New Health International Inc.'s multi-level sales practices violated the provisions of the Supervisory Regulations Governing Multi-level Sales
Case:
New Health International Inc.'s multi-level sales practices violated the provisions of the Supervisory Regulations Governing Multi-level Sales
Key Words:
multi-level sales, report to the authority
Reference:
Fair Trade Commission Decision of February 9, 2001 (the 483rd Commissioners' Meeting); Disposition (90) Kung Ch'u Tzu No. 038
Industry:
Direct Marketing (4812)
Relevant Law:
Article 5(1) of the Supervisory Regulations Governing Multi-level Sales
Summary:
1. A member of the public stated in a letter that they had recently attended the business establishment seminar for New Health International Inc. and other related conferences. During the seminar and other conferences, the responsible person for New Health International and company employees explained the company's system and promoted the company's products. Additionally, the New Health International Inc. claimed that its system and products were superior to those of other multi-level sales companies, and that the company has already "actively recruited" personnel to participate in the organization, and engaged in multi-level sales activities. The Fair Trade Commission (FTC) was requested to investigate the legality of New Health International's reporting procedures. 2. The FTC's investigation showed that New Health International Inc. reported to the FTC as a multi-level sales organization on 17 November 2000. According to the law, New Health International Inc. may not begin engaging in actual multi-level sales activities until 30 days (or until 17 December 2000) after reporting to the FTC. New Health International Inc., however, held product explanation seminars on 30 November 2000 and 3 December 2000, and also solicited participants to join the organization prior to 17 December 2000. The investigation found 13 participants who had been recruited prior to the legally permissible date. They were: Lin Ming-yuan (joined 24 November 2000); Chien Ling-chin, Wang Chen-jung and Hsieh Sen-lin (25 November 2000); Tsai Chih-ming, Hsieh-Lin Hsiu-hui, Fu Su-chi and Li Pei-lun (30 November 2000); and Li Wen-hsiu, Chen Niang-hsiang, Shih Hui-sheng, Hsu Su-chu and Chen Hui-fang (1 December 2000). 3. Grounds for disposition (1) According to the provisions of the Supervisory Regulations Governing Multi-level Sales, multi-level sales enterprises shall file a detailed written report with the central competent authority 30 days prior to the actual commencement of multi-level sales activities. New Health International's product explanation seminars and participant recruitment during the 30-day period immediately after filing their report constituted a violation of the provisions of Article 5(1) of the Supervisory Regulations Governing Multi-level Sales. (2) In consideration of New Health International Inc.'s number of participants, operational status, that the illegal acts did not harm the interests of participants, any undue profit and the company's cooperative attitude towards the investigation, the FTC fined the company NT$50,000 under the provisions of Article 42(3) and the forepart of Article 41 of the Fair Trade Law. Appendix: New Health International Inc.'s Uniform Invoice Number: 12657516 Summarized by Wang, Horng-Shiuan; Supervised by Lin, Ching-Tarng