Liao Wun-jhih violated the provisions of the latter part of Article 41 of the Fair Trade Law
Case:
Liao Wun-jhih violated the provisions of the latter part of Article 41 of the Fair Trade Law
Key Words:
Liao Wun-jhih, Shared Life, Cross-Centennial, multi-level sales
Reference:
Fair Trade Commission Decision of July 24, 2003 (the 611th Commissioners’ Meeting); Disposition (92) Kung Chu Tzu No. 133
Industry:
Other Organizations Not Classified Elsewhere (9499)
Relevant Law:
Article 41 of the Fair Trade Law
Summary:
1. The various economic benefits garnered by the participants (including members and sales representatives) in the "Shared Life" website (www.e-elt.com.tw) “E card” personal webspace services promoted by Mr. Liao Wun-jhih, Shared Life International Telecommunications Network Co., Ltd. (Shared Life), and Cross-Centennial Technology Co., Ltd. (Cross-Centennial) were all derived from payments of webspace construction fees and monthly rental fees. However, the ratio of participants who actually used the webspace was less than one percent. Thus, the great majority of these construction and monthly rental fees were not considerations paid for personal webspace services, but most likely confirms the belief that they were “royalty payments” for membership and economic benefits obtained later. Although the economic benefits garnered by the participants who joined first came, nominally, from construction and monthly rental fees, in actuality they came from the "royalties" paid by subsequent participants, thus confirming that the webpage service transactions were only a formality, a method by which participants could join, with the main purpose being to collect substantial returns from the fees paid by successive participants. The webpage services were insignificant in the overall course of the transaction and it was obviously a case of “nonexistent goods,” which violates the provisions of Article 23 of the Fair Trade Act. Consequently, the Fair Trade Commission (FTC), by the 31 January 2002 decision of the 534th Commissioners’ Meeting, imposed an administrative fine of NT$5 million on Liao Wun-jhih, while administrative fines of NT$10 million each were imposed on Shared Life and Cross-Centennial. In addition, the FTC ordered that all three parties cease these illegal acts beginning from the day following receipt of the disposition. However, through a further internet search initiated by the FTC, it was found that, from the date of service of the aforementioned disposition until 19 February 2002, the number of the Shared Life website “E cards” sold had increased by over 174 units. Consequently, the FTC initiated another ex-officio investigation into the matter.
2. It was found that the Shared Life International Group (whose enterprises include Shared Life, Cross-Centennial, Ci Shih Jie Technology Co., Inc., Wan Li Sian Jing Development Corporation and the Shih Jie Gong Xiang News Group) were promoting webspace on another website, “www.elt.com.hk”. Participants who purchased an advertising website received a placement number. This placement number, however, was simply a continuation or the rankings given out in the previous “E card” case. Furthermore, the price (including construction, “cooperative”, and monthly rental fees) as well as the services offered were exactly the same as the above mentioned one. The original “E card” business organization still continued to promote advertising websites, and the original “E card” members continued to pay monthly rental fees in order to retain their right to collect returns. In addition, for each two advertising websites sold, original “E card” members could purchase one higher position in the “E card” ranking, and thus, collect these returns at an earlier date. All these points show that that the relevant “E card” returns and business activities never stopped, and that the so-called “advertising websites” were, in essence, just a continuation of the “E card” under a different name. In addition, the conditions for promotion from the basic level website to the 2nd and 3rd level websites under the current reincarnation are exactly the same as the conditions for the original “E card” 1st, 2nd, and 3rd level websites. Also, the conditions for joining the business organization, the organizational hierarchy, and the promotion and performance standards for the promotional advertising website are identical to the E card business promotion organization and can confirm that Shared Life International Group’s promotional advertising website is simply a continuation of the actions in the previous “E card” case. Even though the returns from the 4th level website were cancelled and merged into the 3rd level website returns, and although there were slight changes to the amounts of the business organization sales bonuses and the level bonuses, these were only minor changes to the operational plan, and these acts are therefore essentially a continuation of those in the previous case.
3. In view of the fact that Shared Life International Group has not established either a chairperson or general manager, and after confirmation by the related parties that the decision maker for the Shared Life International Group is the Group’s Chief Executive Officer, Liao Wun-jhih, as well as the fact that all administrative decisions for the business are made by him, Mr. Liao is deemed the key person of the Groups’ multi-level sales activity. After weighing factors such as the motive and purpose behind these illegal acts, the expected illicit gains, the degree and duration of harm to the trading order, the total income derived from these illegal acts, the business scope, operating conditions, past violations, frequency, period of time between violations and the penalties imposed, remorse shown for the act and the attitude of cooperation in the investigation, the FTC, according to the provisions of the latter part of Article 41 of the Fair Trade Law, imposes an administrative fine of NT$50 million.
Summarized by Li, Shih-Che; Supervised by Lin, Ching-Tarng