Guan Hao Construction Co., Ltd. and Zhong Xing Xing Development Co., Ltd.

1261st Commissioners' Meeting (2016)

Case:

Guan Hao Construction and Zhong Xing Xing Development violated the Fair Trade Law by posting false advertisements when marketing the "Dun Nan Guan Zhi" housing project

Keyword(s):

Travel time, false advertising

Reference:

Fair Trade Commission Decision of Jan. 6, 2016 (the 1261st Commissioners' Meeting), Disposition Kung Ch'u Tzu No.104145

Industry:

Real Estate Development Activities (6700)

Relevant Law(s):

Paragraph 1 of Article 21 of the Fair Trade Law

Summary:

1. TVBS reported a builder had used “8 minutes from Wenshan District to Taipei 101” as the appeal in an advertisement to attract consumers to take a look at its housing project. However, the name of the housing project was concealed in the report. The FTC searched on the Internet for several times, compared the results with the picture of the advertisement, and then concluded that the project in question was probably the “Dun Nan Guan Zhi” housing project. The FTC’s staff members visited the site of the project and saw the poster (hereinafter referred to as the advertisement) for the housing project indicating the builder as Guan Hao Construction Co., Ltd. (hereinafter referred to as Guan Hao Construction) and the advertising agency as Zhong Xing Xing Development Co., Ltd. (hereinafter referred to as Zhong Xing Xing Development). The claim of “8 minutes to Xinyi District” was also in the advertisement. According to one of the sale representatives for this housing project, people already residing in units therein had told that it would take 8 to 15 minutes to drive from the site of the project (Lane 106, Fuxing Road, Taipei City), taking Xinglong Road, Xinhai Road, Keelung Road and Xinyi Road, to get to Taipei 101 in Xinyi District. It was therefore inconsistent with the claim in the advertisement.

2. Grounds for disposition:

   (1)

   Guan Hao Construction delegated Zhong Xing Xing Development to advertise and sell the remaining units of the “Dun Nan Guan Zhi” housing project. In other words, Guan Hao Construction only provided the funds and built the housing project while the advertising and marketing were the responsibility of Zhong Xing Xing Development. Therefore, Guan Hao Construction was the advertiser. According to the advertising contract, Zhong Xing Xing Development was responsible for advertising and marketing and would pay for the advertising expenses. All the advertising materials had to be reviewed and approved by Guan Hao Construction before they could be printed and posted or distributed. Meanwhile, it was set forth in Article 7 of the “Dun Nan Guan Zhi Marketing Contract” that Guan Hao would pay Zhong Xing Xing for its service 5% of the total bottom price the remaining units and parking spaces were sold for. Although the advertising materials was approved by Guan Hao Construction, Zhong Xing Xing Development was the company actually responsible for planning and producing the advertisement, using the advertisement to market the units and making profits according to the amount of the sales it achieved. Therefore, it is sensible to consider Zhong Xing Xing as one of the advertiser in this case.

   (2)

   The claim of “8 minutes to Taipei 101 in Xinyi District” gave consumers the impression that it would take only 8 minutes to drive from the site of the housing project to Taipei 101. According to the actual test run by Guan Hao Construction and Zhong Xing Xing Development, the route between the site of the project to Taipei 101 would be from Lane 106 of Fuxing Road, Fuxing Road, Section 2 of Xinglong Road, Section 4 of Xinhai Road, Section 3 of Xinhai Road, Section 2 of Keelung Road, Section 5 of Xinyi road, to Taipei 101 in Xinyi District. Meanwhile, according to Taipei City Traffic Engineering Office, the abovementioned route was 6km long. The speed limit was 50km an hour and there were 22 traffic lights on this route. When driving at 50km an hour, it would take about 7.2 minutes (6km*60min/50km per hr=7.2min). However, waiting at traffic lights, traffic jams and traffic conditions during rush hours and other factors also had to be taken into consideration. Later Zhong Xing Xing Development admitted that under the aforementioned circumstances, it would take about 12 to 17 minutes to travel from the project site to Taipei 101 by car or motorcycle. It would be impossible to do it in 8 minutes. In other words, the advertisement was inconsistent with the facts and the difference was more than what the public could accept. The said claim was therefore able to cause wrong perception or decision and in violation of Article 21(1) of the Fair Trade Law. For this reason, the FTC imposed an administrative fine of NT$300,000 on Guan Hao Construction and NT$150,000 on Zhong Xing Xing Development.