Interush Inc.

Case:

Key Words:

multilevel sales, filing for changing operation model, written contract participation agreements

Reference:

Fair Trade Commission Decision of January 27, 2010 (the 951st Commissioners' Meeting); Disposition Kung Ch'u Tzu No.099005

Industry:

Direct Selling Industry

Relevant Laws:

Article 23-2,23-3 and 23-4 of the Fair Trade Law and Paragraph 1 of Article 7, Article 12, and Paragraph 1 of Article 16 of the Supervisory Regulations Governing Multilevel Sales

Summary:

1. On July 15, 2009, the FTC visited Interush Inc. (hereinafter referred to as Interush), a multilevel sales enterprise, and performed business inspection in the company's main office. The findings showed that Interush was in violation of the Fair Trade Law and the Supervisory Regulations Governing Multilevel Sales.
2. Findings of the FTC after investigation: When participants terminated the contract to withdraw from the multilevel sales and return the remaining products in hand, Interush would first deduct 900 NT dollars for the software setting cost and then calculated the expenses for the use in the remaining period based on 10-day cycles. Originally, Interush had only registered the main office in Taipei with the FTC and there were no other branches. According to the business schedule for July 2009 provided by the company and the information on the company's website, however, Interush held presentations in Taipei, Taichung, and Kaohsiung. At the presentations, people expressed interest in joining the program could fill out applications and the instructor from the company would bring them back to Taipei. Some of the application forms were marked as "brought back from Taichung." Interush confessed that its staff members had brought them back from the presentations held in Taichung. This clearly proved that the company did make recruitment in Taichung and the venue could be regarded Interush's branch operation outside Taipei. In addition, the FTC's investigation also showed that some of the participants did not fill out the participation agreements but only registered online and paid the fees to join the company. The company had entered into contracts with minors and in some of the cases there was no letter of agreement from the legal custodian of the minor. In other cases, Interush had not acquired the written consent from the legal custodian in advance.
3. Grounds for Disposition:
   1. When a multilevel sales enterprise processes a participant's withdraw and returning of remaining products in hand, it should follow the regulations in accordance with Article 23-2 and Article 23-3 of the Fair Trade Law and deduct the commission or bonus to paid to the participant for the transactions completed and the cost to cover the reduction of or damage to products returned. If the enterprise deducts or charges these members any fees rather than the statutory items, it is regarded an encroachment on or invalidation of the product return mechanism and considered illegal. The deduction of the 900 NT dollars for the software setting that was not among the listed deduction items already and the conduct violated Paragraph 2 of Article 23-3 of the Fair Trade Law, mutatis mutandis application of the regulation of Paragraph 2 of Article 23-2 of the same law.
   2. Originally, Interush had only registered the main office in Taipei with the FTC and there were no other branches. According to the business schedule for July 2009 provided by the company and the information on the company's website, however, Interush did hold presentations in Taipei, Taichung, and Kaohsiung. The marks of "brought back from Taichung" in some of the agreements that some new participant signing up proved that the company did recruit new members in Taichung and the venue in Taichung. This could be deemed a branch operation of the company outside its main office. The fact that the company failed to file with the FTC of its branch operations was in violation of Paragraph 1 of Article 7 of the Supervisory Regulations Governing Multilevel Sales.
   3. Some of the participants to Interush's multilevel sales did not fill out any agreements but only registered online and paid the fees to become participants. The company had entered into contracts with minors and in some cases there was no letter of agreement from the legal custodian, whereas in some other cases, the written consent of the legal custodian had not been obtained in advance. These were respectively in violation of the regulation of Article 12 and Paragraph 1 of Article 16 of the Supervisory Regulations Governing Multilevel Sales.
   4. Based on the motive and other factors of Interush's violation, the FTC acted in line with the regulation of Paragraphs 2 and 3 of Article 42 as well as the first section of Article 41 and fined Interush 200 thousand NTD in accordance with Paragraph 2 of Article 23-3 of the Fair Trade Law, mutatis mutandis application of Paragraph 2 of Article 23-2 of the same law. In addition, Interush was also fined 500 thousand NTD for its violation of Paragraph 1 of Article 7, Article 12, and Paragraph 1 of Article 16 of the Supervisory Regulations Governing Multilevel Sales enacted in pursuance to Article 23-4 of the Fair Trade Law. Interush received a total fine of 700 thousand NTD and was ordered to cease the illegal conduct immediately.

Summarized by: Su, Min-Huang; Supervised by: Yeh, Tien-Fu'

Appendix:
Interush Inc.'s Uniform Invoice Number: 28489023