Law Articles
2025-10-29
MLM
Exploring the Potential Role of AI Technology in the Direct Selling Industry
【Partner Lawyer Charlotte Wu/ Lawyer Dan Yang, Zhong Yin Law Firm】
charlotte.wu@zhongyinlawyer.com.tw
charlotte.wu@zhongyinlawyer.com.tw
The sudden emergence of ChatGPT[1] in November 2022 has seen productivity tools incorporating artificial intelligence (hereinafter "AI") deeply integrate into people's lives, becoming a key force in changing industrial structures. From word processing software and project management tools to even mobile devices, AI technology is undoubtedly gradually permeating our daily lives. Amidst this wave of innovation, the direct selling industry, often seen as an arena for face-to-face communication and personal charisma, is also quietly undergoing changes. In this article, the authors will explore how AI can exert its unique power in the direct selling field, not only as a tool but potentially as a force that could change the rules of the game.
AI technology is widely used in various productivity tools to enhance people's productivity and is also applied in commercial systems, such as automating customer service and building personalized recommendation systems through automated analysis of customer data. AI technology is also playing an increasingly important role in the direct selling industry, and with the application of these technologies come new legal challenges.
This article will explore these issues not only from a technical perspective but also from the viewpoint of the direct selling industry, examining the potential and challenges of AI technology and observing how this technological revolution is shaping the future of the industry.
Potential Applications of AI Technology in the Direct Selling Industry
1. Assistance in Marketing Promotion and Product Sales
(1) AI technology can more efficiently assist direct sellers in marketing promotion. For example, through prompt input, AI can quickly generate copywriting that aligns with the business model characteristics of specific direct selling companies or provide response strategies and sales scripts for different sales scenarios, based on descriptions of the company's organization and product features. Furthermore, through AI algorithm analysis of the content, it can help ensure compliance with relevant advertising language regulations[2], enabling direct sellers to quickly master sales techniques, increase sales volume, and expand their organizational scale.
(2) AI technology can also assist direct selling companies in precisely targeting their advertising audiences through big data analysis, improving the efficiency of advertising expenditure, and enhancing promotional effectiveness.
(3) AI technology can provide 24/7 uninterrupted customer service, instantly answering questions from direct sellers or potential participants, and offering services such as product recommendations, thereby enhancing customer satisfaction through concise and immediate customer support.
2. Customer Management and Downline Guidance
(1) AI technology can be used to analyze customer data, enabling direct selling companies to understand customer needs and behavioral patterns, and to provide products or services that are more closely aligned with market demands and feedback.
(2) Direct selling companies can also use AI technology to integrate customer data, sales records, and other information, compiling it into data with business operational significance to help direct selling companies understand each customer's situation in developing their organization or expanding their business, and provide timely assistance. Direct sellers themselves can also use AI tools to analyze the status of their downline members, understand organizational coaching needs, and implement corresponding coaching measures, such as teaching sales techniques. Multi-level marketers can, with the assistance of AI technology, identify pain points in organizational development and product service sales, and provide appropriate parameters and suggestions, which helps expand organizational scale and boost sales performance.
3. Other Potential Application Scenarios
(1) Direct selling companies can use AI technology to analyze the market and build predictive models. By applying these models, direct selling companies can develop more effective marketing strategies.
(2) Direct selling companies can use AI technology to establish fraud prevention systems to protect the rights and interests of direct sellers and consumers.
From the above, the application scenarios of AI technology can assist direct sellers in many aspects, and relevant application cases have begun to emerge in practice. For example, some direct selling companies use AI big data and computing functions to understand and analyze customers' skin conditions through questionnaires and database content, providing personalized skincare solutions. This helps direct sellers understand customer needs and improves product service quality and organizational cohesion. In other words, through AI technology, direct selling companies can understand customer needs, provide suitable products, and simultaneously enhance the service quality of direct sellers. If AI technology is properly utilized, it will trigger more business opportunities and social cohesion in the direct selling industry.
