Jung Shin International Enterprise Co., Ltd.

1136th Commissioners' Meeting (2013)

Case:

Jung Shin International violated the Fair Trade Law while engaging in multi-level marketing practices

Key Word(s):

Multi-level marketing, business inspection, written contract

Reference:

Fair Trade Commission Decision of August 14, 2013 (the 1136th Commissioners' Meeting); Disposition Kung Ch'u Tzu No.102115

Industry:

Direct Selling Establishments (4872)

Relevant Law(s):

Articles 7 (1), 12 (1), 16 (2), 18 and 22 (1) of the Supervisory Regulations Governing Multilevel Sales

Summary:

Jung Shin International Enterprise Co., Ltd. (hereinafter referred to as Jung Shin International) filed its change of multi-level marketing system on January 14, 2013 with the FTC. The FTC requested the company to explain the connection between setting the unit price at NT$49,000 and the marketed items. Jung Shin International replied that the unit price of NT$49,000 was the selling price of each "individual ash urn compartment at Chia Yun Memorial Tower" and the "Longevity Village antibacterial energy water machine." For members, each compartment was NT$49,000 and each water machine was NT$24,500 (two machines per purchase making the total to NT$49,000). However, the prices Jung Shin had previously filed with the FTC were respectively NT$45,000 and NT$47,500. The difference could constitute a violation of multi-level marketing regulations. The FTC therefore initiated an ex officio investigation.

Findings of the FTC after investigation:

When conducting business inspections at the main office of Jung Shin International, the FTC's staff members found that the written contracts signed between the company and its participants did not include multi-level marketing regulations required by the law, defect liability provisions and definition of breaches of contract by its participants. The company had also failed to obtain the written consent of the legal representatives of people with limited capacity for civil conduct recruited. At the same time, the main office also did not keep records of types, quantities and amounts of marketed items or services, payment of rewards and commissions, and types and quantities of products returned by its participants and the total amount of rebates disbursed. Another finding indicated that Taipei City Government had approved on May 10, 2013 Jung Shin International's change of company location to Taipei City, yet the address registered remained in Tainan City. Apparently, the company had violated a number of multi-level marketing regulations.

Grounds for disposition:

(1) The prices of each "individual ash urn compartment at Chia Yun Memorial Tower" and each "Longevity Village antibacterial energy water machine" Jung Shin International originally filed with the FTC were respectively NT$45,000 and NT$47,500. The investigation conducted by the FTC, however, revealed that the prices was changed to NT$49,000 each. Meanwhile, the company location Jung Shin International filed with the FTC was in Tainan City, yet Taipei City Government had approved the change of company location to Taipei City on May 10, 2013. In other words, Jung Shin had failed to file with the FTC its change of company location and product prices within the statutorily required period in violation of Article 7(1) of the Supervisory Regulations Governing Multilevel Sales.

(2) Moreover, the business investigation conducted by the FTC also revealed that the contracts signed between Jung Shin and its participants did not carry multi-level marketing regulations and defect liability provisions as required by the law. The company also did not obtain the written consent of the legal representatives of people with limited capacity for civil conduct the company recruited and the participant contracts did not contain definition of breaches of contract by participants and corresponding handling measures. At the same time, the main office did not keep legally required written information. All the above were respectively in violation of Articles 12(1), 16(2), 18 and 22(1) of the Supervisory Regulations Governing Multilevel Sales.

(3) After assessing the motive behind Jung Shin International's unlawful acts, the level of impact of the unlawful acts on trading order, the duration of the unlawful acts, and the company's attitude afterwards, the FTC acted according to Article 42(3) and the first section of Article 41(1) of the Fair Trade Law and sanctioned the company by imposing 300,000 on the Jun Shin International and ordered it to immediately cease its unlawful acts, the FTC also demanded the company to sign with its participants written contracts carrying statutorily required information within 60 days after receiving the disposition and submit the proof to the FTC for reference.

Appendix:
Jung Shin International Enterprise Co., Ltd.’s Uniform Invoice Number: 24215142

Summarized by Chen, Wei-Fan; Supervised by Lai, Mei-Hua

! : For information of translation, click here

(1)	The prices of each "individual ash urn compartment at Chia Yun Memorial Tower" and each "Longevity Village antibacterial energy water machine" Jung Shin International originally filed with the FTC were respectively NT$45,000 and NT$47,500. The investigation conducted by the FTC, however, revealed that the prices was changed to NT$49,000 each. Meanwhile, the company location Jung Shin International filed with the FTC was in Tainan City, yet Taipei City Government had approved the change of company location to Taipei City on May 10, 2013. In other words, Jung Shin had failed to file with the FTC its change of company location and product prices within the statutorily required period in violation of Article 7(1) of the Supervisory Regulations Governing Multilevel Sales.
(2)	Moreover, the business investigation conducted by the FTC also revealed that the contracts signed between Jung Shin and its participants did not carry multi-level marketing regulations and defect liability provisions as required by the law. The company also did not obtain the written consent of the legal representatives of people with limited capacity for civil conduct the company recruited and the participant contracts did not contain definition of breaches of contract by participants and corresponding handling measures. At the same time, the main office did not keep legally required written information. All the above were respectively in violation of Articles 12(1), 16(2), 18 and 22(1) of the Supervisory Regulations Governing Multilevel Sales.
(3)	After assessing the motive behind Jung Shin International's unlawful acts, the level of impact of the unlawful acts on trading order, the duration of the unlawful acts, and the company's attitude afterwards, the FTC acted according to Article 42(3) and the first section of Article 41(1) of the Fair Trade Law and sanctioned the company by imposing 300,000 on the Jun Shin International and ordered it to immediately cease its unlawful acts, the FTC also demanded the company to sign with its participants written contracts carrying statutorily required information within 60 days after receiving the disposition and submit the proof to the FTC for reference.