Fun & Love Corporation

773rd Commissioners' Meeting (2006)

Case:

Ex-officio investigation found that Fun & Love Corporation, a multi-level sales enterprise, violated the Fair Trade Law

Key Words:

multi-level sales, withdrawal and refund, written participation contract

Reference:

Fair Trade Commission Decision of August 31, 2006 (the 773rd Commissioners' Meeting); Disposition (95) Kung Ch'u Tzu No. 095132

Industry:

Direct Sales (4812)

Relevant Laws:

Article 23-2(2) and 23-4 of the Fair Trade Law

1. Pursuant to the Supervision Program of Multi-Level Sales Enterprises included in the administrative plan for 2005, the Fair Trade Commission (“FTC”) shall list several multi-level sales enterprises for inspection. Reasons for such selection of inspection shall include selling intangible products, setting excessively high bonus, having abnormal sales amounts and failing to receive regular inspections. Fun & Love Corporation (hereinafter called “Fun & Love”) was selected for an inspection due to its failure to receive regular inspections.
2. Findings of FTC after investigation:

It was found that Fun & Love violated Article 23-2 of the Fair Trade Law by deducting fees not provided in the law from the refunds requested by participants when these participants withdrew from the direct sales organization and requested for refunds. Furthermore, the participation contract entered by the participants was incompliant with Articles 14, 18 and 15 of the Supervisory Regulations Governing Multi-Level Sales respectively by failing to provide refund methods in the event of reasons attributable to a participant; failing to provide statutory breaches of contract and corresponding handling methods; and failing to prepare financial statements for the previous fiscal year certified by a CPA at the main place of business. Therefore, the FTC initiated an ex-officio investigation.

3. Grounds for disposition:
1. It was found that Fun & Love deducted 10% of the refund amount when participants applied for withdrawal and refunds and could not provide original invoices for the goods. Fun & Love admitted that it had handled more than 10 cases in the same way. This act had constituted a violation of Article 23-2(2) of the Fair Trade Law.
2. The participation contracts entered into by and between Fun & Love and its participants did not contain the refund methods in the event of reasons attributable to a participant or statutory breaches of contract and corresponding handling methods. Also, the financial statements for 2004 kept at Fund & Love's places of business were not certified by a CPA. Therefore, Fun & Love violated Article 23-4 of the Fair Trade Law by failing to comply with Articles 14, 15 and 18 of the Supervisory Regulations Governing Multi-Level Sales.
3. Taking into consideration the motivation, purpose, and expected improper benefit of the unlawful acts of Fun & Love; the degree and duration of the acts' harm to trading order; benefits derived on account of the unlawful acts; scale of the enterprise; whether or not the type of unlawful act involved in the violation has been the subject to correction or warning by the Central Competent Authority; types and number of and intervals between past violations, and the punishment for such violations; remorse shown for the act and attitude of cooperation in the investigation and other factors, the FTC ordered Fun & Love to immediately cease the unlawful acts and imposed an administrative fine of NT$470,000 in accordance with Articles 42(2) and (3) and the fore part of Article 41 of the Fair Trade Law.

Appendix:
Fun & Love Corporation's Uniform Invoice Number: 80140502