Cheng Ming Construction and Bo Gen Development

1338th Commissioners' Meeting (2017)

Case:

Cheng Ming Construction and Bo Gen Development violated the Fair Trade Law for marketing the "Fashion Bobo" housing project

Keyword(s):

Illegal building, false advertising

Reference:

Fair Trade Commission Decision of June 28, 2017 (the 1338th Commissioners' Meeting); Disposition Kung Ch'u Tzu No. 106050

Industry:

Real Estate Development Activities (6700), Real Estate Agencies Activities (6812)

Relevant Law(s):

Article 21(1) of the Fair Trade Law

Summary:

1. The Taoyuan City Government forwarded to the FTC a complaint from a private citizen accusing that Cheng Ming Construction development Co., Ltd. (hereinafter referred to as Cheng Ming Construction) and Bo Gen Development Co., Ltd. (hereinafter referred to as Bo Gen Development) of using false advertising to market the "Fashion Bobo (originally called Line Generation)" housing project (hereinafter referred to as the housing project) located in Bade District, Taoyuan City by indicating in an advertisement entitled "Line Generation, Small Capital Style MRT Intelligent Homes" that the housing project would include "a gym and a lounge bar" and also marked on the 13F layout that there would be facilities including "an aerobics room, a gym, a bar and pool tables," yet these facilities were never built.
2. Findings of the FTC after investigation:
   (1) The FTC requested Cheng Ming Construction and Bo Gen Development to provide written statements and also to give their oral statements at the FTC. The statements revealed that Cheng Ming Construction built and marketed the housing project and commissioned Bo Gen Development to plan the advertising as well as help sell the units. Bo Gen would get a certain percentage of the sales for its service and also certain part of the profit from the units it sold. Therefore, both Cheng Ming Construction and Bo Gen Development were both considered advertisers in this case.
   (2) At the request of the FTC, the Taoyuan City Government provided its opinion and pointed out that according to Article 1, Chapter 1 of the Building Technical Regulations, a flat area with no shelter above is called a terrace. Meanwhile, as Paragraph 1 of Article 25 of the Building Act provides that "without review made by and the building permit issued by the municipal or county (city) (bureau) competent authority of construction, anyone may not construct, use or demolition any building, " any structures constructed on the terrace without the permission of the competent authority would become illegal buildings.
3. Grounds for disposition:
   (1) The uses of buildings described in home-marketing advertisements are important factors that may have an effect on consumers when they decide whether they will make their purchases or not. When marketing the housing project, Cheng Ming Construction and Bo Gen Development posted the wording of "gym and lounge bar" in the advertisements entitled "Line Generation, Small Capital Style MRT Intelligent Homes" and "Fashion Bobo Small Capital Style MRT Intelligent Homes" and also displayed the "13F layout," "3D gym schematic," "3D bar schematic," "3D aerobics room schematic" and "3D pool room schematic" on the electronic billboard at the reception center for the salespeople to describe the facilities and market the units. The overall advertising gave consumers the impression that the facilities on the rooftop terrace could be legally used as advertised. However, the Taoyuan City Government pointed out that the structures constructed on the terrace without the permission of the competent authority would be considered illegal buildings. In other words, the facilities were not provided as advertised and homebuyers could not enjoy the facilities advertised; the positions where the facilities were supposed to be built were also inconsistent with the uses indicated in the as-built drawings. The inconsistency between the advertisement contents and the reality could cause concerned consumers to have wrong perceptions or even make wrong decisions. The conduct was in violation of Article 21 (1) of the Fair Trade Law.
   (2) After assessing the motive of Cheng Ming Construction and Bo Gen Development for the unlawful act, the level of harm, the seriousness of the violation, the business scale of the two companies, and their attitude after the violation, the FTC cited the first section of Article 42 of the Fair Trade Law and imposed an administrative fine of NT$1 million on Cheng Ming Construction and NT$450,000 on Bo Gen Development.