Han Xiang Development Co., Ltd.

1224th Commissioners' Meeting (2015)

Case:

Han Xiang Development violated the Fair Trade Law for posting false advertisements of “Xin Jie Du” presale home project

Keyword(s):

False advertisement, presale home, balcony extended outward

Reference:

Fair Trade Commission Decision of April 2, 2015 (the 1224th Commissioners' Meeting), Disposition Kung Ch'u Tzu No. 104029

Industry:

real Estate Development (6700)

Relevant Law(s):

Article 21 of the Fair Trade Law

Summary:

1. Advertising flyers from Han Xiang Development Co., Ltd. (hereinafter referred to as Han Xiang Development) carried the wording of “creative 2-room units,” “creative 2-room units on 9F/A8,” “creative 2-room units on 5F/B7” “creative 2-room units on 11F/A2,” “creative 2-room units on 9F/B4,” “1+1>2, creative super-efficient use of space,” “exquisitely designed creative 2-room units in ‘Xin Jie Du’…micro homes with 1+1>2 maximum use of space…” as well as pictures of real scenes taken in a sample creative 2-room unit. At the same time, advertisements for the same housing project posted in newspapers also included the claims of “magical 2-room units,” “creative 2-room units and creative 1+1 room units.” Meanwhile, when showing interested consumers around in the sample unit, the company’s salesclerks expressed that although the project included one-room apartments, 2-room units and 3-room units, before handing over one-room apartments to buyers the company would extend the balconies outward to increase space for an extra room, and a bed was indeed placed in the balcony area which was labeled “This is how the area may eventually become.” False advertising was suspected.

2. Findings of the FTC after investigation:

   (1)	Han Xiang Development alone provided the funding and constructed the buildings of the presale home project. It also had the flyers printed and distributed them while Xin He Advertising Co., Ltd. (hereinafter referred to as Xin He Advertising) was delegated to be in charge of selling the units. As Han Xiang Development admitted that it had been responsible for reviewing and producing all the advertisements in relation to the project, the company was indeed the advertiser. In the meantime, according to the sales authorization agreement, Xin He Advertising was to market the units on a commission basis and would take 1.2% of each closed deal as its reward. As Xin He Advertising was not given any power to make decision with regard to the advertisements, it could not be considered as another advertiser of the advertisements posted for the project.
   (2)	Whether a presale home advertisement is false and untrue or misleading has to be assessed in accordance with the objective conditions when the advertiser uses advertisements (such as the advertiser’s capacity to deliver later, related regulations, etc.) If an advertiser is perfectly aware of or should be aware of at the time when the advertisement in concern is posted that it can not deliver as advertised or even if it can but the content of delivery is in violation of related regulations, such an advertisement is false, untrue and misleading.
   (3)	The pictures and texts in the above advertisements could easily mislead consumers to believe that certain space in the one-room apartment, other than as a balcony, could also be used as a bedroom, and they might make their transaction decisions based on this mistaken perception. Moreover, when the company’s salesclerks showed potential buyers around in the sample unit, which originally had been designed as a one-room apartment, the fact that the bed was placed in the balcony area and the label stating that “this is how the area may eventually become” could also deepen the misconception in consumers. According to the building authority of New Taipei City Government, if balcony space was turned into bedroom space through second engineering in a housing project after the acquisition of the use permit, it would be considered as changes inconsistent with the approved uses. Such inconsistency with the pictures and texts attached to the original use permit would be in violation of Article 73 of the Building Act and subject to the Illegal Construction Administration Regulations.

3. Grounds for disposition:

   (1)

   When marketing the “Xin Jie Du” housing project, Han Xiang Development marked the balcony space as part of the interior. It was a false, untrue and misleading representation with regard to content and use of product in violation of Paragraph 1 of Article 21 of the Fair Trade Law.

   (2)

   After assessing the motive of Han Xiang Development behind the aforesaid unlawful act and the illegitimate profits the company expected from it, the FTC cited the first section of Article 42 of the Fair Trade Law and imposed an administrative fine of NT$1.5 million on the company. Since Han Xing Development already removed the bed placed in the balcony area in the sample unit during the investigation period and also stopped using the aforementioned flyers and posting the newspaper advertisements described earlier, there was no need to order the company to cease the practice of using illegal advertisements. Therefore, the FTC did not order Han Xiang Development to cease the aforesaid unlawful act.