Promulgated on February 28, 1992
by Fair Trade Commission Order (81) Kung Mi Fa Tzu No. 001
Amendments Promulgated on June 16, 1999
by Fair Trade Commission Order (88) Kung Mi Fa Tzu No. 01588
Amendments Promulgated on April 24, 2002
by Fair Trade Commission Order Kung Mi Fa Tzu No. 0910003680

¡@CHAPTER ONE
GENERAL PROVISIONS

Article 1

These Regulations are promulgated pursuant to the provisions of Article 23-4 of the Fair Trade Law.

Article 2

The provisions of these Regulations shall apply to relevant matters including any multi-level sales enterprise' filing for record, inspection of activities, required CPA certification of and public disclosure of financial statements, matters requiring notice to participants, the content of participation agreements, the protection of participants' interests, conduct prohibited as materially affecting the interests of participants, and managerial obligations toward participants.

Article 3

(Deleted)

Article 4

(Deleted)

CHAPTER TWO
PROCEDURES OF REPORT FILING FOR RECORD

Article 5

Thirty days prior to commencing multi-level sales activities, a multi-level sales enterprise shall file a written report that accurately sets forth the following particulars for recording by the central competent authority:

1. company name, paid-in capital, responsible person, place of office, date of incorporation registration, and a photocopy of the profit-seeking business registration;
2. locations of the principal place of business and other places of business;
3. names and locations of related enterprises and their shareholding relationship with the multi-level sales enterprise;
4. sales organization or plan;
5. operational plans or rules, specifying, among other things, the methods of calculating participants' commissions, bonuses, and other economic benefits; a forecast of the highest possible share of gross operating revenues that could be constituted by the total amount of such commissions, bonuses, and other economic benefits;
6. the date of commencement of multi-level sales activities;
7. contract clauses and other agreements governing the rights and obligations of participants;
8. types, functions, qualities, prices, and uses of the goods to be sold or services to be provided, the forecasted unit cost of manufacturing, material or labor of the goods or services, and related matters;
9. provisions regarding warranties with respect to defects of the goods to be sold or services to be provided;
10. other matters specified by the central competent authority.
    The format of the "written report" referred to in the preceding paragraph may be prescribed by the central competent authority.

Article 6

If a multi-level sales enterprise fails to fully file all materials in accordance with the provisions of paragraph one of the preceding article, the central competent authority may order it to make necessary corrections and supplement.
If it deems necessary, the central competent authority may order a multi-level sales enterprise to provide additional materials to supplement any item listed in paragraph one of the preceding article.
The multi-level sales enterprise shall perform the corrections or supplementation referred to in the preceding two paragraphs within the time period prescribed by the central competent authority.

Article 7

With the exception of changes to the unit cost of manufacturing, material or labor of the goods or services in item 8, paragraph 1 of Article 5, any change to the content of the report filed by a multi-level sales enterprise shall be reported prior to implementation. However, report on changes with respect to items 1 and 3, paragraph 1 of Article 5 may be filed within 15 days after the change.
A multi-level sales enterprise shall report each June its unit cost of manufacturing, material or labor of the goods or services it sold in the preceding year.

Article 8

A multi-level sales enterprise that ceases multi-level sales activities shall file a report with the central competent authority, post public notices at all its places of business, and notify its participants, thirty days prior to cessation.

Article 9

The central competent authority shall record in a roster the names of multi-level sales enterprises found, upon checking, to have fully reported all the information in paragraph 1 of Article 5.
The roster of multi-level sales enterprises and the important developments of the relevant information thereof shall be published by the central competent authority.
The publication referred to in the preceding paragraph may take the form of publication in the central competent authority's gazette or on its Internet site, or other forms sufficient to make the information widely known to the public.

Article 10

If a multi-level sales enterprise listed in the roster is found, upon checking, to have relocated to an unknown location or shows no evidence of operation, the central competent authority may note such circumstances in the roster.

