Redin International Co., Ltd. violated Articles 12 (1), 13 (1) and 16 of the Supervisory Regulations Governing Multi-Level Sales enacted pursuant to Article 23-4 of the Fair Trade Law

Chinese Taipei

Case:

Keywords:

multi-level sales, participation contract, minor participant

Reference:

Fair Trade Commission Decision of October 14, 2004 (the 675th Commissioners' Meeting); Disposition (93) Kung Ch'u Tzu No. 100

Industry:

Direct Selling Establishments (4812)

Relevant Laws:

Article 23-4 of the Fair Trade Law, Articles 12 (1), 13 (1), and 16 of the Supervisory Regulations Governing Multi-Level Sales

Summary:

1. On May 26, 2003, the Fair Trade Commission (FTC) dispatched an officer to inspect operations at the main business premises of Redin International Co., Ltd. (hereinafter referred to as "Redin") and found that the written participation contracts concluded between Redin and its participants failed to include the laws and regulations relevant to multi-level sales. In the written participation contracts, non-statutory items were stipulated to be deducted from the refunds that the company shall return to the participants who rescind or terminate the contracts. Also, when recruiting partial minors as its participants, the company failed to acquire written agreements from those minors'legal representatives prior to the recruit. The aforesaid acts might be in possible violation of the relevant regulations governing multi-level sales; therefore, the FTC subsequently launched an ex officio investigation.

2. In accordance with Article 12 (1) of the Supervisory Regulations Governing Multi-Level Sales, the written participation contract entered into by a multi-level sales enterprise and a participant shall include the whole text of the laws and regulations relevant to multi-level sales, so the participant may understand his/her relevant rights and interests as well as the regulations to abide by. However, upon the FTC's investigation, it was found that the written participation contracts entered by Redin and the participants failed to contain the laws and regulations relevant to multi-level sales. Moreover, in accordance with Article 13 (1) of the same Regulations, when returning the money paid by a participant who wishes to withdraw or return the goods, a multi-level sales enterprise may only deduct the amount of money relating to three statutory items, "any bonus or remuneration already paid to the participant for the purchase of such goods," " the value of the damage to, or the loss of, the goods, " and " if the goods are retrieved by the enterprise, the enterprise may deduct necessary costs of transportation for such retrieval." However, Redin stipulated to deduct items that were not statutory, such as "the costs of transportation paid by the company for replenishing the stock of such goods" and "the service charge of credit card payment." In addition, when recruiting minors as its participants, Redin failed to acquire written agreements from the minor participants'legal representatives as prescribed in Article 16 of the same Regulations and appended such situation to the participation contracts, in violation of the aforesaid provision.

3. After considering the degree and duration of the act's harm to trading order, operating condition, and the nature and type of the unlawful act, the FTC imposed an administrative fine of NT$ 300,000 on Redin in accordance with Article 42 (3) and the fore part of Article 41 of the Fair Trade Law.

Summarized by Li, Shih-Che;

Supervised by Hsu, Hung-Jen

Appendix:

Redin International Co., Ltd.'s Uniform Invoice Number: 84484394

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1.	On May 26, 2003, the Fair Trade Commission (FTC) dispatched an officer to inspect operations at the main business premises of Redin International Co., Ltd. (hereinafter referred to as "Redin") and found that the written participation contracts concluded between Redin and its participants failed to include the laws and regulations relevant to multi-level sales. In the written participation contracts, non-statutory items were stipulated to be deducted from the refunds that the company shall return to the participants who rescind or terminate the contracts. Also, when recruiting partial minors as its participants, the company failed to acquire written agreements from those minors'legal representatives prior to the recruit. The aforesaid acts might be in possible violation of the relevant regulations governing multi-level sales; therefore, the FTC subsequently launched an ex officio investigation.
2.	In accordance with Article 12 (1) of the Supervisory Regulations Governing Multi-Level Sales, the written participation contract entered into by a multi-level sales enterprise and a participant shall include the whole text of the laws and regulations relevant to multi-level sales, so the participant may understand his/her relevant rights and interests as well as the regulations to abide by. However, upon the FTC's investigation, it was found that the written participation contracts entered by Redin and the participants failed to contain the laws and regulations relevant to multi-level sales. Moreover, in accordance with Article 13 (1) of the same Regulations, when returning the money paid by a participant who wishes to withdraw or return the goods, a multi-level sales enterprise may only deduct the amount of money relating to three statutory items, "any bonus or remuneration already paid to the participant for the purchase of such goods," " the value of the damage to, or the loss of, the goods, " and " if the goods are retrieved by the enterprise, the enterprise may deduct necessary costs of transportation for such retrieval." However, Redin stipulated to deduct items that were not statutory, such as "the costs of transportation paid by the company for replenishing the stock of such goods" and "the service charge of credit card payment." In addition, when recruiting minors as its participants, Redin failed to acquire written agreements from the minor participants'legal representatives as prescribed in Article 16 of the same Regulations and appended such situation to the participation contracts, in violation of the aforesaid provision.
3.	After considering the degree and duration of the act's harm to trading order, operating condition, and the nature and type of the unlawful act, the FTC imposed an administrative fine of NT$ 300,000 on Redin in accordance with Article 42 (3) and the fore part of Article 41 of the Fair Trade Law.