvantageous position and their interests were in jeopardy (such as their leverage in negotiating the contract terms, their worry about having the deposit confiscated if not signing the contract, and their lack of information about the real estate they were purchasing or the related rights and obligations in the contract, and so on."The exploitation of information asymmetry by Huang Hsiang Corp. to conduct transactions was an inappropriate means of market competition that had violated business ethics and market competition. Although Huang Hsiang Corp. agreed to return the deposits afterwards, it was still not enough to fully rectify the misconduct or compensate the homebuyers for the disadvantage they suffered when making transaction decisions under information asymmetry.
   (3)As for the general list of unit property shares, Huang Hsiang Corp. claimed that it had been placed on the counter of the sales location and in the folder of each salesperson for homebuyers' viewing, yet the salespeople had never showed the said list to the staff of the FTC when they visited the location. In fact, the FTC staff had never seen the list at the location and neither had some homebuyers ever seen it in their work. Therefore, when selling the presale units of the "Huang Hsiang Yu Ding"project, Huang Hsiang Corp. could not have provided the general list of unit property shares for homebuyers' viewing and, as a consequence, homebuyers had been unable to know the result of common property allocation calculation or the percentage of the common property each unit held.
   (4)When selling the presale homes of the "Huang Hsiang Yu Ding"project, Huang Hsiang Corp. failed to display the contract at the sales location and instead demanded homebuyers to pay a deposit in order to view the contract, disclose the general list of unit property shares after deducting the common property, or list out the percentage of the total common property each unit will have and make the information available to the public by distribution or free access. Under the circumstances, homebuyers had to make their transaction decisions with insufficient and incomplete information and their interests were jeopardized. This was not only obviously unfair to homebuyers but also unfair competition to other developers that were market competitors as they could lose the opportunity to have fair trade. The said act was therefore deemed obviously unfair conduct able to affect trading order in violation of Article 24 of the FTL. After reviewing the considerations in determining the amount of administrative fine set forth in Article 36 of the Enforcement Rules to the Fair Trade Law, the FTC acted in line with the first section of Article 41 of the Fair Trade Law, ordered Huang Hsiang Corp. to immediately cease the unlawful act, and also imposed on the company an administrative fine of NT$1,500,000.

Appendix:
Huang Hsiang Construction Corporation's Uniform Invoice Number: 86379024

Summarized by: Yang, Chung-lin ; Supervised by: Hung, Shui-hsing