¡@CHAPTER THREE
RIGHTS AND OBLIGATIONS OF PARTICIPANTS

Article 11

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, and shall make no false, dissembling, or misleading presentations:

1. capitalization and gross business volume in the preceding year, or, if the enterprise has been operating for less than one year, the cumulative business volume for the months of operation;
2. multi-level sales organization or plan;
3. operational rules, transaction guidelines, and laws and regulations relevant to multi-level sales;
4. obligations and responsibilities of a participant;
5. contents of benefits a participant may obtain by directly promoting or selling goods or services; contents of benefits a participant may obtain when a person he/she introduced to take part in the plan or organization promotes or sells goods or services, and the conditions for obtaining such benefits;
6. types, functions, qualities, prices, and uses of the goods or services, and other matters related thereto;
7. conditions, terms, and scope of warranties against defects of the goods or services;
8. conditions of withdrawal by a participant from the organization or plan, and rights and obligations arising from the withdrawal; and
9. other matters specified by the central competent authority.

The provisions of the preceding paragraph shall also apply when a participant introduces another person to take part in the organization or plan.

Article 12

A multi-level sales enterprise shall enter into a participation contract in writings with that who intends to take part in the sales organization or plan as a participant; the participation contract shall include the matters prescribed in items 2 through 9 of paragraph 1 of the preceding article.
The writings referred to in the preceding paragraph may not be in the form of an electronic document.

Article 13

The content as specified in item 8, paragraph 1 of Article 11 shall include, subject to other stipulations more favorable to a participant, the following:

1. a participant may rescind the participation contract by giving the multi-level sales enterprise written notice within fourteen days of signing the contract;
2. within a period of thirty days after the rescission of the contract by a participant becomes effective, the multi-level sales enterprise shall, upon request by the participant, retrieve or accept delivery by the participant of the goods; it shall furthermore refund the purchase price of all the goods owned by the participant at the time of rescission as well as other consideration paid at the time the participant joined;
3. when returning the consideration paid by a participant pursuant to the provisions of the preceding item, a multi-level sales enterprise may deduct the value of the damage to, or the loss of, the goods where such damage or loss is attributable to the participant, and may deduct any bonus or remuneration already paid to the participant for the purchase of such goods. If the goods referred to in the preceding item are retrieved by the enterprise, the enterprise may deduct necessary costs of transportation for such retrieval;
4. after the rescission period referred to in the first item has expired, a participant may still terminate the contract in writing and withdraw from the multi-level sales plan or organization at any time;
5. within thirty days following the termination of the contract pursuant to the preceding item, the multi-level sales enterprise shall buy back all goods in the participant's possession at 90% of the participant's original purchase price; provided that deduction may be any bonuses or remuneration already paid to the participant on account of such goods and any decreases in the value of the goods;
6. if a participant exercises rights to rescind or terminate the contract pursuant to the provisions of items 1 and 4, the multi-level sales enterprise may not claim from the participant any damage or penalty for breach of contract in connection with such rescission or termination.

The provisions of items 2 and 5 of the preceding paragraph shall not affect the rights the participant is entitled to exercise pursuant to the relevant provisions of the Civil Code.
The provisions of the two preceding paragraphs concerning goods shall apply mutatis mutandis to services.

Article 14

The method for handling a request by a participant to return goods in the event a multi-level sales enterprise rescinds or terminates the contract for breach of operational rules or plans by such participant or other reasons attributable to such participant shall be specified in the contract.

Article 15

A multi-level sales enterprise shall prepare and keep in its main office the following audited accounting statements for the previous accounting year certified by a Certified Public Accountant:

1. operating reports;
2. balance sheets;
3. inventory of property;
4. income statement.

A participant who has joined a multi-level sales enterprise for more than one year and who was entitled to obtain commission, bonus, or other economic benefit during the preceding year, may inspect the audited statements as specified in the preceding paragraph of the multi-level sales enterprise to which the participant belongs. The multi-level sales enterprise may not refuse such request without justifiable reason.
A multi-level sales enterprise shall continue to abide by the provisions of the preceding two paragraphs for two months after it ceases multi-level sales activities.

Article 16

A multi-level sales enterprise that recruits a minor as its participant shall first obtain the written consent of the minor's statutory agent, and shall furthermore attach it to the participation contract.
The written consent referred to in the preceding paragraph may not be in the form of an electronic document.

