Nanyuan Construction Development Co., Ltd.

1253rd Commissioners’ Meeting (2015)

Case:

Nanyuan Construction violated the Fair Trade Law for posting a false advertisement on “West Lake Impression” housing project

Keyword(s):

Function zoning, residence house, hotel

Reference:

Fair Trade Commission Decision of November 11, 2015 (the 1253rd Commissioners’ Meeting), Disposition Kung Ch’u Tzu No. 104119

Industry:

Real Estate Development Activities (6700)

Relevant Law(s):

Article 21(1) of the Fair Trade Law

Summary:

1. In April 2015, Nanyuan Construction Development Co., Ltd. (hereinafter referred to as Nanyuan Construction) used the terminology for regular residences in an advertisement (hereinafter referred to as the advertisement) posted on housetube.com for its “Impression of the West Lake” housing project but the project was located in a hotel zone. It was false advertising.

2. Findings of the FTC after investigation:

   Nanyuan Construction provided the entire funds to build the housing project. It hired an advertising agency to design the advertisement for the project but the right to review and decide the contents of the advertisement was reserved to Nanyuan Construction. The company also used the service of another business to post the advertisement on housetube.com. According to the building authority of Chiayi City Government, the function zoning of the area where the project was for hotels and the purpose of the application filed for approval by the company was to build hotel buildings. Therefore, sanctions might be imposed in accordance with Paragraph 2 of Article 73 and Article 91 of the Building Act, if it was found out the company did not obtain approval to change the use permit when the project was inspected in the future or the public complained about the units being sold as residences.

3. Grounds for disposition:

   (1)

   In the advertisement, Nanyuan Construction used the terminology for regular residences and posted the wording of “I have checked out and compared all the housing projects in Chiayi and searching for houses has become an interest and responsibility for me because I must provide my family with a most beautiful and well-built home. Therefore, I always check out new houses on rainy days;” “Chiayi does not lack luxury houses but it needs to break through limitations;” “jumping out artificial arrangements, living in nature to enjoy the great earth, taking leisurely walks around the lake at any time, the beautiful views around Holland Lake making one after another performance around the clock, from life to living;” “the only avant-garde community, embracing the lake scenery, sparkling with a mingling of traditional and modern beauty and breaking through limitations will rewrite the lifestyle of the elite on Daya Road” and “the 8M-wide roads in the community show that the focus is set on not only the appearance but also the design of community roads to liberate the perspectives of the units.” The overall advertisement gave consumers the impression that the units of the project could be purchased and used as residences. They would not know the project was not for such purposes. The investigation revealed that the company had no documents issued by the building authority to prove the units could be used as residence houses. Hence, Nanyuan Construction’s advertisement for the “Impression of the West Lake” housing project was inconsistent with the facts in this case and in violation of Article 21(1) of the Fair Trade Law.

   (2)

   After assessing the motive and purpose of Nanyuan Construction’s unlawful conduct, the illegal gains expected, the damage to trading order, the duration of the conduct, the profits obtained, the scale of business of the company, the management condition, the company’s market power, offense records from the past, remorse shown for the act and attitude of cooperation throughout the investigation, the FTC concluded that the conduct had had a serious effect on marketing competition because the housing project was in a hotel zone and could not be used as residence houses. Therefore, the FTC cited the first section of Article 42 of the Fair Trade Law and imposed an administrative fine of NT$600,000 on the company.