MULTI-LEVEL MARKETING GOVERNING ACT
MULTI-LEVEL MARKETING GOVERNING ACTCHAPTER ONE GENERAL PROVISIONS
Article 1 This Act is enacted to improve the trade order of multi-level sales and to protect the rights and interests of distributors.
Article 2 For the purposes of this Act, the term “competent authority” denotes the Fair Trade Commission.
Article 3 For the purposes of this Act, the term “multi-level sales” denotes the marketing operations that promote and sell goods or services by multi-level organizations that
are established through distributors introducing others to participate in the multi-level organizations.
Article 4 For the purposes of this Act, the term “multi-level sales enterprise” denotes the companies, company type, groups or individuals who overall plan or implement the
marketing operations according to the preceding Article. Distributors or a third party from foreign multi-level sales enterprise that introduce or implement multi-level
sales plans or organizations of such enterprises, are deemed as multi-level sales enterprise according to the preceding paragraph.
Article 5 For the purposes of this Act, the term “distributor” denotes the person who receives commissions, bonuses or other economic benefits because of promoting or
selling goods and services through participating in a multi-level enterprise, the person who receives commissions, bonuses or other economic benefits because of
introducing others to participate or the introduced person promoting or selling goods or services or introducing others to participate.According to the previous
paragraph, the person falls into the scope of distributor when he or she stipulates to the multi-level sales enterprise that he or she has the qualifications to promote or
sell goods or services and introduce others to participate only after certain conditions are completed.
CHAPTER TWO MULTI-LEVEL SALES ENTERPRISES FILING FOR RECORD
Article 6 Prior to engaging in multi-level sales operations, a multi-level sales enterprise should prepare a complete document or report containing the following items, and apply
for filing to the competent authority:
1. basic report and business operating location of the multi-level sales enterprise;
2. the multi-level sales structure and conditions for distributor participation;
3. the drafted content of the participation agreement to be signed by the distributor;
4. the itemized goods or services, their prices, and their sources;
5. when the marketing method of goods or services is ruled by other regulations or the promotion or sale of goods must be consented by the target business’s
competent authority, proof of such lawful marketing method or the consent of the target business’s competent authority shall be presented;
6. the method of calculation, standards, and reasons when the multi-level sales enterprise deducts the value of used or damage goods or services during repurchasing
of such goods or services pursuant to the end of Article 21-3 or Article 24 of the Act;
7. such other matters required by the competent authority.
Multi-level sales enterprises that fail to provide such documents or reports meeting the requirements of the preceding paragraph may be ordered by the competent
authority to provide additional supplemental amendments to the report. If the amendatory supplements are not filed, the enterprise shall be deemed to have not filed a
report from the beginning, and the competent authority may return their original report and order them to resubmit a complete one for record.
Article 7 Except for the following items, all other alterations in the required materials submitted in the documents or report for the multi-level sales enterprise should be
reported prior to their going into effect:1. the items of the basic report in Article 6(1)(a) shall not be filed for record except for the change of the name of the
enterprise;2. changes in name of the enterprise shall be reported within 15 days.
When multi-level sales enterprises fail to report the change pursuant to the preceding paragraph, the competent authority may, in its discretion, order the enterprises to
provide additional supplemental amendments to the report. If the amendatory supplements are not filed, the enterprises shall be deemed to have not filed a report for
change, and the competent authority may return their original report and order them to resubmit a complete report for record.
Article 8 The format and process of reporting for record in the previous two Articles is prescribed by the competent authority.
Article 9 Multi-level sales enterprises that intend to cease their multi-level sales operations should file a written report with the competent authority prior to cessation, and
publish in their places of business operation that the distributors may claim the right to return of goods from the multi-level sales enterprises under the participation
CHAPTER THREE IMPLEMENTIONS OF MULTI-LEVEL SALES OPERATIONS
Article 10 Before a distributor takes part in the sales plan or organization of a multi-level sales enterprise, the enterprise shall inform the distributor of the following particulars,
and shall make no dissembling, false, or misleading presentations:
1. capital and business volume of the multi-level sales enterprise;
2. multi-level sales structure and participation conditions for distributors;
3. laws and regulations relevant to multi-level sales;
4. obligations and responsibilities of the distributor, and conditions of withdrawal by the distributor from the plan or organization, and rights and obligations arising
from the withdrawal;
5. the relevant matters to goods or services;
6. the method of calculation, standards, and reasoning when the multi-level sales enterprise deducts the value of use or damage from the repurchased goods or
services pursuant to the last section of Article 21-3 or Article 24 of the Act;
7. such other matters as may be required by the competent authority.The distributor shall make no false or misleading presentations on items listed in the preceding
paragraph when the distributor introduces another person to take part in the organization or plan.
