Supreme Administrative Court judgment regarding alleged violation of the Fair Trade Law by Sanyang Construction Co., Ltd.

Taiwan

Case:

Supreme Administrative Court judgment regarding alleged violation of the Fair Trade Law by Sanyang Construction Co., Ltd.

Key Words:

false advertising, important trading information

Reference:

Supreme Administrative Court Judgment (90) P'an Tzu No. 722

Industry:

Housing Construction and Engineering (3901)

Relevant Law:

Article 21 of the Fair Trade Law

Summary:

1. Case Background

It has been alleged that advertisements placed by the complainant in this case, Sanyang Construction Co., Ltd. (the complainant), in promotion of its "Hawaii" building, were inconsistent with the actual uses of the building and contained false and misleading representations in violation of Article 21 of the Fair Trade Law (FTL) in effect at the time of the acts. An investigation by the defendant, the Fair Trade Commission (FTC), found that the complainant used false and misleading representations and symbols in advertisements regarding the scope of use of the building in question, in violation of the then-effective Article 21(1) of the FTL. The FTC therefore issued a disposition on 15 August 1998 ordering the complainant to halt all advertising containing false or misleading representations or symbols the day after the disposition letter (Disposition Ref. [87] Kung Ch'u Tzu No. 175) was delivered. The complainant filed administrative appeal and administrative re-appeal motions, both of which were dismissed, and then initiated administrative litigation proceedings.

2. The Judgment of the Supreme Administrative Court held as follows:

Article 21 of the FTL provides that "an enterprise shall not, on goods, in connection with the advertising of the goods, or in any other way that is communicated to the public, make or use any false or misleading representation or symbol about price, quantity, quality, content, production process, production date, validity period, method of use, uses, place of origin, manufacturer, place of manufacture, processor, place of processing, and so forth." Also, in accordance with the provisions of the forepart of Article 41 of the FTL, the FTC may order enterprises who violate these provisions to cease or rectify improper practices within a set deadline.

An examination of the advertising copy for the complainant's "Hawaii" project reveals statements such as "constructing an established neighborhood, building a beautiful life; the 14-ping (one ping is equal to 36 sq. feet) 'Free and Independent,' the 27-ping 'Sweet Newlywed,' the 35-ping 'Total Happiness,' and the 40-ping 'Happy Together,'" and depicted model apartments with various furniture arrangements. Another advertisement carried the statements that "the exquisitely finished 80-ping ultra-stylish sea view with loft; the airy 40-ping, 'Morning Glow, Evening Sunset' four-bedroom, the neighborhood standard 30-ping 'Rolling Mountain View..." and the accompanying images of surrounding scenery obviously indicated that the project in question being sold by the complainant would be a residential complex. Additionally, introductions made by on-site sales staff and the accompanying residential-style interior furnishings of the model units led consumers to mistakenly believe that the project in question would be purely a residential complex from the second floor and above.

But the operating license for the complex clearly states that it is divided into a commercial use area, with storefronts on the 1st floor and office space from the 2nd to the 9th floors; and a residential area from the 10th to the 18th floors. The actual use of the property thus clearly does not conform to the depictions in the advertising for the complex.

According to the Taipei County Government's Department of Public Works Letter Ref. Pei Kung Shih Tzu No. B13231, the amendments to the project's approved usage are subject to urban planning restrictions on the ratio of floor space that may be used for residential use within a commercial district, which limit residential use to no more than half of the particular total floor space. Given the restrictions, it would be impossible to modify the project to conform to the depictions in the advertising.

As the primary purpose that most average individuals purchase real estate is for residential use, so the use of other units in the complex is an important piece of trading information. When enterprises sell real estate developments of differing uses and the advertising for those developments leads people to erroneously believe, without clarification from the enterprise, that the entire development is strictly residential, it is a violation of the prohibition on making false or misleading representations contained in Article 21(1) of the FTL. The FTL's silence regarding specifics that should be stated in advertisements does not exempt advertisers from the law's purview.

The defendant the FTC had found that the complainant's advertising for the project in question used false and misleading statements and symbols regarding the project's scope of use in violation of Article 21(1) of the FTL and, under the forepart of Article 41 of the same law, had ordered the complainant to halt all advertising containing false or misleading statements or symbols the day after the defendant's disposition letter had arrived. The defendant's disposition of the matter was proper and consistent with the above-cited articles of law, and its dismissal of the complainant's administrative appeal and re-appeal were reasonable. The complainant therefore lacked grounds for administrative litigation and the suit should be dismissed by the Supreme Administrative Court.

Appendix: Sanyang Construction Co., Ltd.'s Uniform Invoice Number: 04982736

Summarized by Lai, Chia-ching;

Supervised by Chen, Shih-fang