Mannatech Incorporated, Taiwan Branch

Case:

Key Words:

preferential price, original purchase price, multi-level sales

Reference:

Fair Trade Commission Decision of January 18, 2006 (the 793rd Commissioners' Meeting); Disposition (95) Kung Ch'u Tzu No. 096015

Industry:

Direct Selling Establishments (4872)

Relevant Laws:

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

Summary:

1. The public (hereinafter called the "Complainant") filed a complaint stating that Mannatech Incorporated, Taiwan Branch (hereinafter called "Mannatech"), failed to handle participants' withdrawal and refund in accordance with Article 23-2 of the Fair Trade Law.
2. Findings of FTC after investigation:
   (1) There were two products subject to the Complainant's claim, one of which was worth NT$5,310 and bought back by Mannatech at NT$4,779 (90% of the original purchase price), while the other was a package of 28 bottles of goods worth NT$38,000 and also the dispute between both parties hereto.
   (2) According to Mannatech, the original price of the product in question was supposed to be NT$64,200, if calculated with the direct selling price of the product. The Complainant obtained said product for NT$38,000, almost 40% off the original price, since the Complainant was a new participant. In addition, the product returned by the Complainant was not in its entirety, only 17 bottles of which were returned. As a result, Mannatech could not refund 90% of the original purchase price, which was NT$38,000, to buy back the goods returned by the Complainant. Mannatech stated that since 11 bottles were used, the total costs for those 11 bottles should be NT$27,400; and Mannatech could only refund 90% of the difference. Therefore, the correct refund amount should be NT$9.540. The formula is as follows: (NT$38,000-NT$27,400)* 90%.
3. Grounds for disposition:
   (1) Pursuant to Article 23-2(2) of the Fair Trade Law, "within thirty days from the termination of the agreement in accordance with the preceding paragraph, the multi-level sales enterprise shall buy back all goods possessed by the participant at ninety percent (90%) of the original purchase price; provided that it may be deducted the bonuses or remuneration paid to the participant for the purchase as well as the amount of the decreased value of the goods." According to the aforesaid provision, a multi-level sales enterprise shall use the original purchase price of the goods claimed by a participant as the cardinal number. The buy back price shall be 90% of such a cardinal number. However, the bonuses or remuneration paid as well as the amount of the decreased value may be deducted from such an amount. Such a provision was enacted to protect the freedom of a participant to withdraw from a sales organization. Therefore, a multi-level sales enterprise may only perform its buy-back obligation with conditions more preferential than the statutory condition.
   (2) The participant of this case (the Complainant) purchased the goods for NT$38,000 but only returned 17 bottles out of the entire goods. Mannatech calculated the value of the used goods with the direct selling price instead of the original preferential price and deducted such amount from the original purchase price. Since the participant may not request Mannatech to buy back those used goods; and the relevant interests accrued from those used goods were neither relevant to "original purchase price," the bonus of remuneration accrued from those used goods, nor related to "decreased value," such an amount was not supposed to be included in the calculation standards set forth in the aforesaid provision. As a result, Mannatech's calculation was inconsistent with the aforesaid provision.
   (3) After considering the motivation, purpose, and expected improper benefit of the unlawful act of Mannatech; the degree of the act's harm to market order; the duration of the act's harm to market order; benefits derived on account of the unlawful act; the scale, operating condition, sales and market position of the enterprise; whether or not the type of unlawful act involved in the violation has been correct ed or warned 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 Mannatech to immediately cease such unlawful act and imposed an administrative fine of NT$50,000 in accordance with the fore part of Article 42(2), Article 42(3) , and the fore part of Article 41 of the Fair Trade Law.

Appendix:
Mannatech Incorporated, Taiwan Branch's Uniform Invoice Number: 27240778

Summarized by Tu, Cheng-Hsien; Supervised by Hsu, Hung-Jen