Ying Te Wang International Networking Co., Ltd. violated the provisions of Article 7(1) of the Supervisory Regulations Governing Multi-level Sales as provided in Article 23-4 of the Fair Trade Act
Chinese Taipei
Ying Te Wang International Networking Co., Ltd. violated the provisions of Article 7(1) of the Supervisory Regulations Governing Multi-level Sales as provided in Article 23-4 of the Fair Trade Act
Key Words:
Ying Te Wang International Networking Co., Ltd., multi-level sales, website vending rights
Reference:
Fair Trade Commission Decision of May 22, 2003 (the 602nd Commissioners' Meeting); Disposition (92) Kung Chu Tzu No. 110
Industry:
Direct Sales (4812)
Relevant Law:
Article 23-4 of the Fair Trade Act; Article 7(1) of the Supervisory Regulations Governing Multi-Level Sales
Summary:
1. Ying Te Wang International Networking Co., Ltd. (Ying Te Wang) on 25 March 2002 reported for filing as a multi-level sales enterprise and reported “Jin Bi Dual Action Facial Cleanser” and 43 other products for filing but failed, however, to report its business of selling “website vending rights” for filing. The company is suspected of engaging in business for goods or services beyond the scope of that which was originally on file.
2. Although Ying Te Wang claimed that its sales of “website vending rights” did not constitute multi-level sales, examination of the website agreement terms provided on the back of the “Sales Representative Registration Application and Contract” executed between said company and participants states: “The lessee … agrees to apply for Ying Te Wang Networking Company's ‘website vending rights.'” Judging from Ying Te Wang's membership advancement structure on file, in which ordinary members (MB) wishing to advance to the level of sales agent (SA) must first purchase NT$28,500 worth of goods--including NT$14,150 in website vending rights as well as NT$14,350 worth of skin care products--before becoming sales representatives; sales of the “website vending rights” as provided in the content of the website agreement printed on the back of the participation contract, making them a part of said contract, and the calculation thereof, are tied to participants' advancement in said organization. Therefore, it is indeed difficult to maintain that said organization is not a multi-level sales organization. At any rate, according to Ying Te Wang's bonus disbursement report, net sales of goods for the periods September/October 2002 and November/December 2002 were NT$3.95 million and NT$3.25 million, respectively, the figures upon which bonus disbursements were based. If the company's “website vending rights” were not sold via multi-level sales, then the company's bimonthly reporting of operating revenues should have included not only the monthly amount of multi-level sales of goods but also non-multilevel sales revenues derived from sales of the “website vending rights,” inflating sales revenues as listed on the bonus disbursement report. However, sales reports and tax statements filed for the given periods by Ying Te Wang's sales representatives showed that they reported NT$3.76 million and NT$311 million in sales revenue for the September/October 2002 and November/December 2002 periods, respectively, lower than the amount of sales revenue as claimed on the bonus disbursement report. As such, Ying Te Wang's explanation that “Sales of website vending rights are not made through multi-level selling” was obviously not credible.
3. Considering that the content of the materials on file for Ying Te Wang nowhere contains “sales of website vending rights,” it is evident that the disposed party changed the type of goods or services in which they were dealing without reporting to the Fair Trade Commission for filing prior to implementing the change. As said act was a violation of the provisions of Article 7(1) of the Supervisory Regulations Governing Multi-level Sales provided for in Article 23-4 of the Fair Trade Act, Ying Te Wang was subsequently issued an NT$200,000 administrative fine in accordance with the provisions of the forepart of Article 41 and Article 42(3) of the Fair Trade Act.
Appendix:
Ying Te Wang International Networking Co., Ltd.'s Uniform Invoice Number: 70551266
Summarized by Wang, Horng-Shiuan; Supervised by Lin, Ching-Tarng