Dream Bank Enterprise Co., Ltd.

Case:

Key Words:

multilevel sales, depreciated value, signing participant contract, business inspection

Reference:

Fair Trade Commission Decision of February 29, 2012 (at the 1060th Commissioners' Meeting), Disposition Kung Ch'u Tzu No. 101018

Industry:

Direct Selling Establishments (4872)

Relevant Laws:

Paragraph 2 of Article 23-2 of the Fair Trade Law ; Paragraph 1 of Article 7, Paragraph 1 of Article 12, and Paragraph 1 of Article 22 of the Supervisory Regulations Governing Multilevel Sales

Summary:

1. When conducting business inspections on multilevel sales operations, the FTC suspected that the measure adopted by Dream Bank Enterprise Co., Ltd. (hereinafter referred to as Dream Bank Enterprise) in handling of products returned by participants was in violation of Article 23-2 of the Fair Trade Law and therefore initiated an ex officio investigation.
2. Findings of the FTC after investigation:
   The FTC sent its staff members to the main office of Dream Bank Enterprise to conduct a business inspection. They found out that the company had started to sell the D15 and D 30 vending machines in February 2011 but had not filed the operation with the FTC until July 22 of the same year. Meanwhile, Dream Bank Enterprise did not keep in the main office documents regarding the participants' information, the company's organization, the types and quantities of products sold, and the commissions and rewards paid to the participants. The company had also failed to sign the"participant contract" with the participants and its calculation of product depreciation had been conducted according to the date filled in on the"member registration and product order," regarded as the enrollment date, and a 50% value depreciation was imposed on all products returned by anyone who had been a participant for more than 3 months.
3. Grounds for disposition:
   1. When handling products returned by participants, Dream Bank Enterprise calculated product value depreciation by using the enrollment date, the date indicated on the"member registration and product order,"as the record date. However, the company did not order the products from companies in Japan until participants turned in the"member registration and product order" and completed the payment. On average, it took about 3 months between the time the products were shipped out and the time participants could begin their rental operations. Therefore, participants were not able to rent out the products for a profit until the fourth month after they signed up. In other words, between the 15th day after their enrollment and the end of the third month, participants had no access to the products, yet when they returned the products, the company imposed a value depreciation between 5% and 50% (3 months after enrollment) starting from 15 days after enrollment. The value deduction imposed by Dream Bank Enterprise on returned massage chairs and vending machines was in violation of Paragraph 2, Article 23-2 of the Fair Trade Law.
   2. In addition, Dream Bank Enterprise failed to file with the FTC before starting the vending machine sales, did not sign with participants the participant contract and the rental contract but used the"member registration" and"product order" filled out by participants as the proof of enrollment, and also did not keep the information regarding its business operations and development in the main office. The said acts were respectively in violation of Paragraph 1, Article 7, Paragraph 1, Article 12, and Paragraph 1, Article 22 of the Supervisory Regulations Governing Multilevel Sales enacted in accordance with Article 23-4 of the Fair Trade Law.
4. After assessing the motive and content of the illegal conduct of Dream Bank Enterprise, the company's business scale, and the number of times and types of the company's violations in the past, the FTC acted according to the first section of Paragraph 1, Article 41 of the Fair Trade Law, and ordered Dream Bank Enterprise to immediately cease the aforesaid unlawful acts, sign with each participant a contract carrying statutorily required information and submit the proof to the FTC within 30 days after receiving the disposition. In addition, the FTC also imposed on the company an administrative fine of NT$2,500,000.

Summarized by Lin, Yu-Ching; Supervised by Lai, Mei-Hua
　　　　　　　　　　　　　　　　　
Appendix:
Dream Bank Enterprise Co., Ltd's Uniform Invoice Number: 25125858