Ex-officio investigation by the Fair Trade Commission into the Ken Wei Ya Co., Ltd. violates the Fair Trade Law by improper engaging in multi-level sales activities

Case:

Key Words:

multi-level sales enterprises, contract termination, to sign written participation contract

Reference:

Fair Trade Commission Decision of May 20, 2004 (the 654th Commissioners' Meeting); Disposition Kung Ch'u Tzu No. 093056

Industry:

Direct Selling Establishments (4812)

Relevant Laws:

Article 23-2(2) of the Fair Trade Law; Articles 5(1) ,7(1), 8(1) and 12(1) of the Supervisory Regulations Governing Multi-Level Sales

Summary:

This case was initiated following complaints from members of the public. In summary: The 12 persons in question joined the Ken Wei Ya Co., Ltd. (hereinafter called "Ken Wei Ya") and purchased A cards (network cards) and B cards (safety cards). A cards provide personal website space and services; members pay a website establishment fee and first month's lease for the sum amount of New Taiwan Dollars (NT$)3,800. In addition, members must also pay monthly lease of NT$1,000 starting in the second month. Those B card holders who die after 182 days from the time they receive their card obtain a NT$50,000 emergency relief payment and funeral services with a retail price of NT$16,000. Because Ken Wei Ya refused to accept the returned goods in accordance with law when the persons in question notified the company of their intention to return goods on June 12 of the same year (2002) via a legal attest letter, the Fair Trade Commission (FTC) undertook an ex-officio investigation consequently.
Findings of the Fair Trade Commission (FTC) after investigation:
Ken Wei Ya had already begun engaging in multi-level sales activities before reporting its intention to engage in multi-level sales to the FTC. Ken Wei Ya also failed to report its change of a representative and new B card services before the statutory deadline. Ken Wei Ya further failed to report the cessation of its multi-level sales action to the FTC before the statutory deadline, and failed to clearly inform those persons who had signed written participation agreements of the statutory items required by law.
Grounds for disposition:
1. Multi-level sales enterprises shall handle matters connected with return of goods within 30 days of receiving written notification of agreement termination from those participating persons who wish to terminate their agreements and return goods, and shall repurchase goods for 90% of their original purchase price. It was found after investigation that although Ken Wei Ya had forthrightly admitted that it received the legal attest letter notifying it of return of goods sent by the 12 persons including Mr./Ms Liu and Mr./Ms Tzeng, Ken Wei Ya argued that it refused to process the returned goods because it could not accept the persons' demand for a full refund. Nevertheless, the aforementioned legal attest letter only stated that the 12 persons including Mr./Ms Liu and Mr./Ms Tzeng individually joined Ken Wei Ya's sales organization in February and March 2002, and asked to terminate their agreements and return their goods for a refund. The legal attest letter did not demand full refunds as claimed by Ken Wei Ya. Membership application and agreement documents signed by Mr./Ms Liu and Mr./Ms Tzeng and copies of their legal attest letter posted on the Tzung Heng Szu Hai website (www.athena.com) may serve as evidence. Since Ken Wei Ya was unable to provide written documentation to corroborate its aforementioned arguments, its action of refusing to terminate the agreements of participants and accept returned goods for refund was in violation of Article 23-2 (2) of the FTL.
2. While Ken Wei Ya reported to the FTC on April 1, 2002 of its intention to begin engaging in multi-level sales on May 1, 2002, it had in fact begun recruiting participants and promoting and selling A cards (network cards) in December 2001. The company's representative had forthrightly admitted to these facts. Membership application and agreement documents signed by ten participating persons including Mr./Ms Chen on the Tzung Heng Szu Hai website (www.athena.com) may serve as evidence. This action was in violation of Article 5 (1) of the Supervisory Regulations Governing Multi-level Sales.
3. While Ken Wei Ya reported to the FTC on April 1, 2002 of its intention to engage in multi-level sales with Lin Tai-Shan as the representative and to sell A cards (network cards), investigation of the company via the Department of Commerce, Ministry of Economic Affairs (MOEA), corporate data query website indicated that the company had already changed its representative to Chang Chia-Cheng on April 24, 2002. Furthermore, the company began the new promotion and sales of B cards (safety cards) in February and March 2002, and provided life contract service items. While Ken Wei Ya offered B cards to A card participants for a retail price of NT$16,000, and had business achievement, it had failed to report to the FTC by the statutory deadline. Chang Chia-Cheng had forthrightly admitted to these facts, and the company data posted by the Department of Commerce, MOEA, and the peaceful life contract applications of Athena e-commerce members signed by ten persons including Mr./Ms Wang may serve as evidence. This action was in violation of Article 7 (1) of the Supervisory Regulations Governing Multi-level Sales.
4. Ken Wei Ya had forthrightly admitted that it ceased recruiting participants and issuing awards in the middle of June 2002. In addition, according to Letter Tsai-Pei-Kuo-Shui-Chung-Cheng-Ying-Yeh-Tzu No. 0920028263 issued by the Chungcheng Tax Office of the Taipei Tax Administration, Ministry of Finance, on December 26, 2003, Ken Wei Ya terminated business arbitrarily on June 1, 2002. While this evidence was sufficient to attest that Ken Wei Ya had ceased to engage in multi-level sales action, the company failed to report termination of business to the FTC by the statutory deadline. This action was in violation of Article 8 of the Supervisory Regulations Governing Multi-level Sales.
5. While Ken Wei Ya reported to the FTC on April 1, 2002 of its intention to engage in multi-level sales starting on May 1 of the same year (2002), there were many omissions in the reported data. Although the FTC made a written request in Letter Kung-San-Tzu No. 0910003802 of April 29, 2002, to the company to provide missing statutory items concerning the award system, compliance with the relevant laws and regulations governing multi-level sales, participants' withdrawal from the organization or plan conditions, and rights and duties pursuant to withdrawal, Ken Wei Ya has not yet provided these statutory items. Furthermore, the application and agreement documents between the respondent and ten participants including Mr./Ms Chen on the Tzung Heng Szu Hai website (www.athena.com) confirmed the absence of the foregoing statutory items. This action was deemed to be in violation of Article 12 of the Supervisory Regulations Governing Multi-level Sales, and Ken Wei Ya shall accordingly be imposed an administrative fine of NT$1,000,000.

Appendix:
Ken Wei Ya Co., Ltd.'s Uniform Invoice Number: 70395575

Summarized by Liao, We-Meen; Supervised by Lin, Ghing-Tarng

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