Hong Zhu Construction Co., Ltd.

1107th Commissioners' Meeting (2013)

Case:

Hong Zhu Construction Co., Ltd. and Han Tian Advertising Co., Ltd. violated the Fair Trade Law for posting false and untrue advertisements for "Exploration 21" housing project

Key Word(s):

Real estate advertisement, power generation capacity

Reference:

Fair Trade Commission Decision of January 23, 2013 (the 1107th Commissioners' Meeting); Disposition Kung Ch'u Tzu No. 102005

Industry:

Real Estate Development Activities (6700)

Relevant Law(s):

Article 21(1) of the Fair Trade Law

Summary:

The FTC received complains that an advertisement for the "Exploration 21" housing project had claimed that the wind power generators installed for this project would have the capacity to generate "2KW x 1/Hour = 2KW/Hour, 2KW x 24/Hour = 8KW/Day, 48KW x 30/Day = 1,440KW/Month, 1,440KW x 12/Month = 17,280KW/Year, 17,280KW/Year x 2(generators) = 34,560KW/Year." However, the fact was the wind power generators were still unable to achieve the estimates when the complaints were filed. In addition, the common facilities advertised, including the "pool room and basketball shooting room," "multi-function recreation room," "KTV," "movie theater" and "lobby" were still inaccessible, and the actual design and arrangement of the lobby were also inconsistent with what had been shown in the said advertisement. It was false advertising. Furthermore, the advertisement had also carried the wording of "the two 2KW wind power generators to be used for this housing project will generate up to 34,560KW/Year; for example, the 100 40W lights installed in Basement 1 will use up 40W x 100 x 24hours x 30 days x 12months = 34,560KW and the annual electricity bill will be 34,560KW x NT$2.85 = NT$98,496 and the wind power generators will help the residents save NT$98,496 each year." The FTC therefore started an investigation into these matters.

Findings of the FTC after investigation:

The FTC requested the informer to provide further details and related evidences. Besides, Hong Zhu Construction Co., Ltd. and Han Tian Advertising Co., Ltd. were requested to provide their statements and reason to the FTC.

Grounds for disposition:

(1) The advertisement in question gave consumers the impression that the two 2KW wind power generators installed for the said housing project could generate up to 34,560KW of electricity and save NT$98,496 on their electricity bills each year. However, wind power generation involves unpredictable factors, such as the objective environment and the size of the wind field. Consequently, it would be impossible to expect the two wind power generators at issue to generate power in their full capacities 24 hours a day and 365 days a year to produce the maximum of 34,560KW each year. In other words, the goal claimed in the advertisement about the power generation capacity would be impossible to achieve. This was substantiated by the statements from Hong Zhu Construction Co., Ltd. and Han Tian Advertising Co., Ltd. and their inability to provide objective and concrete evidences or test reports. Moreover, since the calculation of the amount of power that could be saved was based on the above unrealistic expectation of power to be generated, the claim of saving up to NT$98,496 therefore lacked support and was impossible to achieve. Hence, the representation in the said advertisement was false, untrue and misleading and was in violation of Article 21 of the Fair Trade Law. Acting according to the first section of Article 41 of the same law, the FTC therefore imposed an administrative fine of NT$200,000 on Hong Zhu Construction Co., Ltd. and NT$100,000 on Han Tian Advertising Co., Ltd.

(2) As for the other complaint about the common facilities, namely the "pool room and basketball shooting room," "multi-function recreation room," "KTV" and "movie theater" remained inaccessible and the advertisement therefore being false, the informer did not provide further details. However, the result of the FTC's investigation revealed that the said facilities were not open because the management committee of the said housing project had not yet completed the acceptance inspection but they were finally open to the residents on September 8, 2012 and there were photos to serve as the proof. Hence, the FTC considered the complaint had been mainly a dispute over contract performance to which the Fair Trade Law did not apply.

(3) The informer also complained that the use and arrangement of the "lobby" was inconsistent with what had been indicated in the said advertisement. However, as real estate transactions involved massive amounts of capital, the design and arrangement of the lobby could not be regarded an important factor to be considered in real estate transactions. In most condominiums, there is usually a counter for the superintendant or security guard to stay and equipment required for management such as monitoring cameras, etc. These are normally accepted by the general public as reasonable. Therefore, it was difficult to consider that the advertisement had led to wrong perceptions and decisions of the trading counterparts just because the installation of the said equipment was slightly different from the actual design and arrangement and what had been shown in the advertisement. Under such circumstances, the Fair Trade Law was also inapplicable in this complaint.

Appendix:
Hong Zhu Construction Co., Ltd.'s Uniform Invoice Number: 28923053
Han Tian Advertising Co., Ltd.'s Uniform Invoice Number: 25008556

Summarized by Ho,Yen-Jung; Supervised by Yang,Hsiu-Yun

! : For information of translation, click here

(1)	The advertisement in question gave consumers the impression that the two 2KW wind power generators installed for the said housing project could generate up to 34,560KW of electricity and save NT$98,496 on their electricity bills each year. However, wind power generation involves unpredictable factors, such as the objective environment and the size of the wind field. Consequently, it would be impossible to expect the two wind power generators at issue to generate power in their full capacities 24 hours a day and 365 days a year to produce the maximum of 34,560KW each year. In other words, the goal claimed in the advertisement about the power generation capacity would be impossible to achieve. This was substantiated by the statements from Hong Zhu Construction Co., Ltd. and Han Tian Advertising Co., Ltd. and their inability to provide objective and concrete evidences or test reports. Moreover, since the calculation of the amount of power that could be saved was based on the above unrealistic expectation of power to be generated, the claim of saving up to NT$98,496 therefore lacked support and was impossible to achieve. Hence, the representation in the said advertisement was false, untrue and misleading and was in violation of Article 21 of the Fair Trade Law. Acting according to the first section of Article 41 of the same law, the FTC therefore imposed an administrative fine of NT$200,000 on Hong Zhu Construction Co., Ltd. and NT$100,000 on Han Tian Advertising Co., Ltd.
(2)	As for the other complaint about the common facilities, namely the "pool room and basketball shooting room," "multi-function recreation room," "KTV" and "movie theater" remained inaccessible and the advertisement therefore being false, the informer did not provide further details. However, the result of the FTC's investigation revealed that the said facilities were not open because the management committee of the said housing project had not yet completed the acceptance inspection but they were finally open to the residents on September 8, 2012 and there were photos to serve as the proof. Hence, the FTC considered the complaint had been mainly a dispute over contract performance to which the Fair Trade Law did not apply.
(3)	The informer also complained that the use and arrangement of the "lobby" was inconsistent with what had been indicated in the said advertisement. However, as real estate transactions involved massive amounts of capital, the design and arrangement of the lobby could not be regarded an important factor to be considered in real estate transactions. In most condominiums, there is usually a counter for the superintendant or security guard to stay and equipment required for management such as monitoring cameras, etc. These are normally accepted by the general public as reasonable. Therefore, it was difficult to consider that the advertisement had led to wrong perceptions and decisions of the trading counterparts just because the installation of the said equipment was slightly different from the actual design and arrangement and what had been shown in the advertisement. Under such circumstances, the Fair Trade Law was also inapplicable in this complaint.