Jing Ya International Co., Ltd. engaged in multi-level sales but failed to inform participants of the relevant laws and regulations, did not record matters prescribed by law in its participation contract, and failed to obtain consent from the statutory agents of minor participants in violation of the Supervisory Regulations Governing Multi-Level Sales
Case:
Jing Ya International Co., Ltd. engaged in multi-level sales but failed to inform participants of the relevant laws and regulations, did not record matters prescribed by law in its participation contract, and failed to obtain consent from the statutory agents of minor participants in violation of the Supervisory Regulations Governing Multi-Level Sales
Key Words:
multi-level sales, participation contract, minors
Reference:
Fair Trade Commission Decision of May 31, 2000 (the 447th Commissioners' Meeting); Letter (89) Kong T'san Tzu No. 8814488-003, Disposition (89) Kung Ch'u Tzu No. 087
Industry:
Importing Industry (5601)
Relevant Laws:
Article 23-4 of the Fair Trade Law, Article 11(1), 12, 14, 16, and 18 of the Supervisory Regulations Governing Multi-Level Sales
Summary:
1. Jing Ya International Co., Ltd. (Jing Ya International) reported a multi-level sales scheme for water purifiers with the Fair Trade Commission (the Commission) in January 1999. The Commission initiated the investigation after receiving numerous complaints from the public regarding their disputes with the company. 2. The Commission inspected and investigated the premises of Jing Ya International in December 1999 and retrieved the company handbook, participation contract, and inspection records. It was the finding of the Commission that the company was handing out old versions of its application forms and company handbook to participants. It was acknowledged by the Commission that the amended Supervisory Regulations Governing Multi-Level Sales (Supervisory Regulations) took effect on 1 July 1999. New articles included Article 11(1)(iii), Article 14, and Article 18. Article 11(1)(iii) contains laws and regulations pertaining to multi-level sales. Article 14 provides the methods for handling returns if the participation contract is rescinded or terminated for reasons attributable to the participant. Article 18 specifies breaches of agreement by the participant, and prescribes the methods for handling such breaches. Pursuant to Articles 11(1) and 12 of the Supervisory Regulations, the multi-level sales enterpri se must inform participants of certain particulars [prescribed in Article 11(1)(ii) through 11(1)(ix)] and must record these particulars in a written contract before a participant joined the organization. Jing Ya International was engaged in multi-level sales before the Commission amended the Supervisory Regulations. Although Jing Ya International drafted a new participation contract for its company handbook pursuant to the amended Supervisory Regulations, it continued to use the old version of its participation contract and company handbook until February 2000 when it began to distribute the revised version to participants. During this period then, Jing Ya International failed to inform participants of the laws and regulations pertaining to multi-level sales and the terms prescribed by Articles 14 and 18 of the Supervisory Regulations. It also failed to include these particulars in its written participation contract. Together, they had constituted a violation of Article 11(1) and 12 of the Supervisory Regulations. 3. From the participation contracts entered into by Jing Ya International and the participants, the Commission also discovered that many of the participants were minors. Nevertheless, copies of the written consents from their statutory agents were not attached to these contracts. To protect the rights and interests of minors, Article 16 of the Supervisory Regulations provides that a multi-level sales enterprise that recruits a minor as a participant shall first obtain the written consent from the minor's statutory agent, and shall furthermore attach it to the participation contract. Jing Ya International did provide the Commission with written consents from statutory agents of some of the minor participants, but consents were not received for all minor participants. Moreover, some of the consents had been obtained after the participation contracts were completed. Consents acquired in this manner did not meet the requirement prescribed in Article 16, which provides that the consent shall be obtained in advance. By failing to obtain consents from all minor participants in a timely manner, Jing Ya had violated Article 16 of the Supervisory Regulations. 4. Jing Ya International violated Articles 11(1), 12, and 16 of the Supervisory Regulations Governing Multi-Level Sales, which were instituted pursuant to Article 23-4 of the Fair Trade Law. After considering the circumstances listed in Article 33 of the Enforcement Rules of the Fair Trade Law, the Commission fines Jing Ya International NT$750,000 and ordered the company to cease and rectify these acts pursuant to Articles 42(3) and the fore part of Article 41 of the Fair Trade Law. Appendix: Jing Ya International Co., Ltd.'s Uniform Invoice Number: 16709331 Summarized by Chou Pai-Wei; Supervised by Lin Ching-Tarng