Article 11 When recruiting distributors by advertising or by other means, a multi-level sales enterprise or distributor shall make it clearly known that it is engaged in multi-level
sales activities; they shall not recruit distributors under the guise of recruiting employees or on another pretense.
Article 12 When promoting or selling goods or services or recruiting participants by means of success stories, a multi-level sales enterprise or distributor shall concretely explain
the time periods, benefits obtained, and course of development of such stories, and m
Article 13 A multi-level sales enterprise shall enter into a participation agreement in writing with that who intends to take part in the sales plan or organization as a distributor,
and shall deliver the original agreement. The writing referred to in the preceding paragraph may not be in the form of an electronic document.
Article 14 The content of the participation agreement in the preceding Article shall include the following matters:
1. the particulars in accordance with Article (1)(b) through (g);
2. grounds for the distributor’s breach of agreement and their handling means;
3. the rights and obligations in Article 20 through 22 or any terms more beneficial to distributors;
4. the method for handling a request by a distributor to return goods in the event that the reasons of rescinding or terminating the contract are due to the
distributor’s breach of operational rules, or due to breach matters specified in Article 15(1), or due to other reasons attributable to the distributor;
5. the conditions of renewal of the contract when there exists a participation period in the agreement.
Article 15 A multi-level sales enterprise shall stipulate that the following are breaches of contract by the distributor, and shall prescribe methods for handling such breaches:
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;
3. engaging in sales activities by means that run counter to public order or good morals;
4. affecting consumers’ benefit by improper direct sales calls;
5. engaging in sales activities that violate this Act, the Criminal Code, or other laws or regulations. The multi-level sales enterprise shall faithfully enforce the methods
for handling as provisioned in the preceding paragraphs.
Article 16 Multi-level sales enterprises may not recruit incapacitated persons to be distributors. A multi-level sales enterprise recruiting a person with limited capacity to be a
distributor 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.
Article 17 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 amount of total sales in the previous accounting year exceeds the sum prescribed by the competent authority, the aforesaid financial statements
shall require auditing and certification by a certified public accountant.Distributors 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.
Article 18 A multi-level enterprise shall generate income primarily through promoting or selling goods or services at reasonable prices, rather than generate income from their
introduction of new participants.
Article 19 A multi-level sales enterprise may not engage in any of the following activities:
1. requiring a distributor to pay any fee obviously incommensurate with the cost in the name of training, seminars, social activities, meetings, promoting, or other like
2. requiring a distributor to pay any security deposit, fine for breach, or other fees where such is obviously unreasonable;
3. urging a distributor to purchase goods in a quantity that would obviously be impossible for an average person to sell out in a short timeframe, unless it is agreed that
the price shall be paid only after the goods are re-sold;
4. giving specific personal preferential treatment in a manner contrary to the multi-level sales organization or plan, such that the benefits which should be available to
other distributors would be diminished;
5. improperly engaging distributors to purchase or allowing them to have two or more rights to promote the multi-level organization;6. other requirements for
distributors to undertake obviously unfair obligations.
The person introduced by distributors may not engage in activities in the aforesaid subparagraphs one through three and subparagraphs five and six.
CHAPTER FOUR CONTRACT RESCISSION AND CONTRACT TERMINATION
Article 20 Distributors may inform the multi-level sales enterprise to rescind or terminate the contract in writing within 30 days of execution of the contract. Within 30 days since
the rescission or termination of the contract enters into effect, the multi-level sales enterprise shall accept the application for return of goods or return of goods by
distributors, and shall refund to the distributors the amount of the purchase price.When refunding the fees to distributors in accordance with the preceding paragraph,
the multi-level sales enterprise may deduct the returned goods’ value of damage or loss that is attributable to distributors, and bonuses or rewards paid to the
distributors due to such purchases.When the returned goods are taken back by the multi-level sales enterprise, the delivery fees shall be deducted.
