Guanglong Biotechnology Corporation

Case:

Key Words:

registration, statutory period, minor participants

Reference:

Fair Trade Commission Decision of May 18, 2011 (the 1019th Commissioners' Meeting), Disposition Kung Ch'u Tzu No. 100075

Industry:

Direct Selling Establishments (4872)

Relevant Laws:

Article 5(1),7(1), 12(1), 13, 15(1) and 16 (1) of the Supervisory Regulations Governing Multilevel Sales

Summary:

1. Guanglong Biotechnology Corporation (hereinafter referred to as Guanglong Corp.) was long overdue for registration and the FTC sent a written request to the company to provide related business information. Examination of the information presented by Guanglong Corp. showed there were no letters of consent from the legal representatives of minor participants while Guanglong Corp. had also failed to register its change of company location. The FTC therefore sent staff to the main business office of Guanglong Corp. for business inspection.
2. Findings of the FTC after investigation:
   During the business inspection, the FTC staff discovered the company had not registered with the FTC until about one year after the beginning of its multilevel sales operations as well as other unlawful acts.
3. Grounds for disposition:
   (1)The multilevel sales operations of Guanglong Corp. met the description set forth in Article 8 of the Fair Trade Law and the "Distributor Application and Contract" Guanglong Corp. provided to some of the participants also indicated that the participation had taken place before the company registered with the FTC. By failing to register with the FTC before its operations began, Guanglong Corp. had violated Article 5 (1) of the Supervisory Regulations Governing Multilevel Sales.
   (2)Another finding showed that Guanglong Corp. had failed to register certain business changes (including company location, reward system, and marketed items) with the FTC within the statutory period and the conduct was also in violation of Article 7 (1) of the Supervisory Regulations Governing Multilevel Sales.
   (3)Again, when recruiting and establishing contracts with participants, Guanglong Corp. only signed with them the "Distributor Application and Contract" and never provided a complete written participation contract that includes description of the company's multilevel sales system, participants' obligations and responsibilities, etc. This conduct had violated the regulation set forth in Article 12 (1) of the Supervisory Regulations Governing Multilevel Sales requiring multilevel sales businesses to establish with participants written contracts carrying information to which the participants were statutorily entitled.
   (4) In addition, although Guanglong Corp. did signed the "Distributor Application and Contract" with the participants. The said document failed to indicate, as required by law, the conditions on the withdrawal from the organization or any schemes or the rights and obligations thereof incurred. This was in violation of Article 13 of the Supervisory Regulations Governing Multilevel Sales.
   (5)Furthermore, Guanglong Corp. did not keep a copy of the previous year's CPA-attested financial statement in its main business office nor did it obtain the written agreement of the legal representatives of minor participants. The acts had respectively violated Article 15 (1) and Article 16 (1) of the Supervisory Regulations Governing Multilevel Sales.
   (6)Considering the motive of the violations of Guanglong Corp., the seriousness of the damage created, the circumstances of the illegal acts, the scale of the company, and its attitude after the violations, the FTC acted in line with the first section of Article 41 of the Fair Trade Law, ordered Guanglong Corp. to immediately cease its unlawful acts stated in the preceding paragraph, and demanded the company to establish with the participants contracts carrying the statutorily required information and present the proof to the FTC for record within 30 days after receiving the disposition, and also imposed on it an administrative fine of NT$800,000.

Appendix:
Guanglong Biotechnology Corporation's Uniform Invoice Number: 28887710

Summarized by: Lin,Yu-Ching; Supervised by: Yeh,Tien-Fu