Chlitina International Trade Co., Ltd. violated the Supervisory Regulations Governing Multi-Level Sales enacted pursuant to Article 23-4 of the Fair Trade Law by failing to report its new sales goods prior to selling the goods

Chinese Taipei

Case:

Keywords:

multi-level sales, report on changes

Reference:

Fair Trade Commission Decision of August 26, 2004 (the 668th Commissioners' Meeting); Disposition (93) Kung Ch'u Tzu No. 093080

Industry:

Direct Selling Establishments (4812)

Relevant Laws:

Article 23-4 of the Fair Trade Law and Article 7 (1) of the Supervisory Regulations Governing Multi-Level Sales

Summary:

1. Chlitina International Trade Co., Ltd. filed a letter on August 21, 2003 to report on the changes of its enterprise handbook and new sales goods. The Fair Trade Commission (FTC) found that Chlitina's product "π Water Generator" was marketed during December of 2002, yet the company did not report to the FTC prior to selling the goods. In addition, Chlitina started selling several other products, such as Chlitina Colostrums Tablet and Chlitina ProSlim series, in 2002, but the report on these changes were delayed and finally made on August 21, 2003, in possible violation of Article 7 (1) of the Supervisory Regulations Governing Multi-Level Sales in effect at the time the acts were committed.

2. Article 5 (1) of the Supervisory Regulations Governing Multi-Level Sales in effect at the time the acts were committed provides, "Thirty days prior to commencing multi-level sales activities, a multi-level sales enterprise shall file a written report that accurately sets forth the following particulars for recording by the central competent authority:…8. types, functions, qualities, prices, and uses of the goods to be sold or services to be provided, the forecasted unit cost of manufacturing, material or labor of the goods or services, and related matters;…" The fore part of Article 7(1) of the same Regulations provides, "With the exception of changes to the unit cost of manufacturing, material or labor of the goods or services in Article 5 (1) (viii), any change to the content of the report filed by a multi-level sales enterprise shall be reported prior to implementation." It was found that Chlitina's newly-added product "π Water Generator" became available in the market on December 14, 2002. From the date to August 2003, 13,276 machines were sold (total NT$ 371,728). The sale of other products, such as Chlitina Colostrums Tablet and Chlitina ProSlim series, was also commenced in 2002. However, the report on all of these changes was delayed and finally made on August 21, 2003. Chlitina explained that the delay was caused by the personnel alteration. It also admitted making the mistake and stated that it would modestly accept the FTC's disposition.

3. In conclusion, Chlitina violated Article 7 (1) of the Supervisory Regulations Governing Multi-Level Sales enacted pursuant to Article 23-4 of the Fair Trade Law in effect at the time the acts were committed. After considering the number of participants, operating condition, sales amount, its attitude of cooperation in the investigation, and the degree of the act's harm to trading order, the FTC, in accordance with the fore part of Article 41 of the Fair Trade Law, imposed an administrative fine of NT$ 200,000 and ordered Chlitina to immediately cease the unlawful practice.

Summarized by Kuo, An-Chi;

Supervised by Yeh, Tien-Fu

Appendix:

Chlitina International Trade Co., Ltd.'s Uniform Invoice Number: 22361105

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1.	Chlitina International Trade Co., Ltd. filed a letter on August 21, 2003 to report on the changes of its enterprise handbook and new sales goods. The Fair Trade Commission (FTC) found that Chlitina's product "π Water Generator" was marketed during December of 2002, yet the company did not report to the FTC prior to selling the goods. In addition, Chlitina started selling several other products, such as Chlitina Colostrums Tablet and Chlitina ProSlim series, in 2002, but the report on these changes were delayed and finally made on August 21, 2003, in possible violation of Article 7 (1) of the Supervisory Regulations Governing Multi-Level Sales in effect at the time the acts were committed.
2.	Article 5 (1) of the Supervisory Regulations Governing Multi-Level Sales in effect at the time the acts were committed provides, "Thirty days prior to commencing multi-level sales activities, a multi-level sales enterprise shall file a written report that accurately sets forth the following particulars for recording by the central competent authority:…8. types, functions, qualities, prices, and uses of the goods to be sold or services to be provided, the forecasted unit cost of manufacturing, material or labor of the goods or services, and related matters;…" The fore part of Article 7(1) of the same Regulations provides, "With the exception of changes to the unit cost of manufacturing, material or labor of the goods or services in Article 5 (1) (viii), any change to the content of the report filed by a multi-level sales enterprise shall be reported prior to implementation." It was found that Chlitina's newly-added product "π Water Generator" became available in the market on December 14, 2002. From the date to August 2003, 13,276 machines were sold (total NT$ 371,728). The sale of other products, such as Chlitina Colostrums Tablet and Chlitina ProSlim series, was also commenced in 2002. However, the report on all of these changes was delayed and finally made on August 21, 2003. Chlitina explained that the delay was caused by the personnel alteration. It also admitted making the mistake and stated that it would modestly accept the FTC's disposition.
3.	In conclusion, Chlitina violated Article 7 (1) of the Supervisory Regulations Governing Multi-Level Sales enacted pursuant to Article 23-4 of the Fair Trade Law in effect at the time the acts were committed. After considering the number of participants, operating condition, sales amount, its attitude of cooperation in the investigation, and the degree of the act's harm to trading order, the FTC, in accordance with the fore part of Article 41 of the Fair Trade Law, imposed an administrative fine of NT$ 200,000 and ordered Chlitina to immediately cease the unlawful practice.