Advantages and Challenges of AI Technology
As mentioned above, the advantage of AI technology lies in automating tedious tasks that originally relied on human labor, thereby improving productivity and efficiency, and also helping direct selling companies reduce labor and management costs. At the same time, AI enhances customer satisfaction by providing more personalized customer service. Besides facing customers, AI technology can also assist direct selling companies in designing reward mechanisms that align with their market strategies, while maximizing the benefits for both direct selling companies and direct sellers.
However, in addition to the advantages mentioned above, AI technology still has the following challenges and considerations that users should pay attention to:
1. Limitations caused by AI technology
Although current AI can generate responses in real-time based on user prompts, its nature as a language model means that the generated content may not be timely or accurately respond to user questions due to data not being the most current, thus making it unable to provide results that meet user needs.
Additionally, AI may produce potential inaccuracies or even biases[3] due to its training data content, thereby exacerbating ethnic and gender biases. Adopting AI-generated content with biases may also lead to many social issues. For example, in image-generating AI applications, when AI is asked to create images of professional occupations, the generated results typically depict older people as men, which is considered to reinforce existing gender stereotypes[4]. Therefore, how to prevent AI from generating biases in the future still depends on the industry's own ability to interpret the data sources and generated content of the AI they use, as well as the development of related AI ethical norms.
2. Personal Data Protection
Current common AI technology applications involve training language models by collecting relevant data to provide users with valuable data and generated content. For instance, direct selling companies using AI technology to understand the status of customers and direct sellers' product usage typically need to understand users' backgrounds, including information such as gender, age, education, occupation, and social activities. This data falls under the definition of "personal data" as stipulated in Article 2 of the Personal Data Protection Act[5]. Furthermore, AI technology usually collects large amounts of such data to create "personal data files" that can be retrieved and organized in an automated or non-automated manner. Therefore, according to the provisions of the Personal Data Protection Act, direct selling companies have an obligation to inform data providers of the purpose, period, method, and other information regarding the collection, processing, and use of personal data.
Since direct selling companies collect, process, and use large amounts of users' personal data to compile them into personal data files, they must, in accordance with Article 27 of the Personal Data Protection Act, adopt appropriate security measures to prevent personal data from being stolen, tampered with, damaged, lost, or leaked. They must also comply with the personal data file security maintenance plans[6] or personal data handling methods after business termination, as designated and formulated by the competent central authorities. In response to the frequent occurrence of personal data breach cases in recent times, the Personal Data Protection Act was amended in May 2023 to increase penalties for data leakage[7]. This represents a legal risk that direct selling companies collecting, processing, and using personal data should prioritize in their management. In the course of adapting to the development of AI technology, whether there will be special regulations concerning issues such as privacy, data governance, and personal data protection remains to be seen, and we must pay attention to future regulatory developments.
3. Market Competition
As AI plays an increasingly important role in market competition in the future, it will change the way companies compete and also bring challenges to the issue of fair markets. For example, the application of AI technology relies on immense computing power. Companies with advanced AI technology or those that can afford such costs can gain a leading advantage in the market, which in turn raises the risk of market monopolization and may limit the innovation and diversity of small and medium-sized enterprises. Therefore, how to prevent companies from using AI technology to abuse their market position or engage in other forms of unfair competition is one of the issues that future regulatory authorities should address.
4. Protection of Consumers and Direct Sellers
As mentioned in the previous issues, consumer protection is also closely related to the aforementioned issues. Business operators who use AI technology to provide products or services should ensure that their products or services do not infringe on consumer privacy protection or other rights due to the use of AI technology, and ensure that their products or services meet the safety that can be reasonably expected by the current technology or professional standards. Attention should also be paid to avoiding biased results caused by AI technology, which may lead to direct sellers giving preferential treatment to specific individuals, thereby reducing the interests of other direct sellers and violating the Multi-level Marketing Management Act.[8]
Conclusion
From the above discussion, we have explored the potential impacts and roles of AI technology in the direct selling industry. From improving marketing efficiency, enhancing customer service to strengthening market analysis, AI technology undoubtedly brings many advantages to the direct selling industry. Through automation and data analysis, direct sellers can more accurately target customer needs and provide personalized services, thereby improving customer satisfaction and sales performance. At the same time, AI technology also helps direct selling companies optimize organizational management, strengthen communication and collaboration among direct sellers, and further consolidate the cohesion of the direct selling network.
