A violation of the Fair Trade Law by multi-level sales enterprise Chutel Unite Telcom. Co., Ltd

Chinese Taipei

Case:

A violation of the Fair Trade Law by multi-level sales enterprise Chutel Unite Telcom. Co., Ltd

Key Words:

system registration fee

Reference:

Fair Trade Commission Decision of April 7, 2005 (the 700th Commissioners' Meeting); Disposition (94) Kung Ch’u Tzu No. 094040.

Industry:

Direct Selling Establishment (4812)

Relevant Laws:

Article 23-2(2) and Article 23-3(2) of the Fair Trade Law

Summary:

1. Chutel Unite Telcom. Co., Ltd. (hereinafter referred to as Chutel Unite Telecom) promotes and sells telecommunication services of personal numbers, calling cards, Internet telephone, HICALL mobile phone number, with the aim of giving users favorable telephone charges. The participant pays a fixed price at the time joining the system, in addition to receiving the rights of using the aforementioned telecommunication service, the participant is also given NTD 1,000 stored value telephone charges and the selling price include NTD 3,000 system registration fee. The members handbook states clearly “The system registration fee shall be returned according to the following manner: NTD 2,000 will be returned in the case that the participant terminates the system within thirty (30) days, NTD 1,000 will be returned in the case that the participant terminates the system after thirty (30) days but within sixty (60) days, no registration fee will be returned after sixty (60) days.” The aforementioned return policy is implemented.
   
2. Chutel Unite Telecom indicated that the company, for every transaction of telecommunication service bought by the participant, has to key in its purchased number with the operating system. The aforementioned operating system is considered as facilities bought by the company, the participant, after his/her number has been registered and keyed in, should share the wear and tear costs for the aforementioned facilities. And, as time passed by, the participant should bear the cost of using that increases progressively. Therefore, the reduction of system registration fee is “the amount deducted for the decreased value of the goods” as stipulated in the provision of Article 23-2 of the Fair Trade Law.
   
3. However, the telecommunication service providers are obligated to establish the aforementioned start-up communication operating system when they provide telecommunication service. Furthermore, the major operating income of the providers should come from the users’ telecommunication charges, and not requesting its users to share the wear and tear expenses and operating costs for the aforementioned facilities. Therefore, when the participant terminates the participating contract, the issue of decreased value for the telecommunication service at issue will not arise. In accordance with regulations, Chutel Unite Telecom must buy back the service at issue at ninety percent (90%) of the original purchase price. However, the investigation found that Chutel Unite Telecom has established a policy of “NTD 2,000 will be returned in the case that the participant terminates the system within thirty (30) days, NTD 1,000 will be returned in the case that the participant terminates the system after thirty (30) days but within sixty (60) days, no registration fee will be returned after sixty (60) days” when handling the withdrawal and reimbursement matters for the participant that is terminating his/her contract, without stating clearly that the costs of facilities that must be borne by the participant is the decreased value of the telecommunication service. Chutel Unite Telecom in this case did not buy back the telecommunication service hold by the participant at ninety percent (90%) of the original purchase price when the participant terminates participating contract, withdraws and returns the goods. The act of Chutel Unite Telecom indiscriminately deducts “system registration fee” obviously has violated the provision of Article 23-2 (2) of the Fair Trade Law, applied mutatis mutandis to Article 23-3 (2).

Summarized by Wang, Horng-Shiuan;
Supervised by Hsu, Hung-Jen

Appendix:
Chutel Unite Telcom. Co., Ltd.’s Uniform Invoice Number: 12724254