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Promulgated on February 28, 1992
by Fair Trade Commission Order (81) Kung Mi Fa Tzu No. 001
Amendments Promulgated on June 16, 1999
by Fair Trade Commission Order (88) Kung Mi Fa Tzu No. 01588
Amendments Promulgated on April 24, 2002
by Fair Trade Commission Order Kung Mi Fa Tzu
No. 0910003680
Amendments Promulgated on November 26, 2003
by Fair Trade Commission Order Kung Mi Fa Tzu
No. 0920010906
Amendments Promulgated on December 24, 2004
by Fair Trade Commission Order Kung Mi Fa Tzu
No. 093000976
Amendments Promulgated on May 25, 2009
by Fair Trade Commission Order Kung Mi Fa Tzu
No. 0980004914
Amendment to Articles 15 and 16 Promulgated on September 28, 2012
by Fair Trade Commission Order Kung Jing Tzu No. 10114614211
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CHAPTER ONE
GENERAL PROVISIONS
Article 1
These Regulations are promulgated pursuant to the
provisions of Article 23-4 of the Fair Trade Act ("the
Act" for short).
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Article 2
The provisions of these Regulations shall apply
to relevant matters including any multi-level sales
enterprise' filing for record, inspection of activities,
required CPA certification of and public disclosure
of financial statements, matters requiring notice to
participants, the content of participation agreements,
the protection of participants' interests, conduct
prohibited as materially affecting the interests of
participants, and managerial obligations toward
participants.
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Article 3
(Deleted)
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Article 4
(Deleted)
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CHAPTER TWO
PROCEDURES OF REPORT FILING
FOR RECORD
Article 5
Prior to engaging in multi-level sales operations, a
multi-level sales enterprise, should prepare a complete
and truthful report containing the following items, and
apply for record by the central competent authority:
1. | the name of the enterprise, the actual paid in
capital, the representative or legally responsible
natural person, location, date of establishment,
and documents pertaining to the corporation and
business registration; |
2. | primary place of business and other business
operating places; |
3. | the date of commencement of multi-level sales
operations; |
4. | conditions for participating in the multi-level sales
plan or organization; |
5. | the multi-level sales structure, including
commissions, bonuses and other economic
benefits provided, conditions for earning such
remuneration, methods of calculation, and estimates
for the highest percentage such payments constitute
within the overall sales income; |
6. | the participation agreement terms and conditions as
well as the form of the contract; |
7. | the itemized products or services for sale, prices,
unit costs, uses of the product or service, place of origin or source, and other related matters; |
8. | for enterprises which have a partial refund policy
providing a standard for determining the degree of
use or damage of a product or service pursuant to
Article 23-2 or 23-3 of the Act, provide the standard
and its contents; and |
9. | such other matters as may be required by the central
competent authority.
The format and process of report discussed in the
preceding paragraph may be prescribed by the
central competent authority. |
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Article 6
Multi-level sales enterprises which fail to provide a
complete report meeting the requirements of paragraph
one of the preceding article, shall be deemed to not
have filed a complete report, and the central competent
authority may return their report, and order them to
resubmit a complete one for record.
If it deems necessary, the central competent authority
may order a multi-level sales enterprise to provide
additional materials to supplement any item listed in
paragraph one of the preceding article.
Regarding any of the requirements in paragraph one of
the preceding article, the central competent authority
may in its discretion determine it to be appropriate,
to order the multi-level sales enterprise to provide
additional supplemental amendments to the report; if
the amendatory supplements are not filed, then the
preceding paragraph may be applied.
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Article 7
Except for changes regarding the unit costs in Article
5(1)(vii), all other alterations in the required materials
submitted in the report for the multi-level sales
enterprise, should be reported prior to their going into
effect. But for items included within the scope of Article
5(1)(i) above, which may have changed, it is permitted
to report within 15 days of the change.
The format and process of making amendment to the
report discussed in the preceding paragraph may be
prescribed by the central competent authority.
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Article 8
Multi-level sales enterprises which intend to cease their
multi-level sales operations, should file a written report
with the central competent authority prior to cessation.
