Newsletter
FTA DRAFTS MULTILEVEL SALES CONTROL ACT
Regulation of multilevel sales enterprises and their activities is currently based mainly on the relevant provisions of the Fair Trade Act and of the Supervisory Regulations Governing Multi-Level Sales, made by the Fair Trade Commission under the powers granted to it by the FTA.
The current FTA empowers the FTC to supervise and regulate multilevel sales activities. However, as a competition legislation, the FTA mainly regulates activities that restrain competition, and acts of unfair competition. These functions dif-fer in nature from the regulation of multilevel sales activities. The criteria for adjudicating and penalizing unlawful activities in the area of multilevel sales, and the factors to be considered, also differ from those in the area of competition regulation. For these reasons, it is difficult to achieve the legislative purpose of effectively controlling and deterring illegal multilevel sales activities.
Recently, there have been many instances of unscrupulous businesses using debased multi-level sales activities as a vehicle for fraud, cre-ating a serious societal problem. Accordingly, the FTC has prepared a draft Multilevel Sales Control Act, comprising 43 articles in eight chapters. Its content is outlined below:
Legislative intent, competent authority, and definition of terms.
Registration of multilevel sales enterprises, amendments to registration, and announce-ment of cessation of multilevel sales activities.
Multilevel sales enterprises' duty of disclosure and explanation toward participants.
Creation and content of written contract of participation.
Actions constituting breach of contract by participants, and handling of such actions.
Formal requirements when a multilevel sales enterprise recruits a minor as a participant.
Duty of a multilevel sales enterprise to dis-close financial information.
Prohibited unethical multilevel sales activities and prohibited actions toward participants.
Statutory conditions for participants to rescind or terminate contracts, and rights and obliga-tions arising out of rescission or termination of contract.
A multilevel sales enterprise may not claim damages for losses arising out of rescission or termination of contract by a participant, or impose contractual penalty payments for such rescission or termination, or obstruct the par-ticipant in conducting procedures for with-drawal from participation and for the return of goods.
The provisions on rescission and termination of contracts also apply mutatis mutandis to services.
Procedures for inspections and investigations by the competent authority, and cooperation with other agencies.
Scope of access to information or case files for involved or interested parties, procedures for such access, and related powers.
Damages claims for violations of the Act, and time limits for such claims.
Criminal penalties for violations of the Act.
Administrative penalties for violations of the Act.
Transitional arrangements for the application of the Act to multilevel sales enterprises that commenced multilevel sales activities before the Act’s entry into force.
The FTC has placed the draft Multilevel Sales Control Act online to solicit opinions from the public. After completing this consultation process the FTC will submit its final draft to the Executive Yuan for review.