Article 21 Distributors may terminate the contract and withdraw from the multi-level sales plan or organization, and require return of goods even if the period in Article 20(1) has
passed. But if it has been 6 months since the day when the distributor acquired the goods, the distributor then cannot require product returns. The multi-level sales
enterprise, within 30 days after the enforcement of contract termination, shall accept distributors’ return applications, and may repurchase those goods at 90% of the
original purchase price.When the multi-level sales enterprise repurchases the goods held by distributors in accordance with the preceding paragraph, the bonuses or
rewards for the transaction given to distributors shall be deducted. Where there is a loss of the repurchased goods, the total value of such damage or loss may be
deducted.When the returned goods are taken back by the multi-level sales enterprise, the delivery fees shall be deducted.
Article 22 When distributors implement the right of rescission or termination in accordance with the preceding two Articles, multi-level sales enterprises may not claim
compensation for damages or penalties for breach due to such contract rescission or termination.Under the circumstance that sold products are provided by a third-
party, when distributors implement the right of rescission or termination in accordance with the preceding two Articles, multi-level sales enterprises shall conduct
returns and buy-back according to the preceding two Articles and the third party shall bear burden the damages arising from the distributor rescinding or terminating
Article 23 The multi-level sales enterprises and distributors shall not unduly obstruct distributors implementing returns in accordance with this Act.The multi-level sales
enterprises shall not withhold commissions, bonuses, or other economic benefits rightfully belonging to distributors when they rescind or terminate the contract.
Article 24 Except for the exception in Article 21(1), the relevant regulations about products in this Chapter shall also apply to services.
CHAPTER FIVE INSPECTION OF BUSINESS INSPECTION PROCEDURES
Article 25 The materials of organizational development, sales of goods or services, payment of bonuses and handling of return of goods within the territory of the Republic of
China shall be prepared by the multi-level sales enterprises and kept in their primary places of business for the competent authority to inspect, verify and record therein
on a monthly basis.The materials in the preceding paragraph shall be kept for a period of 5 years; the same shall apply in the case of an enterprise that ceases multi-
level sales activities.
Article 26 The competent authority may at any time dispatch personnel to inspect the materials of operational development or order multi-level sales enterprises to provide
information and to report in the prescribed manner and content. The enterprises shall not evade, impede, or refuse such inspection or order.
Article 27 The competent authority may investigate and prosecute for cases in violation of this act.
Article 28 The competent authority in engaging in investigations in accordance with this Act, shall follow the procedures as below:
1. Inform parties and related parties to present their views;
2. inform parties and related parties to provide accounting books, documents, and other necessary materials or evidences;
3. dispatch personnel to offices, business premises, or other places to carry out the necessary investigation.The competent authority may detain the materials that can
be used as acquired evidence by the preceding investigations; the scope and period of detention shall be limited to the purpose of a necessary investigation,
inspection, appraisal, or other preservation of evidence.
The respondents, without justified reasons, shall not evade, impede, or refuse the investigation initiated by the competent authority according to the preceding
The personnel dispatched to investigate shall present documents proving his or her authority when executing official duties under law; the respondents may refuse if
the personnel fails to do so.
CHAPTER SIX PROVSIONS FOR PENALTIES
Article 29 For violations of Article 18 of this Act, the responsible person shall be subject to imprisonment for a period not exceeding 7 years and a fine not exceeding
NT$100,000,000. When the representative of legal persons, agents, employees, or other practitioners violate Article 18 due to the execution of business, the penalties of
the preceding paragraph shall apply to the responsible person, and the fine of the preceding paragraph shall apply to the enterprise as well.
Article 30 Where other laws have stricter penalties than those in the preceding Article, the stricter regulations shall prevail.
Article 31 For multi-level sales enterprises that violate Article 18, the competent authority may order dissolution, force closure, or order to cease activities for a period not
exceeding 6 months.
Article 32 For violations of Article 6(1), Article 20(2), Article 21(2), and Articles 22 or 23, the competent authority shall order the responsible person, within a period, to cease or
correct its activities, or to adopt necessary amendment measures, and to pay a fine not less than NT$100,000 nor more than NT$5,000,000; Those who fail to comply in
the limited period shall be subject to cease or correct activities, or to adopt necessary amendment measures and face continual fines of not less than NT$200,000 nor
more than NT$10,000,000 until they comply. In significant cases, the competent authority shall order dissolution, closure, or cease in operations not exceeding 6
months. The regulations of the preceding paragraph as well as those of Article 24, Article 21(2), Articles 22 or 23 shall apply to violations of Article 20(2).Where
protective organizations are in violation of business handling or supervision and management matters as provisioned in Article 38(5), the competent authority shall
issue penalties according to Paragraph 1.
