Mei Yen Li Development Co. Ltd.

Case:

The Supreme Administrative Court decision on Mei Yen Li Development Co. Ltd.'s violation of the Fair Trade Law, for the company's failure to purchase back the goods possessed by a participant at the time that such a participant terminated the contract and requested for returning the goods

Key Words:

multi-level sales, handle the returning of goods, report change

Reference:

Taipei Supreme Administrative Court Decision (96) Pan-Tzu No. 801

Industry:

Direct Selling Establishments (4872)

Article 23-2 of the Fair Trade Law

Summary:

1. The defendant, Fair Trade Commission (Defendant), initiated an ex officio investigation pursuant to a complaint and found that the Plaintiff, Mei Yen Li Development Co. Ltd. which conducted multi-level sales, failed to purchase back the goods possessed by a participant at a price 90% of the original purchase price when such a participant terminated the contract and requested for returning the goods. Additionally, the Plaintiff did not handle reporting change for an increase of business locations within the period prescribed by law; the representations, the proceeding period of and the profits obtained from the successful cases claimed by the Plaintiff were false, untrue and misleading. The Plaintiff violated the related provisions of the Fair Trade Law and the FTC disposed the Plaintiff in accordance with Articles 41, 42(2) and (3) of the same law. The Plaintiff was dissatisfied with the decision and filed an administrative action which was denied by the court of first instance. The Plaintiff therefore filed this Appeal.

2. It was found that the parties who were not in the Appeal, Sun, Chih-Chung and seven people, became the participants of the Plaintiff's multi-level sales by signing the participation contracts with the Plaintiff on February 26, 2002. On May 5, 2003, they issued legal attest letters to inform the Plaintiff of returning the payment of the goods. As the court of first instance assured of these facts, the Plaintiff had the obligation to purchase back the goods possessed by the participants who requested for returning the goods in accordance with the purpose of the text set forth in Articles 23-1(1) and 23-2 of the Fair Trade Law. Therefore, based on the results of arguments regarding evidence, the court of first instance stated in detail that the grounds to convince the judge for violation of Article 23-2 of the Fair Trade Law constituted by the Plaintiff failing to purchase back the goods possessed by a participant at a price 90% of the original purchase price in terms of the provision were adequate or there was no improper application of laws or regulations. Therefore, the claim in the Appeal accusing that the original decision infringed laws was groundless.

3. Furthermore, it was found that the Disposition of the Defendant had specified in detail the circumstances which were considered in terms of Article 36 of the Enforcement Rules to the Fair Trade Law, and these circumstances were: the number of the Plaintiff's participants, operation condition, market status, turnover, the degree of coordination in the investigation, the motive, purpose and anticipated improper profits of the unlawful acts, and the degree and duration of the unlawful acts' harm to trading order. The Plaintiff was therefore imposed with an administrative fine of NT$450,000 for the act concerning administration of multi-level sales, and the same amount of fine for its violation of Article 23-2(2) of the Fair Trade Law. After basing on the aforesaid Disposition concerning the circumstances under consideration and the record of the amount of the fine, and considering every item of the Reference to Considerations for Imposition, the court of first instance found that the Defendant's decision on the administrative fine was proper – the grounds were adequate and conformed to logic and legal principles. Therefore, the claim in the Appeal accusing that the original decision did not conform to law was groundless. In conclusion, the court of first distance upheld the Appeal decision and the original Disposition that they conformed to applicable laws in the said case, and the claim of the Plaintiff proposed in the court of first instance was denied. It shall be groundless for the Plaintiff to employ the claim in the Appeal, accusing that the original decision was inconsistent with laws and requesting for revocation of the original decision, and the claim shall be denied.

Appendix:
Mei Yen Li Development Co. Ltd.'s Uniform Invoice Number: 70606311

Summarized by Lai, Chia-Ching; Supervised by Lee, Wen-Show