However, the application of AI technology also comes with a series of challenges, including issues such as data privacy protection, algorithmic bias, and fairness in market competition. While enjoying the convenience brought by AI, direct selling companies must also actively address these challenges to ensure the responsible use of technology. The protection of personal data is particularly important, and direct selling companies must strictly comply with relevant laws and regulations, implementing appropriate security measures to prevent the risk of data breaches.
Furthermore, to maintain fair market competition and prevent AI technology from becoming a tool for market monopolization, relevant regulatory authorities should strengthen supervision over AI technology applications and establish clear guidelines and regulations. At the same time, direct selling companies should actively explore how to leverage AI technology to promote innovation while ensuring all participants can benefit fairly, avoiding the use of AI technology to exacerbate market inequality.
In summary, AI technology has brought unprecedented opportunities to the direct selling industry, but it has also introduced numerous challenges. In the future, direct selling companies, governments, and all sectors of society must work together to ensure the responsible use of AI technology, enabling it to bring sustainable and comprehensive development to the direct selling industry without compromising consumer rights and market fairness.
[1] Coincidentally, Google launched its conversational AI model Ultra 1.0 on February 8, 2024, designed to assist users with challenging productivity tasks such as writing code, logical reasoning, and even creative writing. Reference source: Bard Evolves to Gemini: Try Ultra 1.0 and the New Mobile App, https://taiwan.googleblog.com/2024/02/bard-becomes-gemini.html, last accessed: February 17, 2024.
[2] For example, Article 28 of the Food Sanitation Act and Article 10 of the Cosmetics Sanitation Act stipulate that advertisements must not be false, exaggerated, or involve claims of medical efficacy.
[3] This bias may arise in the initial training data, the algorithm itself, or the predictions generated by the algorithm. Reference: Shedding light on AI bias with real world examples, IBM, https://www.ibm.com/blog/shedding-light-on-ai-bias-with-real-world-examples/, last accessed: February 17, 2024.
[4] Ibid.
[5] Personal data as defined in Article 2 of the Personal Data Protection Act refers to: "Personal data: means the name, date of birth, national ID number, passport number, physical characteristics, fingerprints, marital status, family background, education, occupation, medical history, medical records, genetic information, sexual life, health examination results, criminal records, contact information, financial status, social activities, and other information of a natural person that can directly or indirectly identify that individual." A personal data file is defined as: "A personal data file refers to a collection of personal data established in a systematic manner that can be retrieved and organized by automated means or other non-automated methods."
[6] The Fair Trade Commission, the central competent authority for the direct selling industry, has established the "Regulations for Multi-level Marketing Enterprises to Establish Personal Data File Security Maintenance Plans and Personal Data Handling Methods after Business Termination" in accordance with the law.
[7] The Fair Trade Commission, as the central competent authority for the direct selling industry, has established the "Operational Procedures for the Development of Personal Data Security Maintenance Plans and the Handling of Personal Data Following Business Termination by Multi-Level Marketing Enterprises" in accordance with the law.
The amended Article 48 of the Personal Data Protection Act revises the penalty method and amount for non-governmental agencies violating security maintenance obligations. It now mandates direct penalties alongside corrective orders, while raising the maximum fine to between NT$20,000 and NT$2 million. For serious violations, fines range from NT$150,000 to NT$15 million.
[8] Article 19 of the Multi-Level Marketing Management Act: "Multi-level marketing enterprises shall not engage in the following acts: (4) Granting preferential treatment to specific individuals in a manner that violates their marketing plan or organizational structure, thereby diminishing the interests of other distributors."