Hsueh Yang-lun and Lai Mei-lun, members of US-based Herbalife Taiwan, violated Articles 19 and 20(1) of the Supervisory Regulations Governing Multi-level Sales
Case:
Hsueh Yang-lun and Lai Mei-lun, members of US-based Herbalife Taiwan, violated Articles 19 and 20(1) of the Supervisory Regulations Governing Multi-level Sales
Key Words:
multi-level marketing, soliciting members
Reference:
Fair Trade Commission Decision of February 15, 2001 (the 484th Commissioners' Meeting); Disposition (90) Kung Ch'u Tzu No. 037
Industry:
Miscellaneous Food Retailing Industry (5330)
Relevant Laws:
Articles 19 and 20(1) of the Supervisory Regulations Governing Multi-level Sales
Summary:
1. According to a letter the complainant wrote to the Fair Trade Commission (the Commission) in March 2000, complainant went to the Chunghsiao office of Herbalife Taiwan Inc. for an interview after visiting an employment services website. Following a sales pitch by Lai Mei-lun, complainant paid NT$3,600 to become a Herbalife member and received a set of Herbalife products. After telephoning Herbalife requesting a return of the products and a refund, complainant was rebuffed and contacted the Commission for redress. In a letter dated April of the same year, the complainant claimed to have been subjected to rude treatment during a visit to the Chunghsiao office of Herbalife Taiwan to return merchandise and cancel the Herbalife membership. Complainant also stated that after the visit, Herbalife Taiwan continued to advertise for new members on the aforementioned employment services website, potentially misleading job-seekers, and requested that the Commission look into the matter. 2. An inquiry into the matter indicated that between October 1999 and December 2000, Hsueh Yang-lun and Lai Mei-lun solicited Herbalife members through the distribution of leaflets offering employment. The leaflets did not specify that the nature of the employment was multi-level sales. Those who received the leaflet and responded directly to the company were simply asked to come to the Chunghsiao office for an interview. Only in the office would job seekers be informed that the company was engaging in multi-level sales. Between February 2000 and April 2000, Herbalife placed an advertisement on an employment services website. The ad simply stated that "An American company" was offering "a career opportunity," without clarifying that the company was engaging in multi-level marketing. As with the leaflet, those responding to the Internet ad were also told to come in to the office for an interview. The ad additionally purported to offer a statement from a Herbalife Taiwan member stating that "since starting (with Herbalife) my monthly income has risen to more than NT$200,000." The complainant's total income during the 11-month period (from January to November 2000) was just NT$380,000. The content of the leaflet was clearly without basis in fact and sufficient to mislead the public. 3. In summary, Hsueh Yang-lun and Lai Mei-lun, in writing their Internet ad and leaflet, failed to clearly indicate that the nature of their business was multi-level marketing. Their citations of previous success stories to bring new recruits into their sales organization had no basis in fact and were clearly designed to mislead people. This constituted a violation of Article 19 and Article 20 (1) of the Supervisory Regulations Governing Multi-level Sales adopted pursuant to Article 23-4 of the Fair Trade Law. The Commission's decision imposed a fine of NT$50,000 and required Herbalife Taiwan to cease its unlawful practices.Appendix: Hsueh Yang-lun's Uniform Invoice Number: E120049204 Lai Mei-lun's Uniform Invoice Number: M221487331 Summarized by Chi, Hsuen Li; Supervised by Lin, Ching Tarng