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Article 9
The central competent authority shall record in a roster
the names of multi-level sales enterprises found, upon
checking, to have fully reported all the information in
paragraph 1 of Article 5.
The roster of multi-level sales enterprises and the
important developments of the relevant information
thereof shall be published by the central competent
authority.
The publication referred to in the preceding paragraph
may take the form of publication on the World Wide
Web site, or other forms sufficient to make the
information widely known to the public.
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Article 10
If a multi-level sales enterprise listed in the roster is
found, upon checking, to have relocated to an unknown
location or shows no evidence of operation, the central
competent authority may note such circumstances in
the roster.
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CHAPTER THREE
RIGHTS AND OBLIGATIONS OF
PARTICIPANTS
Article 11
Before a participant takes part in the sales organization
or plan of a multi-level sales enterprise, the enterprise
shall inform the participant of the following particulars,
and shall make no dissembling, false, or misleading
presentations:
1. | Paid-up capital and gross business volume in
the preceding year, or, if the enterprise has been
operating for less than one year, the cumulative
business volume for the months of operation; |
2. | multi-level sales system, which shall include the
contents of the attainable benefits, acquiring
requirements and measuring methods from goods or
services directly promoted or sold by participants as
well as from goods or services promoted or sold by
participants who joined the multi-level sales system
posteriorly. |
3. | laws and regulations relevant to multi-level sales; |
4. | obligations and responsibilities of a participant; |
5. | the itemized products or services for sale, prices,
unit costs, uses of the product or service, place of
origin or source, and other related matters; |
6. | conditions, terms, and scope of warranties against
defects of the goods or services; |
7. | conditions of withdrawal by a participant from the
organization or plan, and rights and obligations
arising from the withdrawal; and |
8. | such other matters as may be required by the central
competent authority. |
Shall make no false or misleading presentations
on items listed in the preceding paragraph when a
participant introduces another person to take part in
the organization or plan.
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Article 12
A multi-level sales enterprise shall enter into a
participation contract in writings with that who intends
to take part in the sales organization or plan as a
participant; the participation contract shall include the matters prescribed in items 2 through 8 of paragraph 1
of the preceding article.
The writings referred to in the preceding paragraph
may not be in the form of an electronic document.
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Article 13
The content of written contract, which should be
disclosed by multi-level sales enterprise to participants,
in accordance with item 7, paragraph 1 of article 11,
should include articles 23-1 through 23-3 of the Act,
except for those are beneficial to participants.
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Article 14
The method for handling a request by a participant to
return goods in the event a multi-level sales enterprise
rescinds or terminates the contract for breach of
operational rules or plans by such participant or other
reasons attributable to such participant, shall be
specified in the contract.
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Article 15
A multi-level sales enterprise shall prepare the balance sheet and income statement for its multi-level sales operations in the previous accounting year before the end of May each year and keep them in its main office.
When the capital of a multi-level sales enterprise reaches the amount specified in Paragraph 2, Article 20 of the Company Act or the total sales in the previous accounting year exceeds NT$100,000,000, the aforesaid financial statements shall require auditing and certification by a certified public accountant.
Participants may request to inspect the aforesaid financial statements of the multi-level sales enterprise to which they belong and the multi-level sales enterprise may not refuse such requests without justifiable reasons.
Multi-level sales enterprises that had already met either of the conditions set forth in Paragraph 2 before the last amendment to these Regulations took effect on September 28, 2012 shall act according to Paragraph 1 and have the financial statements kept in the main office ,audited and certified by a certified public accountant from 2013 onwards.
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Article 16
Multi-level sales enterprises may not recruit incapacitated persons to be participants.
A multi-level sales enterprise recruiting a person with limited capacity to be a participant shall first obtain the written consent from the legal representative of such a person and also attach the said written consent to the contract.
The written consent referred to in the preceding paragraph may not be an electronic document.
Incapacitated persons who had signed a contract with a multi-level sales enterprise before the last amendment to these Regulations took effect on September 28, 2012 may continue their multi-level sales activities until they withdraw from the said multi-level sales scheme or organization.
