Medical Designs Inc. engaged in multi-level sales activities but failed to report its new place of business in Chung-li and to obtain written consent from the statutory representatives of minor participants in violation of the Fair Trade Law
Case:
Medical Designs Inc. engaged in multi-level sales activities but failed to report its new place of business in Chung-li and to obtain written consent from the statutory representatives of minor participants in violation of the Fair Trade Law
Key Words:
minor participants, consent forms from statutory representatives
Reference:
Fair Trade Commission Decision of October 12, 200 (the 466th Commissioners' Meeting); Disposition (89) Kung Ch'u Tzu No. 168
Industry:
Retail Cosmetic Sales (5382)
Relevant Laws:
Article 23 of the Fair Trade Law and Articles 7 and 16 of the Supervisory Regulations Governing Multi-Level Sales
Summary:
1. Medical Designs Inc. reported its engaging in multi-level sales to the Fair Trade Commission (the Commission) in January 1997. Since that time, members of the public have repeatedly complained to the Commission by e-mail and telephone that Medical Designs recruits college students and minors at promotional meetings and encourages them to apply for credit card cash advances to purchase goods. These complaints also indicated that Medical Designs had failed to obtain written consent from the statutory representatives of minor participants. The Commission therefore investigated under its ex officio powers. 2. The Commission's investigation found that Medical Design's primary territory of business was in Taipei, but that it also had business branches in Chungli, Taichung, and Kaohsiung. Medical Designs opened its Chungli branch in June of 2000 and began to take orders (July sales were approximately NT$2 million). However, Medical Designs failed to report these particulars to the Commission as required by law. The Commission also learned that Medical Designs had failed to attach consent forms from statutory representative to contracts with a minor surnamed Cheng and others. Although these contracts contained a column for the signature of the minor's guardian, this column was left blank. These circumstances, Medical Designs claimed, were the result of administrative oversight. Medical Designs stated that it was willing to make corrections. 3. The Commission investigation found that although Medical Designs began doing business at its Chungli branch in June 2000, it failed to report these developments to the Commission in writing until 25 July 2000. This failure constituted a violation of Article 7(1) of the Supervisory Regulations Governing Multi-Level Sales ("Supervisory Regulations"). The Commission also found that the minor surnamed Cheng and a number of other minors joined the organization in 2000 but that consent forms from their statutory representatives were not attached to the contracts, nor did the signature columns for their guardians on the contract contain the signatures of their statutory representative. This failure to obtain consent and signatures from the statutory representatives of these minors constituted a violation of Article 16 of the Supervisory Regulations. Having considered the factors listed in Article 33 of the Implementing Rules to the Fair Trade Law, the Commission, in accordance with Article 42(3) and the forepart of Article 41, fined Medical Signs NT$2 million and ordered it to correct the illegal practices described in the foregoing paragraph on the second day of receiving the Commission's disposition. The Commission further ordered Medical Designs to comply with Article 16 of the Supervisory Regulations by obtaining written consent from the statutory representatives of its minor participants and attaching this consent to their contracts within 30 days of receiving the Commission's disposition. Appendix: Medical Designs, Inc.'s Uniform Invoice Number: 86012048 Summarized by Kuo An Chi; Supervised by Lin Ching Tarng