Multi-level sales operations by the I F International Co. Ltd. in violation of the Fair Trade Law and the Supervisory Regulations Governing Multi-Level Sales

Chinese Taipei


Case:

Multi-level sales operations by the I F International Co. Ltd. in violation of the Fair Trade Law and the Supervisory Regulations Governing Multi-Level Sales

Key Words:

multi-level sales, failure to report changes for recordation, termination of contract

Reference:

Fair Trade Commission Decision of May 3, 2000 (the 443rd Commissioners' Meeting); Disposition (89) Kung Ch'u Tzu No. 8808638-004

Industry:

other automobile service (8919)

Relevant Laws:

Article 23ter(2) of the Fair Trade Law; pre-amendment Article 3(2) and post-amendment Articles 11(1) and 13(1) of the Supervisory Regulations Governing Multi-Level Sales

Summary:

  1. When the I F International Co., Ltd. (I F International) in October of 1998 added new products to its line, including its "An-hsin" card, water purifier, and products for everyday use, it did not report changes in its business to the Commission for recordation in violation of Article 3(2) of the pre-amendment Supervisory Regulations Governing Multi-Level Sales (the Regulations). I F International also held the products offered in association with its "Hsi-fu" discount card to be unique, and from 15 May 1999, its "Hsi-fu" membership application contract stated "The trial period for this card is 14 days; after the trial period has passed, no applications for refunds will be accepted." This clause was also not reported to the Commission prior to its implementation, in violation of Article 3(2) of the pre-amendment Regulations. In addition, this action also violated Article 13(1) of the post-amendment Regulations, which state that the conditions for participants' withdrawal and the associated rights and obligations shall include Article 13(5): "for participants who terminate their contract under the terms of the preceding subparagraph, the multi-level sales organization shall, within 30 days of such termination, buy back the participant's previously purchased goods at 90 percent of their original price . . .." In fact, actual handling of participants' withdrawals was based on the clause, "the trial period for this card is 14 days; after the trial period has passed, no applications for refunds will be accepted," and for any participants who joined after 15 May 1999, no termination of contract or return of cards was accepted, in violation of article 23ter(2) of the post-amendment Fair Trade Law.

  2. In the distributor's handbook, I F International also attached "An Introduction to the 'Automotive Friend'" as part of its introduction to the featured products and services associated with the "Hsi-fu" card. It introduced the island-wide road services team of this auto club as being "linked to the GPS satellite navigation and positioning system." However, due to the fact that the Ministry of Transportation and Communications has not yet authorized such use of GPS frequencies, the claims made for the road services team in the introduction were not factual and violated the provisions of the Article 11(1) of the post-amendment Regulations, which state that a multi-level sales enterprise shall provide information on the types, functions, qualities, prices, and uses of its goods or services, and "shall make no false, dissembling, or misleading representations" in regard to these.

  3. In conclusion, I F International Co., Ltd. violated Article 3(2) of the pre-amendment Regulations, Article 11(1) and 13(1) of the post-amendment Regulations, and Article 23ter(2) of the Fair Trade Law. In consideration of the number of its participants, its operational status, revenues, and the degree of injury to the trading order caused by its unlawful conduct, it was assessed a fine of 500,000 New Taiwan Dollars and ordered to cease its unlawful conduct in accordance with the forepart of Articles 41, 42(2), and 42(3) of the Fair Trade Law.


Appendix:
I F International Co. Ltd.'s Uniform Invoice Number: 16367051


Summarized by Li Ya-ching
Supervised by Lin Ch'ing-tang


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