SUPERVISORY REGULATIONS OF MULTI-LEVEL SALES OF 1992

Promulgated on February 28, 1992
by Fair Trade Commission Order (81) Kung Mi Fa Tzu No. 001

Article 1

These Regulations are enacted pursuant to Paragraph 2, Article 23 of the Fair Trade Law.

Article 2

The provisions of these Regulations shall apply to the control of multi-level sales.

The term "multi-level sales enterprise" as referred to in these Regulation shall mean an enterprise which makes its operational projects or its rules, and plans its overall sales activities in respect of multi-level sales.

The term 'participant' as referred to in this Regulations, shall mean a person who takes part in the organization or plan of a multi-level sales enterprise and sells or promotes the sale of commodities or services, and introduces other persons to join the aforesaid activities.

Article 3

Prior to commencing its business or operation, a multi-level sales enterprise shall file a written report setting forth the following particulars for recordation with the central competent authority:

  1. sales organization or plan;
  2. operation project or guidelines, providing, among others, calculation formula of participants' commissions, grants and other economic gains;
  3. the commencement date business or operation;
  4. principal office;
  5. terms and conditions providing rights and obligations of participants and general conditions of sales; and
  6. provisions regarding warranties with respect to the commodities or services to be sold.

In the event of any change in the contents of the aforesaid report, the enterprise shall file another report for such change with the authority prior to the implementation thereof.

Any multi-level sales enterprise which commences its business or operation of multi-level sales before the promulgation of these Regulations shall file the aforesaid report for recording within two (2) months after the promulgation of these Regulations.

If deemed necessary, the central competent authority may notify a multi- level sales enterprise to supplement the report as filed in accordance with the first paragraph within a specified time limit.

Article 4

Before a participant takes part in the sales organization or plan of a multi-level sales enterprise, the enterprise shall inform the participant of the following particulars with no false, concealed, or misleading statements:

  1. capital amount;
  2. sales organization or plan;
  3. operation rules and trading guide;
  4. obligations and liabilities of a participant;
  5. contents of gains paid to a participant for directly selling or promoting the sales of commodities or services, and, if a participant may be paid gains for selling or promoting the sales of commodities or services by another participant who is introduced to join the plan or organization by the former participant, the contents and conditions of such gains;
  6. particulars in connection with the types, functions, qualities, and usages of commodities or services;
  7. terms, conditions and limitation of the obligations for warranties in commodities or services;
  8. terms and conditions of withdrawal of a participant from and organization or plan, and rights and obligations arising out of the withdrawal; and
  9. other particulars as designated by the central competent authority.

Before a participant takes part in the sales organization or plan of a multi-level sales enterprise, the enterprise shall enter into a written participating contract with the participant, incorporating the provisions as prescribed in Items 2 through 9 of the first paragraph of this Article.

To evidence the performance of the non-disclosure duty of the first paragraph, the multi-level enterprise shall keep a statement signed by each participant or other types of proof documenting such disclosure.

The provisions as prescribed in paragraphs 1 and 3 of this Article shall apply to a participant introducing a third person to participate.

Article 5

The contents of Item 8, Paragraph 1 of the preceding Article shall include the following particulars:

  1. A participant may give written notice to a multi-level sales enterprise to rescind a contract within fourteen (14) days after the execution of the contract.
  2. Within thirty (30) days after the cancellation of the contract becomes effective, the multi-level sales enterprise shall, upon the participant's request, retrieve or accept the participant's delivery of the commodities, and return the purchase price at the time of cancellation of the contract and other expenses paid by the participant at the time of participation.
  3. In returning the payments made by the participant under Paragraph 2 of this Article, the multi-level sales enterprise may deduct the value of the commodities destroyed or extinguished due to reasons attributable to the participant and the grant and/or the amount paid to the participant for such dealing, as well as the shipping cost if the enterprise retrieves the commodities.
  4. After expiration of the period for entitlement to rescind a contract as set forth in Paragraph 1 of this Article, the participant may terminate the contract in writing and withdraw from the multi-level sales plan or organization at any time.
  5. After termination of a contract, the multi-level sales enterprise shall buy back commodities possessed by the participant concerned at the price of ninety percent (90%) of the original purchase price paid by the participant, provided that the enterprise may deduct the amount paid to the participant for such dealing and the diminished value of the commodities if the value of the retrieved commodities is diminished.
  6. If the participant exercises its rights to cancel or terminate a contract under Paragraph 1 or 4, the multi-level sales enterprise shall not claim from the participant any breach penalty or compensation for damages suffered by the enterprise in connection with the cancellation or termination of the contract.

Article 6

A multi-level sales enterprise shall prepare and keep, in its principal office, written information about monthly records of the development of the enterprise within the territory of the Chinese Taipei for the examination by the central competent authority, including the overall organizational system of the enterprise and the organizational system of each of its levels, the number of participants, categories of commodities and services sold or dealt, quantities, commissions, grants or other economic gains and principal distribution areas.

The aforesaid records shall be kept for five year.

The written information may be restored by electronic data media if the central competent authority so agrees.

The central competent authority may dispatch officials to check the written information from time to time, which the enterprise shall not impede, refuse or evade.

Article 7

A multi-level sales enterprise shall not conduct any of the following activities:

  1. Require a participant to pay any fee exceeding the cost in the name of training, seminars, social activities or meetings, or in any others.
  2. Require a participant to pay or undertake any security deposit, breach penalty, or other responsibilities which are obviously inappropriate.
  3. Require a participant to purchase commodities in a quantity which are clearly impossible to be sold out in a short period by an average person, unless it is set forth in a contract that the price shall be paid after the commodities are sold.
  4. Withhold gains payable to a participant after the participant withdraws from the enterprise in accordance with the relevant regulations.
  5. Set forth in a contract that a participant shall be given more gains only after the participant pays a massive amount of training fees or other costs.
  6. Require, in other improper manners, a participant to undertake any responsibility which is clearly unfair. The above-listed provisions of this Article shall apply mutatis mutandis to a participant introducing a third person to participate.

Article 8

These Regulations shall come into force as of the date of promulgation.

ÿ