Sun Chin Marketing Network Co., Ltd.

Case:

Key Words:

multiple-level sales, participants, successful cases, false and untrue, misleading

Reference:

Fair Trade Commission Decision of October 4, 2007 (the 830th Commissioners' Meeting); Disposition Kung Ch'u Tzu No. 096159

Industry:

Direct Selling Establishments (4872)

Relevant Laws:

Article 23-4 of the Fair Trade Law , Article 20 of the Regulations Governing Multi-level Sales

Summary:

1. The multi-level sales enterprise, Sun Chin Marketing Network Co. Ltd (hereinafter referred to as "Sun Chin"), being reported to have made a false representation about its participant in a media interview. The false representation was placed in the section "Sun Chin Highlights" of its website And the contents of the representation are as follows:
   1. The participant, Mr. Jiang, joined Sun Chin 2 years ago and took up the position as a "consultant" in the company in March 2006. He applied the "Invitation and Recommendation Technique" and attained the monthly income target of million New Taiwan dollars within 4 months after joining the company.
   2. Mr. Jiang would plan a "road to success" for each member and indicated that the road to success was very easy – if the member followed its plan, earning the monthly income of million New Taiwan dollars would not be a dream.
2. Through issuing an investigation letter to Sun Chin, the Commission invited the company to make a statement about the genuineness of the aforementioned representation on October 1, 2007. The summary is as follows:
   1. Sun Chin confessed that it had placed the media report on its website since the beginning of 2007 and took it down from the website on September 20 of the same year.
   2. Mr. Jiang joined Sun Chin on April 13, 2004, and served as the company's "consultant" and "lecturer" since March 2006. The bonus after tax, received by Mr. Jiang within 4 months after joining the company was NT$ 41,230.- Besides, since Mr. Jiang's participation to the end of September 2007, Mr. Jiang's aggregated bonus after tax was NT$ 622,477.
   3. The statement of Mr. Jiang could earn monthly income of million New Taiwan dollars within 4 months as mentioned in the said media report, meant that Mr. Jiang did achieve the goal of monthly income of million New Taiwan dollars within 4 months of participation in its prior engagement in the "San-Guang-Jimmy Marketing Sales Enterprise" and the intention of the media report should be that Mr. Jiang brought in his related experiences into Sun Chin to grow the sales organization.
3. Grounds for disposition:
   1. In accordance with the Article 20 of the Regulations Governing Multi-level Sales, "when promoting or selling goods or services or recruiting participants by means of declared cases of success, a multi-level sales enterprise or its participants shall concretely explain the time periods, benefits obtained, and course of development of such cases, and cannot make false or misleading representations." Where a multi-level sales enterprise publishes successful stories on its website to promote sales products or services and introduces others to participate, it must specifically declare relevant facts when claiming for benefits and avoid any false or misleading representations, or otherwise, it would violate the aforementioned provision.
   2. The investigation revealed that Sun Chin posted the content of the media interview of its participant, Mr. Jiang, on the "Sun Chin Highlights" section of its website. Besides, the interview mentioned that Mr. Jiang joined Sun Chin 2 years ago and attained million New Taiwan dollars monthly income within 4 months after his participation in the company. The FTC found that Sun Chin attempted to utilize successful cases to promote, sell products or services and induce others to join; and if the contents were in any way false, Sun Chin shall be responsible for any consequential administrative penalties.
   3. Findings of FTC after investigation: Sun Chin confessed to have posted the article about Mr. Jiang's earning of millions of New Taiwan dollars per month on its website. Nonetheless, the investigation showed that, since its establishment, no participant had attained an earning of million of New Taiwan dollars per month. Furthermore, the aggregated bonus received by the said Mr. Jiang mentioned in the media article did not reach a million New Taiwan dollars since Mr. Jiang's participation and thus the aforementioned contents of the media article were obviously erroneous. Sun Chin should have verified the correctness of the article content before it reprinted it. If there are any false, untrue or misleading representations in the article, then it is the company's duty to verify beforehand and consider if the article is appropriate for reprint – the company must filter-select articles and reprint does not discharge the company of such a duty. Therefore, if the article content reprinted by Sun Chin has any false representations, then it should be subject to the aforementioned legal provisions.
   4. Above all, Sun Chin re-printed and posted on its website about Mr. Jiang's goal of attaining monthly income of million New Taiwan dollars within 4 months of his participation. However, in fact, Mr. Jiang did not have the said successful experience. Thus, the statement that Sun Chin was able to attain benefits from this successful story had been found to be false and untrue representations and undoubtedly violated the Article 20 of the Regulations Governing Multi-level Sales.
4. After considering Sun Chin's motive, purpose, and anticipated improper profits of the unlawful acts; the degree and duration of the unlawful acts' harm to market order; benefits derived on account of the unlawful acts; scale, operating condition and market position of the enterprise; whether or not the type of unlawful act involved in the violation has been the subject of correction or warning by the Central Competent Authority; the types and numbers of and intervals between past violations, and the punishment for such violations; remorse shown for the unlawful acts and attitude of cooperation in the investigation, and other factors, Sun Chin is fined for NT$ 500,000 in accordance with the Article 43(3) and the fore part of Article 41 of the Fair Trade Law.

Appendix:
Sun Chin Marketing Network Co., Ltd.'s Uniform Invoice Number: 13098688

Summarized by Hsu, Chen; Supervised by Hsu, Hung Jen