Violation of the Supervisory Regulation of Multi-level Sales by China Nikken Co., Ltd.
Chinese Taipei
Case:
Violation of the Supervisory Regulation of Multi-level Sales by China Nikken Co., Ltd.
Key Words:
improper multi-level sales, bonus system
Reference:
Fair Trade Commission Decision of October 7, 1998 (the 361st Commission Meeting); Disposition Ref. (87) Kung Ch'u Tzu No. 220
Industry:
Retail sales of other general goods (5319)
Relevant Laws:
Articles 23(2) and 42 of the Fair Trade Law; Article 3(2) of the Supervisory Regulation of Multi-level Sales
Summary:
Article 3(2) of the Supervisory Regulation of Multi-level Sales (SRMS) provides that in the event of any change in the contents of the written report previous filed with the central competition authority, the enterprise shall file another report for such change with the authority prior to the implementation thereof. According to Article 3(1)(ii) of the same, a multi-level sales enterprise shall file a written report setting forth for recordation (with the central competent authority) the calculation formula of participants' commissions, grants and other economic gains, and provisions regarding warranties with respect to the commodities or services to be sold as required by Article 3(1)(vi) of the same. In May 1997, China Nikken Co., Ltd. (the respondent) started to distribute the "Wei Lai Waving Food Container" series (the product). In July of the same year, the respondent decided to modify the performance qualification of all levels of participants and the terms regarding the commission to certain levels of participants. The modification was implemented in September of the same year. However, the respondent failed to report such change prior to the implementation in violation of the aforesaid provisions. The respondent's alleged reasons including personnel change, heavy workload or ignorance of the relevant laws and regulations were not acceptable.
In conclusion, the respondent was found in violation of SRMS Article 3(ii). There were approximately 140,000 participants in the respondent's multi-sales program as to the end of June 1998. The respondent's total annual sales for 1997 was greater than NT$1,260,000,000. It paid more than NT$590,000,000 in commissions or bonuses to its participants. In consideration of the aforesaid, the respondent is regarded as having a large business scale and thus having the ability to exercise due care and management. Nonetheless, it has failed to report the substantial change regarding the rights and interests of its participants. In view of the scale of influence resulted by the failure, the 361st Commission Meeting of the Fair Trade Commission decided to impose a fine of NT$300,000 on the respondent in accordance with Article 42 of the Fair Trade Law.
Summarized by Lin, Chun-Huei
Supervised by Yang, Chia-Chun
Appendix:
China Nikken Co., Ltd.’s Uniform Invoice No.: 22663642