Xiong Guanming

Case:

Key Words:

bring in multilevel sales operations from overseas, fail to file for record

Reference:

Fair Trade Commission Decision of October 20, 2010 (the 989th Commission Meeting), Disposition Kung Ch'u Tzu No. 099113

Industry:

Direct Selling Establishments (4872)

Relevant Laws:

Article 8 of the Fair Trade Law and Article 5 (1) of the Supervisory Regulations governing Multilevel Sales

Summary:

1. The FTC visited the headquarters of the Taiwan branch of the US-based doTERRA International (hereafter referred to as doTERRA ) for business inspection. Evidence showed that the US-based doTERRA International had been conducting its multilevel sales in Taiwan long before doTERRA Taiwan was established and filed its multilevel sales operations for record with the FTC. People participating in the multilevel sales activities of local doTERRA claimed that they had signed the participation contract when attending the presentation on the multilevel sales system of doTERRA organized by Xiong Guanming. Accordingly, Mr. Xiong had introduced the multilevel sales system of the US-based doTERRA without filing for record before his multilevel sales activities.
2. 2. Findings of the FTC after investigation: Mr. Xiong claimed that he had joined the multilevel sales network of the US-based doTERRA on July 8, 2009 to promote the company's essential oil products. Before local doTERRA was officially established (November 9, 2009,) he had invited a number of people to visit doTERRA International in the US and some of these people had immediately joined the sales network. Meanwhile, when introducing and offering trial use of doTERRA's essential oil products at his beauty spas and home, Mr. Xiong also suggested to those expressing interest that they could log on to the doTERRA website with his membership code to join the sales network as independent product consultant and become his downline participants.
3. Grounds for disposition:
   The rewarding system posted on the doTERRA website showed that participants could receive a commission at a certain percentage of the sales achieved by their downlines. The operation had the characteristics of "team-based rewarding" and "sales commission" and met the description of multilevel sales in Subparagraph 1 of Article 8 of the Fair Trade Law. Paragraph 4 of the same article also regulates that one, who is a participant or a third party in a foreign enterprise, introduces multilevel sales plans or organization from overseas will be considered as multilevel sales business.. According to Mr. Xiong's organization chart provided by doTERRA , the company had begun in September 2009 to recruit people to participate in the multilevel sales network of doTERRA. Up till the time when doTERRA Taiwan registered its multilevel sales operations, the company had recruited more than 200 people. As some of these people had already been given cash rewards for the sales targets achieved, it is unquestionable that Mr. Xiong had been conducting multilevel sales activities. According to the aforesaid regulations, Mr. Xiong's was regarded as a multilevel sales business. Mr. Xiong's failure to file for record before undertaking the multilevel operations was in violation of Subparagraph 1 of Article 5 of the Supervisory Regulations Governing Multilevel Sales. He was therefore imposed with an administrative fine of NT$100,000.

Summarized by: Yu, Wei-Jhen ; Supervised by: Yeh, Tien-Fu