An ex officio investigation of Surplus International Corp. engaging in multi-level sales and violating the Fair Trade Law

Chinese Taipei

Case:

Key Words:

Multi-level sales, handling of returned goods, written participation contract

Reference:

Fair Trade Commission Decision of June 15, 2006 (the 762nd Commissioners’ Meeting), Disposition (95) Kung Ch’u Tzu No. 095066

Industry:

Direct Selling Establishments (4812)

Relevant Laws:

Article 23-4 of the Fair Trade Law Article 12, Paragraph 1, Article 14, and Article 18 of the Supervisory Regulations Governing Multi-level Sales

Summary:

1. This case originated from the Fair Trade Commission (FTC)’s initiative to dispatch personnel to the principal place of business of Surplus International Corp. (hereinafter referred to as Surplus) to carry out business inspection. It is found that the written participation contracts signed between the said company and its participants did not specify laws and regulations relevant to multi-level sales, the methods of handling returned goods for reasons attributable to the participants, and specific violations of the participants.
2. Grounds for disposition: In accordance with the provision of Article 12, Paragraph 1 of the Supervisory Regulations Governing Multi-level Sales, the written participation contract signed between a multi-level sales enterprise and its participants shall include the “laws and regulations relevant to multi-level sales” prescribed in Article 11, Paragraph 1, Subparagraph 3 of the same Regulations. In addition, according to Article 14 and Article 18 of the same Regulations, the written participation contract signed between a multi-level sales enterprise and its participants shall specify the method of handling returned goods for reasons attributable to the participant. The participation contract must include the following five breaches of contract by the participant; (1) promoting or selling goods or services, or recruiting participants to the sales organization, by deceptive or misleading means; (2) raising funds from other persons in the name of the multi-level sales enterprise or through its organization; (3) engaging in sales activities by means that run counter to public order or good morals; (4) affecting the market trading order or creating heavy losses to consumers by improper in-person solicitations; and (5) engaging in sales activities that violate the Criminal Code or other laws or regulations governing industry and commerce.
3. Taking into consideration the motivation, purpose and expected improper benefit of the unlawful acts of Surplus; the degree and duration of the act’s harm to market order; benefits derived on account of the unlawful act; scale of the enterprise; remorse shown for the act and attitude of cooperation in the investigation, therefore, a fine of NT$ 110,000 is imposed on Surplus according to Article 42, Paragraph 3 and the anterior paragraph of Article 41 of the Fair Trade Law.

Summarized by: Li, Shih-Che;
Supervised by: Hsu, Hung-Jen

Appendix:
Surplus International Corp.’s Uniform Invoice Number: 13027283