Article 33 For violations of Article 16, the competent authority shall order the responsible person, within a period, to cease or correct her or her activities, or to adopt necessary
amendment measures, and to pay a fine not less than NT$100,000 nor more than NT$2,000,000; those who do not comply in a limited period shall cease or correct
activities, or adopt necessary amendment measures, and continually pay fines not less than NT$200,000 nor more than NT$4,000,000 until they comply.
Article 34 For violations of Article 7(1), Articles 9 through 12, Article 13(1), Article 14, Article 15, Article 17, Article 19, Article 25(1) or Article 26, the competent authority shall
order the responsible person, within a period, to cease or correct her or her activities, or to adopt necessary amendment measures, and to pay a fine not less than
NT$50,000 nor more than NT$1,000,000; those who fail to comply in the limited period shall cease or correct activities, or adopting necessary amendment measures
and continually pay fines not less than NT$100,000 nor more than NT$2,000,000 until they comply.
Article 35 Where the respondents are in violation of Article 28(3) when the competent authority investigates in accordance with Article 28, the authority shall fine not less than
NT$50,000 nor more than NT$500,000; in the case that the respondents are informed again and evade, impede, or refuse the investigation without justified reasons, the
competent authority shall continually inform the respondent of an investigation and issue fines not less than NT$100,000 nor more than NT$1,000,000 until the
respondents accept investigation, present their views , or provide materials or evidence of relevant accounting books and documents.
CHAPTER SEVEN SUPPLEMENTARY PROVISIONS
Article 36 The multi-level sales enterprises that fall out of the scope of Article 8 of the Fair Trade Act but have undertaken multi-level sales activities prior to the effective date of
this Act, shall report for record to the competent authority pursuant to Article 6 of this Act within 3 months from the effective date of this Act; if the report is not filed in
time, then Article 6(1) may be applied.Pursuant to Article 13(1), the multi-level sales enterprises in the preceding paragraph shall enter into a contract in writing with
distributors who take part in the enterprise before the effective date of this Act within 6 months of this Act coming into effect. For those who fail to meet the
requirement in time, Article 13(1) may be applied.The distributors, who have taken part in the multi-level sales enterprise in the scope of Paragraph 1 before the
effective date of this Act, shall rescind or terminate the contract according to Article 20, Article 22, or Article 24 within the time period from this Act coming into effect
to 30 days after the conclusion of the contract in the preceding paragraph; where exceeding the above period, the distributors shall also terminate the contract
according to Article 21, Article 22, or Article 24.In the case that distributors in the preceding paragraph terminate the contract after the effective date of this Act, the
relative period specified in Article 21(1) shall be calculated from the effective date of this Act.
Article 37 In the case that the multi-level sales enterprises have already filed report to the competent authority prior to this Act coming into force, the content of filed documents
or materials shall be amended in accordance with Article 6(1), and the multi-level sales enterprises shall provide the amendatory documents or materials to the
competent authority within 2 months from the effective date of this Act. If the amendatory supplements are not filed in time, then Article 7(1) may be applied.In the
case that the multi-level sales enterprises have already filed to the competent authority prior to this Act coming into force, the enterprises, within 2 months from the
effective date of this Act, shall coordinate and amend the written participant agreement with its existing distributors and shall inform of amendatory, added, or deleted
matters in writing, and shall make public of these matters in its business premises. If the enterprise fails to inform in writing within that period, then Article 13(1) may be
applied.In regard to the preceding paragraph, distributors that do not show disagreement of the informed matters within a certain period shall be deemed as agreeing
with the informed matters.
Article 38 The competent authority shall order the multi-level sales enterprises that have completed filing to donate a certain sum to establish a protection agency that handles
protection of rights and benefits, and assists with dispute settlement between such multi-level sales enterprises and distributors. The donated amount may be used to
pay for the protection fund and annual fee in paragraph 2. For handling of activities in the preceding paragraph, the protection agency may charge the filed multi-level
sales enterprises for a protection fund and annual fee, and the amount and method of payment shall be ruled by the competent authority.If the filed multi-level sales
enterprises fail to pay truthfully pursuant to the preceding two Articles, Article 32(1) may be applied.
Enterprises that pay for the protection fund and annual fee as ordered by the competent authority shall ask for protection from the protection agency..
The protection agency’s structure, tasks, use of funds, means of handling activities, and supervision and management matters shall be ruled by the competent
Article 39 The rules related to multi-level sales in the Fair Trade Act shall not be applied beginning from the effective date of this Act.
Article 40 This act shall be prescribed by the competent authority.
Article 41 The Act shall be in force from the date of promulgation.