¡@CHAPTER FOUR
SALES ACTIVITIES

Article 17

A multi-level sales enterprise may not engage in any of the following activities:

1. requiring a participant to pay any fee obviously incommensurate with the cost in the name of training, seminars, social activities, meetings, or other like activities;
2. requiring a participant to pay or undertake any security deposit, breach penalty, or other liability, where such is obviously unreasonable;
3. requiring a participant to purchase goods in a quantity that would obviously be impossible for an average person to sell out in a short period, unless it is agreed that the price shall be paid only after the goods are re-sold;
4. unjustifiably withholding commission, bonus, or other economic benefit payable to a participant after rescission or termination of the contract;
5. stipulating that a participant shall be paid greater benefits only after he pays training fees obviously incommensurate with the cost or pays other obviously unjustifiable consideration;
6. giving specific persons preferential treatment in a manner contrary to the multi-level sales organization or plan, such that the commission, bonus, or other economic benefits that should be available to other participants would be diminished;
7. improperly hindering a participant from returning goods arising from rescinding the contract or terminating the contract;
8. requiring a participant to undertake obviously unfair obligations.
   The provisions of the preceding paragraph shall apply mutatis mutandis to participants.

Article 18

For purposes of regulating the activities of its participants in respect of multi-level sales, a multi-level sales enterprise shall stipulate that the following are breaches of contract by the participant, and shall prescribe methods for handling such breaches and faithfully enforce them:

1. promoting or selling goods or services, or recruiting participants to the sales organization, by deceptive or misleading means;
2. raising funds from other persons in the name of the multi-level sales enterprise or through its organization;
3. engaging in sales activities by means that run counter to public order or good morals;
4. affecting the market trading order or creating heavy losses to consumers by improper direct sales calls;
5. engaging in sales activities that violate the Criminal Code or other laws or regulations governing industry and commerce.

Article 19

When recruiting participants by advertising or other means of communication to the public, a multi-level sales enterprise shall make it clearly known that it is engaged in multi-level sales activities; neither may it recruit participants under the guise of recruiting employees or on other pretense.
The provisions of the preceding paragraph shall also apply to participants.

Article 20

When promoting or selling goods or services or recruiting participants by means of declared cases of success, a multi-level sales enterprise or its participants shall concretely explain the time periods, benefits obtained, and course of development of such cases, and may not make false or misleading representations.
The preceding paragraph shall apply mutatis mutandis to assertions of the items in paragraph 1 of Article 11.

Article 21

After a participant joins the sales organization or plan of a multi-level sales enterprise, the enterprise shall educate and train the participant with respect to laws and regulations relevant to multi-level sales and to channels for filing complaints about infractions of law by enterprises.

CHAPTER FIVE
INSPECTION OF BUSINESS

Article 22

A multi-level sales enterprise shall prepare and keep in its principal place of business the following written materials, and record therein on a monthly basis its development within the territory of the Republic of China:

1. the organizational system of the enterprise overall and at each level of its hierarchy;
2. total number of participants, and numbers of participants that joined and withdrew in the relevant month;
3. each participant's name or appellation, citizen's ID card number or number appeared on the business license, address, and contact telephone number; and the areas in which the participants are mainly located;
4. written participation contracts signed with the participants;
5. types, quantities, and monetary amounts of the goods or services sold, and other matters related thereto;
6. status of the payment of commission, bonus, or other economic benefits;
7. status of the handling of return of goods by participants and the aggregate amount of purchase price refunds paid.

The materials in the preceding paragraph shall be kept for five years; the same shall apply in the case of an enterprise that ceases multi-level sales activities.
The written materials in the first paragraph may be stored by means of electronic data storage media.

Article 23

The central competent authority may at any time dispatch personnel to inspect the materials provided for in the preceding article, or order an enterprise to provide those materials at regular intervals; the enterprise may not impede, refuse, or evade such inspection or order.

CHAPTER SIX
SUPPLEMENTARY PROVISIONS

Article 24

(Deleted)

Article 25

(Deleted)

Article 26

The Regulations shall be in force from the date of promulgation, with the exception of the provisions amended and promulgated on June 16, 1999, which shall be in force from July 1, 1999.