Violation of the Regulations Governing Multilevel Marketing by Shih Chih-ch'iang, a Participant of Natalia International Co.

Chinese Taipei

Case:

Violation of the Regulations Governing Multilevel Marketing by Shih Chih-ch'iang, a Participant of Natalia International Co.

Key Words:

multilevel marketing, issuance of promissory notes, return of goods upon withdrawal

Reference:

Fair Trade Commission Decision of November 2, 1995 (the 210th Commission Meeting); Disposition (84) Kung Ch'u Tzu No. 146

Industry:

Retail Business of Other General Goods (5319)

Relevant Laws:

Article 4 of the Regulations Governing Multilevel Marketing

Summary:

1. In accordance with Article 4(1)(viii) and Article 4(4) of the Regulations Governing Multilevel Marketing, a multilevel marketing enterprise should inform the participants before they join the multilevel marketing organization or project, and should not make any false, concealing or misleading representations, of the terms/conditions and the rights/obligations for the withdrawal from its organization or project; the above requirements are also applicable to the circumstance where the participants introduce another persons to join the organization or project. During 1993, Mr. Shih Chih-ch'iang, a participant of Natalia, introduced Mr. Feng Kuei-nan and then Mr. Feng Jen-shan to join Natalia. Later, Feng Kuei-nan and Feng Jen-shan introduced others to join the company. It may be unsettled as to whether Mr. Shih is obligated to disclose the above-mentioned information to such other persons introduced by Feng Kuei-nan and Feng Jen-shan upon their accession under Article 4(1) of the Regulations. Nevertheless, Mr. Shih should be found to have violated the above provisions for his failure to notify Feng Kuei-nan and Feng Jen-shan of the terms and conditions for the withdrawal from the organization and of the rights and obligations incurred by such withdrawal. This fact is substantiated by the recorded statements of Shih Chih-ch'iang, Feng Kuei-nan and Feng Jen-shan.

2. In accordance with Article 7(2) of the Regulations that applies Article 7(1)(ii) mutatis mutandis, a multilevel marketing enterprise may not require the participants to pay or assume unreasonable performance bonds, penalties or other obligations. Shih Chih-ch'iang is found to have unreasonably required the issuance of IOUs or promissory notes by the participants for the payment of admission fees for the new members introduced by them; and have demanded the repayment or honor of the participants' obligations in order to promote multilevel activities. Mr. Shih also admitted that in order to facilitate the operation of the organization, he has demanded the downline participants to issue promissory notes and IOUs upon admission to the organization as advance admission payments for the participants. This fact is supported by the recorded statements of Shih and his downline participants. These acts of Mr. Shih are improper operation activities in violation of Article 7(2) of the Regulations that applies Article 7(1)(ii) mutatis mutandis.

　

Summarized by Kung Ch'in-lung

＠: For information of translation, click here

[Browse by APEC Member Economies] [Browse by Subject Categories] [Home]
[Decisions] [Approvals] [Interpretations] [Administrative Guidance]