Hua Rong Construction Development Co., Ltd.

1136th Commissioners' Meeting (2013)

Case:

Hua Rong Construction violated the Fair Trade Law by posting false advertisement for "Shen Geng No. 3" housing project

Key Word(s):

Housing project advertisement, illegal construction, balcony outward extension

Reference:

Fair Trade Commission Decision of August 14, 2013 (the 1136th Commissioners' Meeting); Disposition Kung Ch'u Tzu No. 102132

Industry:

Real Estate Development Activities (6700)

Relevant Law(s):

Article 21 of the Fair Trade Law

Summary:

A complainant filed on October 16, 2011 with the FTC and stated that when he paid a deposit for the C5 unit of the "Shen Geng No. 3" housing project constructed by Hua Rong Construction Development Co., Ltd. (hereinafter referred to as Hua Rong Construction), Hua Rong Construction did not explain the dotted lines marking the bathroom areas and some other interior space in the floor plans of certain units. When the unit was handed over on January 15, 2013, the complainant checked the building use license and realized that the space outside the dotted lines was originally meant to be for balconies yet the company had changed it into interior space for bathrooms without permission from the competent authority. In other words, it was illegal construction. The complainant therefore filed the written complaint accusing Hua Rong Construction of false advertising in violation of Article 21 of the Fair Trade Law.

Findings of the FTC after investigation:

(1) The FTC's investigation indicated that Hau Rong Construction had designed and produced the said advertisement as well as printed out advertising brochures, floor plans and flyers distributed to consumers at the reception center. Another finding of the investigation showed that Hua Rong Construction had also made an online advertisement with the same content and posted it on the website housetube.tw. The FTC therefore concluded that Hua Rong was the advertiser in this case.

(2) Hua Rong Construction marked certain interior space with dotted lines to indicate the bed room or bathroom areas in the brochure, the floor plans posted in the online advertisement and the floor plans put up at the reception center. It gave consumers the impression that the dotted line areas were part of interior space to be used for bedrooms or bathrooms. However, according to the competent authority in Tainan City Government, the areas marked with dotted lines in the floor plans posted on online and put up at the reception center had been indicated as balconies in the building use license application. Hua Rong Construction had changed the design and turned the balconies into interior space for bedrooms or other interior space without the permission of the competent authority after acquiring the building use license. In other words, using the dotted line areas as interior space was inconsistent with the purposes stated in the building use license. It was illegal construction by extending the balconies outward. Meanwhile, Hua Rong Construction admitted that the illegally construction resulted from the "second engineering" could be subject to compulsory dismantling by the competent authority if the competent authority was informed.

(3) The text and images provided in home advertisements and the interior layout displayed have a significant effect on consumers' purchasing decisions. The amount of usable interior space is often a key factor in such decisions. The overall content of the advertisement in question gave the public the impression that the dotted line areas were interior space and could be legally used for corresponding purposes (such as bedrooms or bathrooms). If consumers had known that use of the dotted line areas as interior space was inconsistent with the purposes indicated in the building use license and the structures thus put up could be subject to compulsory dismantling, they would not have made the purchasing decisions. Therefore, the false representation in the advertisement was likely to lead to consumers' misconceptions about the use and content of the object in question and wrong decisions. Hence, it was a false, untrue and misleading representation in violation of Article 21(1) of the Fair Trade Law.

Grounds for disposition:

(1) Hua Rong Construction marked the space original intended for balconies as the interior space for bedrooms and bathrooms in the brochure distributed and the floor plans put up at the reception center and the online advertisement. It was a false, untrue and misleading representation with regard to content of product in violation of Article 21(1) of the Fair Trade Law.

(2) After assessing the motive and purpose behind Hua Rong Construction's illegal conduct, expected unlawful gains, the level of damage incurred to trading order and the duration of such damage, the profit obtained, the scale, management condition and market status of the company, whether the company had been corrected or warned by the competent authority for similar practices, the types, number of times and intervals of past violations and penalties received, remorse and attitude of cooperation in the investigation, and other factors, the FTC acted according to the first section of Article 41(1) of the Fair Trade Law and imposed an administrative fine of NT$500,000 on Hua Rong Construction. Meanwhile, since the advertisement at issue had been discontinued, there was no need to order the company to cease its unlawful act.

Appendix:
Hua Rong Construction Development Co., Ltd.'s Uniform Invoice Number: 89207953

Summarized by Wen, Che-Chia; Supervised by Wu, Ting-Hung

! : For information of translation, click here

(1)	The FTC's investigation indicated that Hau Rong Construction had designed and produced the said advertisement as well as printed out advertising brochures, floor plans and flyers distributed to consumers at the reception center. Another finding of the investigation showed that Hua Rong Construction had also made an online advertisement with the same content and posted it on the website housetube.tw. The FTC therefore concluded that Hua Rong was the advertiser in this case.
(2)	Hua Rong Construction marked certain interior space with dotted lines to indicate the bed room or bathroom areas in the brochure, the floor plans posted in the online advertisement and the floor plans put up at the reception center. It gave consumers the impression that the dotted line areas were part of interior space to be used for bedrooms or bathrooms. However, according to the competent authority in Tainan City Government, the areas marked with dotted lines in the floor plans posted on online and put up at the reception center had been indicated as balconies in the building use license application. Hua Rong Construction had changed the design and turned the balconies into interior space for bedrooms or other interior space without the permission of the competent authority after acquiring the building use license. In other words, using the dotted line areas as interior space was inconsistent with the purposes stated in the building use license. It was illegal construction by extending the balconies outward. Meanwhile, Hua Rong Construction admitted that the illegally construction resulted from the "second engineering" could be subject to compulsory dismantling by the competent authority if the competent authority was informed.
(3)	The text and images provided in home advertisements and the interior layout displayed have a significant effect on consumers' purchasing decisions. The amount of usable interior space is often a key factor in such decisions. The overall content of the advertisement in question gave the public the impression that the dotted line areas were interior space and could be legally used for corresponding purposes (such as bedrooms or bathrooms). If consumers had known that use of the dotted line areas as interior space was inconsistent with the purposes indicated in the building use license and the structures thus put up could be subject to compulsory dismantling, they would not have made the purchasing decisions. Therefore, the false representation in the advertisement was likely to lead to consumers' misconceptions about the use and content of the object in question and wrong decisions. Hence, it was a false, untrue and misleading representation in violation of Article 21(1) of the Fair Trade Law.