Fair Trade Commission Disposal Directions (Guidelines) on Investigations in Multi-level

Fair Trade Commission Disposal Directions (Guidelines) on Investigations in Multi-level Sales Cases

Prescribed by the 278th Commissioners' Meeting of February 26, 1997
Circulation by Letter (86) Kung San Tzu No. 00861 of March 11, 1997
Revised by the 354th Commissioners' Meeting of August 19, 1998
Circulation by Letter (87) Kung Fa Tzu No. 03242 of August 26, 1998
Revised by the 389th Commissioners' Meeting of April 21, 1999
Circulation by Letter (88) Kung San Tzu No. 01134 of April 26, 1999
Revised by the 417th Commissioners' Meeting of November 3, 1999
Circulation by Letter (88) Kung Fa Tzu No. 03182 November 9, 1999
Revised by the 493th Commissioners' Meeting of April 20, 2001
Promulgated by Order (90) Kung San Tzu No. 01650 of June 1, 2001
Revised the Title by the 688th Commissioners' Meeting of January 13, 2005
Promulgated by Order Kung Fa Tzu No. 0940001278 February 24, 2005
Revised by the 729th Commissioners' Meeting of October 27, 2005
Promulgated by Order Kung San Tzu No. 0940009652 of November 11, 2005
Revised by the 914th Commissioners' Meeting of May 13, 2009
Promulgated by Order Kung San Tzu No. 0980004924 of May 25, 2009
Revised by the 954th Commissioners' Meeting of February 10, 2010
Promulgated by Order Kung San Tzu No. 0990001300 of February 25, 2010

(Purpose)
With a view toward discovering unlawful acts in a timely fashion, managing relevant information, expediting the investigation process, and minimizing the harm done to the economic order of society by illegal multi-level sales, the Fair Trade Commission (the "Commission") adopts these principles for investigations in multi-level sales cases.
(Principles for Judging Violations)
A violation of Article 23 of the Fair Trade Law (the "Law") shall be found where the participants [the senior members] of a multi-level sales organization generate income primarily through their introduction of new participants and receiving commissions from the latter's membership fees, rather than generate income from the marketing or sale of the goods or services at reasonable market prices. The terms "primarily" and "reasonable market prices" are to be construed in accordance with the Commission's Interpretation Ref. Kung Yen Shih No. 008.
(Commission's Authority to Conduct Investigations)
The Commission shall initiate ex officio investigations of multi-level sales organizations in response to complaints from the public or press coverage provided the Commission believes that the Law has been violated; written form or substantial evidence is not required for a complaint.
(Oversight of Report Meterials)
The Commission shall review with due care all information reported by multi-level sales organizations. If the reported information does not meet the standards established in the Supervisory Regulations Governing Multi-Level Sales (the "Regulations"), or fail to provide adequate or timely supplements after an order to do so, the report will be deemed to have not filed, and the Commission shall return the original report, and instruct the applicant to resubmit a complete one while preserving an paper-based or electronic copy of the report submitted for the official files.
(Inspection of Business Operations)
When the Commission dispatches personnel to the business premises of a multi-level sales organization to inspect the documentation required to be kept on the premise under Article 23 of the Regulations, the personnel shall not only verify whether the organization's actual operations conforms to its reports, but also give appropriate explanations and guidance to the organization if it has questions regarding the relevant laws, regulations and administrative policies.
(Priority Supervision)
If the Commission has reasonable grounds to believe that a reporting multi-level sales organization may be violating the Law or injuring the rights of its participants, the Commission may place that organization under priority supervision. Pursuant to Article 27 of the Law and Article 23 of the Regulations, the Commission may request the organization to provide relevant information on a regular basis or dispatch Commission's personnel to the premises of the organization to inspect the documentation that the organization is required to keep on its premises.
(Discretion of Other Government Agencies)
If the goods, services, or practices reported by a multi-level sales organization fall within the jurisdiction of another government agency, the Commission may transfer the relevant materials and information to that agency and request that agency to handle the matter. The Commission and the agency may handle the matter jointly if necessary. With respect to a multi-level sales organization that, using multi-level sales techniques, sells or promotes goods or services that require special permits from another government agency, the Commission may refer the matter to that government agency for disposition in addition to its own investigation and disposition under the Law and the Regulations.
(Criminal Liability)
If a multi-level sales organization is found to have violated Article 23 of the Law or other criminal laws based on information obtained by an investigation, the Commission may, upon its internal reporting and approval, refer the matter to investigative or law enforcement agencies for investigative assistance.
(Violation of Other Provisions of the Law)
Violations of other provisions of the Law not directly regulating multi-level sales shall be investigated and disposed.
(Termination of Investigation)
If the multi-level sales organization under investigation no longer exists, has been suspended operations, has ceased operations, or has moved to an unknown location, or the investigation fails to obtain material evidence of violations, the investigating unit may draft suggestions to the reviewing Commissioner. After signed approval by the Chairperson or Vice Chairperson is given, the case may either be kept in the files for future reference or closed, with regular general reports on these cases at the meetings of the Commission.
(Streamlined Procedures I)
Where Multi-level sales organization are in violation of Article 5(1), Article 7(1), Article 8, Article 12, Article 13, Article 14, Article 15, Article 16(1), Article 18, or Article 22, of these regulations, the Commission may, at its discretion, handle the matter under the streamlined procedures.
(Streamlined Procedures II)
Dispositions may be drafted immediately in cases disposed under streamlined procedures and reviewed by the reviewing Commissioner.The disposition can be issued after signed approval by Chairperson or Vice Chairperson is given and reported to the Commissioners Meeting the following week (for retroactive adoption). If there is dissenting opinion, the streamlined procedures shall be reapplied after supplementation, and the case may considered by the Commissioners Meeting if necessary.
(Standards for Imposing Fines under Streamlined Procedures)
For cases disposed under the streamlined procedures, fines shall be imposed according to the following standards:
1. For violations of Article 5(1), Article 7(1) or Article 8 of these regulations, fines of not less than NT$50,000 nor more than NT$1,000,000 may be imposed.
2. For violations of Article 12, 13, 14, or 18 of these regulations, fines of not less than NT$50,000 nor more than NT$1,000,000 may be imposed.
3. For violations of Article 15 or 22 of these regulations, fines of not less than NT$50,000 nor more than NT$1,000,000 may be imposed.
4. For violations of Article 16(1) of these regulations, fines of not less than NT$50,000 nor more than NT$2,000,000 may be imposed.
Cases which do not fall within the guidelines of the administrative fine standards above, shall not be handled according to the simplified case handling procedures, but should be referred to the Commission for appropriate action.
(Safety Considerations)
When the circumstances of a case make it necessary for personnel to be dispatched to a multi-level sale organization's place of business to investigate, at least two personnel shall be dispatched. If necessary, local law enforcement agencies and government agencies with relevant jurisdictions may be asked to cooperate in the investigation so as to facilitate the progress of the investigation and protect the safety of the Commission's personnel.