Cayuan International Ltd. violated the provisions of Article 18 of the Supervisory Regulations Governing Multi-Level Sales as provided in Article 23-4 of the Fair Trade Act

Chinese Taipei

Cayuan International Ltd. violated the provisions of Article 18 of the Supervisory Regulations Governing Multi-Level Sales as provided in Article 23-4 of the Fair Trade Act

Key Words:

Cayuan International Ltd., multi-level sales, participation contract

Reference:

Fair Trade Commission Decision of May 1, 2003 (the 599th Commissioner's Meeting); Disposition (92) Kung Chu Tzu No. 057

Industry:

Direct Sales (4812)

Relevant Law:

Article 23-4 of the Fair Trade Act; Article 18 of the Supervisory Regulations Governing Multi-Level Sales

Summary:

1. On 29 August 2002, the Fair Trade Commission (FTC) dispatched an officer to inspect operations at the main business premises of Cayuan International Ltd. (Cayuan) and found that the written contracts concluded between Cayuan and participants failed to clearly specify, in accordance with the law, what would constitute a breach of said contract and the means for handling any such breaches. The FTC subsequently launched an ex officio investigation.

2. The FTC found that the written contracts executed between Cayuan and its participants as well as its participant handbooks neither explicitly stated what actions by the participants would constitute a breach of their participation contract nor the means for handling any such breaches. Appearing before the FTC on 8 October 2002, an officer of Cayuan conceded that between August 2001, following the updating of their participant handbook, and January 2003, said contents of the handbook had indeed been omitted.

3. Considering that the multi-level sales participants are the operators of a marketing organization provided by the marketing enterprise to promote the goods of the marketing enterprise, the participant has a right to know and the enterprise has an obligation to specifically clarify what actions would constitute a breach of the participation contract. After consideration of the degree of harm to the trading order, its period of duration, the enterprises operational circumstances, the nature of Cayuan's illegal practices as well as its attitude toward cooperation with the investigation, the FTC subsequently imposed an administrative fine of NT$100,000 on Cayuan in accordance with the provisions of the forepart of Article 41 and Article 42(3) of the Fair Trade Act.

Appendix:
Cayuan International Ltd.'s Uniform Invoice Number: 16131231

Summarized by Li, Shih-Che; Supervised by Lin, Ching-Tarng