Violation of the Fair Trade Law by Hung Ch'i International Co., Ltd.
Chinese Taipei
Case:
Violation of the Fair Trade Law by Hung Ch'i International Co., Ltd.
Key Words:
improper multi-level sales
Reference:
Fair Trade Commission Decision of September 23, 1998 (359th Commission Meeting); Disposition Ref. (87) Kung Ch'u Tzu No. 212
Industry:
Other General Goods Retail Sales Industry (5319)
Relevant Laws:
Article 24 of the Fair Trade Law
Summary:
According to the complaint, the respondent was suspected of having violated the Fair Trade Law (FTL) by obtaining unjustified profits through demanding high membership dues from participants in its multi-level sales.
The respondent reported to the Fair Trade Commission (FTC) in March 1997 its multi-level sales of travel memberships. According to the report, participants had to accumulate 300,000 points for sales of the travel memberships to obtain the "Singapore Family" title. If one of the participants from the original participant's first descendant level qualified as "Singapore Family" (the Title), the original participant would be promoted to "Tokyo Family." If two participants from the original participant's first descendant level obtained the Title, the original participant would be promoted to "Sydney Family." If four from the same obtained the Title, the original participant would be promoted to "Rome Family." If six from the same obtained the Title, the original participant would be promoted to "Paris Family." For these progressive promotions, the original participant would be entitled to a bonus of 38%, 41%, 44%, and 47% of the sales, respectively. In addition, the original participant would be entitled to a 5% cultivation bonus for each of the "Tokyo Family," "Sydney Family," "Rome Family," and "Paris Family" titles it obtained. Furthermore, if a "Paris Family" participant succeeded in cultivating six descendant "Paris Family" participants, such participant would be promoted to "Washington Family," which included a 2% leadership bonus, a 25% year-end bonus, a performance bonus that was 60% of the combined sales of all levels cultivated, and a 40% of point-accumulation bonus nationwide. The FTC found that Chung Pi-e, the respondent's general manager, started as a "Paris Family" participant in February 1997 and cultivated four "Paris Family" participants in July 1997. Thereafter, Chung was promoted to "Washington Family" contrary to the respondent's multi-level sales plan. Chung's promotion affected not only the rights and interests of the other "Washington Family" participants, but also those of the other participants in the lower levels.
In conclusion, the respondent was found in violation of FTL Article 24 for its deceptive and obvious unfair act of promoting Chung, as the respondent has improperly deprived the other participants of profit distributions and adversely affected the normal operation of the multi-level sales. In accordance with FTL Article 41, the FTC ordered the respondent immediately to cease such action from the day following its receipt of the disposition.
Summarized by Hu Peng-nien
Supervised by Yang Chia-chun
Appendix:
Respondent's Uniform Invoice No.: 97367865