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CHAPTER FOUR
SALES ACTIVITIES
Article 17
A multi-level sales enterprise may not engage in any of
the following activities:
1. | requiring a participant to pay any fee obviously
incommensurate with the cost in the name of
training, seminars, social activities, meetings, or
other like activities; |
2. | requiring a participant to pay or undertake any
security deposit, breach penalty, or other liability,
where such is obviously unreasonable; |
3. | requiring a participant to purchase goods in a
quantity that would obviously be impossible for an
average person to sell out in a short period, unless
it is agreed that the price shall be paid only after the
goods are re-sold; |
4. | unjustifiably withholding commissions, bonuses, or
other economic benefit payable to a participant after
rescission or termination of the contract; |
5. | stipulating that a participant shall be paid greater
benefits only after he pays training fees obviously
incommensurate with the cost or pays other
obviously unjustifiable consideration; |
6. | giving specific persons preferential treatment in a
manner contrary to the multi-level sales organization
or plan, such that the commissions, bonuses, or
other economic benefits that should be available to
other participants would be diminished; |
7. | improperly hindering a participant from returning
goods arising from rescinding the contract or
terminating the contract; |
8. | requiring a participant to undertake obviously unfair
obligations. |
The provisions of the preceding paragraph shall
apply mutatis mutandis to participants.
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Article 18
For purposes of regulating the activities of its
participants in respect of multi-level sales, a
multi-level sales enterprise shall stipulate that
the following are breaches of contract by the
participant, and shall prescribe methods for
handling such breaches and faithfully enforce them:
1. | promoting or selling goods or services, or recruiting
participants to the sales organization, by
deceptive or misleading means; |
2. | raising funds from other persons in the name
of the multi-level sales enterprise or through its
organization; |
3. | engaging in sales activities by means that run
counter to public order or good morals; |
4. | affecting the market trading order or creating heavy
losses to consumers by improper direct sales calls; |
5. | engaging in sales activities that violate the Criminal
Code or other laws or regulations governing industry
and commerce. |
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Article 19
When recruiting participants by advertising or other
means of communication to the public, a multi-level
sales enterprise shall make it clearly known that it is
engaged in multi-level sales activities; neither may
it recruit participants under the guise of recruiting
employees or on other pretense.
The provisions of the preceding paragraph shall also
apply to participants.
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Article 20
When promoting or selling goods or services or
recruiting participants by means of declared cases
of success, a multi-level sales enterprise or its
participants shall concretely explain the time periods,
benefits obtained, and course of development of
such cases, and may not make false or misleading
representations.
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Article 21
After a participant joins the sales organization or plan
of a multi-level sales enterprise, the enterprise shall
educate and train the participant with respect to laws
and regulations relevant to multi-level sales and to
channels for filing complaints about infractions of
law by enterprises.
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CHAPTER FIVE
INSPECTION OF BUSINESS
Article 22
A multi-level sales enterprise shall prepare and keep
in its principal place of business the following written
materials, and record therein on a monthly basis its
development within the territory of the Republic of
China:
1. | the organizational system of the enterprise overall
and at each level of its hierarchy; |
2. | total number of participants, and numbers of
participants that joined and withdrew in the relevant
month; |
3. | each participant's name or appellation, citizen's ID
card number or number appeared on the business
license, address, and contact telephone number;
and the areas in which the participants are mainly
located; |
4. | written participation contracts signed with the
participants; |
5. | types, quantities, and monetary amounts of the
goods or services sold, and other matters related
thereto; |
6. | status of the payment of commissions, bonuses, or
other economic benefits; |
7. | status of the handling of return of goods by
participants and the aggregate amount of purchase
price refunds paid. |
The materials in the preceding paragraph shall be kept
for five years; the same shall apply in the case of an
enterprise that ceases multi-level sales activities.
The written materials in the first paragraph may be
stored by means of electronic data storage media.
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Article 23
The central competent authority may at any time
dispatch personnel to inspect the materials provided
for in the preceding article, or order an enterprise
to provide those materials at regular intervals; the
enterprise may not impede, refuse, or evade such
inspection or order.
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CHAPTER SIX
SUPPLEMENTARY PROVISIONS
Article 24
(Deleted)
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Article 25
(Deleted)
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Article 26
The Regulations shall be in force from the date of
promulgation.
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