Redin International Co., Ltd.’s violated Article 3(2) of the Supervisory Regulations Governing Multi-Level Sales for failing to file a report before implementing changes to its methods of calculating commission, bonus, and other economic benefits and making new additions to its product line

Chinese Taipei


Case:

Redin International Co., Ltd.’s violated Article 3(2) of the Supervisory Regulations Governing Multi-Level Sales for failing to file a report before implementing changes to its methods of calculating commission, bonus, and other economic benefits and making new additions to its product line

Key Word:

multi-level sales, changes of system, additions of product line, changes of report

Reference:

Fair Trade Commission Decision of May 19, 1999 (the 393rd Commission Meeting); Disposition (88) Kung Ch'u Tzu No. 045

Industry:

General Merchandise Wholesaling (5110)

Relevant Law:

Articles 23(2) and 42 of the pre-amended Fair Trade Law and Article 3(2) of the pre-amended Supervisory Regulations Governing Multi-Level Sales

Summary:

  1. Pursuant to Article 6 of the pre-amended Supervisory Regulations Governing Multi-Level Sales (SRMS), the Fair Trade Commission (FTC) dispatched personnel in December 1998 to investigate the written materials that Redin International Co., Ltd. ("Redin") is required to keep in its principal place of business. Discrepancies were discovered between the rates of bonuses actually paid to participants at various levels of the membership hierarchy and the rates that Redin had originally reported. Furthermore, certain products sold by Redin such as "gold-threaded" blouses and "gold-threaded" slacks had not been reported to the FTC as required. The FTC therefore launched an investigation ex officio.

  2. Redin was requested by letter to appear before the FTC to give an explanation. It confirmed that it had changed its bonus plan on March 1, 1998, but had failed to report the changes to the FTC due to a recent change of address, the departure of key executives, and neglect by administrative personnel. Redin also acknowledged that after it had reported to the FTC its introduction of K'ang Tien products on October 9, 1995, it had successively introduced additional new products including "gold-threaded" blouses and "gold-threaded" slacks, but had failed in all cases to report such new products to the FTC on account of a lack of attention to relevant regulations following a change in administrative personnel.

  3. Under Article 3(1) of the SRMS in effect at the time of Redin's actions, matters required to be reported by a multi-level sales enterprise to the central competent authority prior to their commencement of operations include the methods of calculating participants' commissions, bonuses, and other economic benefits, and the content of the contract providing rights and obligations of participants and general conditions of trade. Article 3(2) of the SRMS further provides that the enterprise is required to report any change in the matters specified in Article 3(1) prior to its implementation. Redin's failure to report the changes regarding its bonus plan and the additions of new products to the FTC in writing prior to their implementation has violated Article 3(2) of the SRMS promulgated pursuant to Article 23(2) of the Fair Trade Law (FTL) in effect at the time of the act.

    Taking into account of Redin's sales volume and its number of participants, and that its failure to report the changes concerning its bonus plan was due to administrative oversight and its failure to report the additions of new products a lack of familiarity with the SRMS rather than an intent to violate the law, an administrative fine of NT$100,000 was imposed on Redin pursuant to Article 42 of the FTL in effect at the time of the acts.

 

Summarized by Lee, Ya-ching

Supervised by Yang, Chia-chun

 

Appendix:

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


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