Melilea International Company Ltd.

Case:

Key Words:

business change registration, information to be disclosed to participants as requested by law

Reference:

Fair Trade Commission Decision of March 16, 2011 (the 1010th Commissioners' Meeting), Disposition Kung Ch'u Tzu 100023

Industry:

Direct Selling Establishments (4872)

Relevant Laws:

Article 7(1), 12, 13, and 15 (1) of the Supervisory Regulations Governing Multilevel Sales

Summary:

1. The FTC sent its staff to the main business office of Melilea International Co., Ltd. (hereinafter referred to as Melilea International) for business inspection and discovered it had been relocated while the company had also failed to register business changes for the "Melilea 100% Natural Fruit Drink – Apple Garden" and 10 other newly added products. Moreover, when signing contracts with new participants, the company did not provide each of them with a copy of the "Direct Selling Directions and Rules". It was only placed in the cabinet and on the counter in the office for people to access and read. The regulations on multilevel sales in the said document were not the updated version and were incomplete, whereas the provisions regarding contract cancellation and termination were inconsistent with the stipulations in the Fair Trade Law (FTL). Lastly, the ompany did not keep a copy of the 2009 CPA-attested financial statement in the office.
2. The investigation and findings: Melilea International contended that the failure to register change of office location and addition of new multilevel sales products was administrative negligence while the problems with the "Direct Selling Directions and Rules" were the result of the compiler's unfamiliarity with multilevel sales regulations and misunderstanding of the connotations of the regulations, and the company therefore did not provide it to new participants when signing contracts. Yet the regulations in the said Directions and Rules regarding contract cancellation and termination restricted participants to withdraw or return products within 30 days, whereas the provisions on contract cancellation did not include reimbursement of "other expenses paid at the time of participation" to participants and the regulation in Article 23(3) of the FTL was also missing in the provisions on contract cancellation and termination. In addition, although the 2009 financial statement had already been sent for CPA attestation, it was never retrieved and therefore the main business office did not carry a copy of the 2009 CPA-attested financial statement. Meanwhile, the company had also set up branch offices in Taichung and Kaohsiung to conduct multilevel sales operations.
3. Grounds for disposition:
   The findings of the investigation confirmed that Melilea International failed to register its change of company location, its set-up of two new business offices, and addition of 11 new products within the statutory period. The contract signed with participants also did not clearly prescribe information to be disclosed to participants as requested by law, while the provisions on contract cancellation and termination restricted participants to apply for return of products within 30 days, a restriction not prescribed in the FTL and therefore illegal. It also did not indicate the conditions on the withdrawal from the organization or any scheme or the rights and obligations pertaining to withdrawal. In addition, the main business office did not carry a copy of the 2009 CPA-attested financial statement. All the above were in violation of Articles 7 (1), 12, 13, and 15 (1) of the Supervisory Regulations Governing Multilevel Sales. The FTC ordered the company to immediately cease the unlawful act and also imposed on it an administrative fine of NT$550,000.

Appendix
Melilea International Company Ltd.'s Uniform Invoice Number: 80688494

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