The Purpose of the Act on Door-to-Door Sales, etc.
The purpose of this Act is to protect the rights and interests of consumers and raise market confidence by providing for matters regarding fair transactions of goods and services through Special-type Sales, such as door-to-door sales, telemarketing, multi-level marketing, recurring transactions, transactions for soliciting business, etc.
“Special-type Sales” means selling products and services to customers as a seller or marketer actively going out and searching for customers and not just waiting for customers to come. Though customers enjoy the convenience of purchasing products and services without visiting stores, they are comparatively more likely to suffer unexpected damages as compared with regular sales transactions. Consumers do not have enough time to think about products or services and have much less knowledge on the relevant products or services; hence sellers take the initiative in business talks. Under such circumstances, sellers often give coercive, false or exaggerated explanations to customers, and consequently consumers may suffer damage. This is the reason why Special-type Sales should be regulated.
6 Key Types of Door-To-Door Sales
Door-To-Door Sales: A business model in which a person sells goods or services by soliciting consumers at anyplace, other than his/her sales office, distribution shop, or other place of business.
Telemarketing: A business model in which products or services are sold by receiving contract subscriptions from consumers or by entering into a contract with consumers after soliciting consumers by telephone.
|Consumer Protection Measures||
Right to withdraw subscription
Prohibition of sellers from soliciting or trading with a consumer by making a false or exaggerated representation or by using any fraudulent means
Obligation to provide information to consumers before concluding a contract
Obligation of sellers to file a report
|Multi-Level Marketing,Door-To-Door Sales Under Sponsorship||Definition||
A business model in which sales companies encourage their existing distributors to recruit new distributors as their affiliate distributors. Distributors are structured on at least three levels or more, and compensated not only for the sales they personally generate, but also for the sales of their affiliate distributors.
|Consumer Protection Measures|
Obligation to register
Ceiling on the total amount of bonuses that can be given to a salesperson
Prohibition on inducing a prospective multi-level marketing salesperson or a multi-level marketing salesperson to buy goods or services excessively.
|Recurring Transactions,Transactions for Soliciting Business||Definition||
Recurring Transactions: A business model in which a customer must enter into a subscription contract to be provided with a product or service during a period of at least one month.
Transactions for Soliciting Business: A business model in which customers are solicited to purchase products by arranging or providing a business opportunity to them.
|Consumer Protection Measures||
Consumers’ right to cancel a contract
Ceiling on the amount of premature termination penalty.
Disclosing the Information of the Businesses
The KFTC discloses the information of door-to-door sales businesses and multi-level marketing businesses, so that consumers can make informed choices. The information includes sales figures, the number of salesperson, information of bonuses paid out to salespersons.
Imposing Corrective Measures and Sanctions Against the Violation of the Act on Door-to-Door Sales, etc.
Where a business entity violates the Act on Door-to-Door Sales, etc., the KFTC may issue a corrective order, order to publish the fact that the entity received a corrective order, or impose penalty surcharges, on the business entity. Also the KFTC may file a criminal charge against the business entity or its employees.
- The KFTC compares and analyzes the disclosed information of multi-level marketing businesses, etc. and reports from municipal governments to monitor violations, such as the bonus payments to salespersons and sales of goods and services at excessive prices.
Together with mutual aid associations, which rewards those who report law violating practices of multi-level marketing businesses, the KFTC monitors unregistered illegal multi-level marketing businesses. the KFTC also requests police investigation over unregistered businesses.
- Illegal issuing a pocketbook for salespersons of Korea Hanbaek
ㅇ The KFTC imposed sanctions against a multi-level marketing business, Korea Hanbaek, for a violation of the Act on Door-to-Door Sales, etc. (Nov. 2016).
- The KFTC imposed a 444 million won penalty surcharges and filed a criminal charge against Korea hanbaek for paying bonuses to salespersons beyond the amount prescribed in the act, and issuing a pocketbook, for salespersons, without all the legally required information for the pocketbook, etc.
ㅇ The KFTC imposed sanctions against a multi-level marketing business, NRCommunication, for a violation of the Act on Door-to-Door Sales, etc. (Dec. 2016).
- The KFTC issued a corrective order, imposed a 1.75 billion won penalty surcharges and filed a criminal charge against NRCommunication for paying bonuses to salespersons beyond the amount prescribed in the act, and making an actual monetary transaction in disguise of a transaction of goods or services.
Supervising Mutual Aid Associations
According to the Act on Door-to-Door Sales, etc., when a mutual aid association intends to implement a mutual aid program, it shall establish articles of incorporation and regulations on the mutual aid program and shall obtain authorization therefor from the KFTC. The same procedure shall also apply when it is intended to amend the articles of incorporation and regulations on a mutual aid program.
- In cases where a consumer asks for refund after purchasing products from a multi-level marketing company but the company refuses, the consumer may ask the mutual aid associations to pay the refund.
If deemed necessary, the KFTC may order a mutual aid association to submit a report on the mutual aid association's business or accounting, or to take other necessary measures. The KFTC may also authorize the KFTC's public officials to examine the current status of business or accounting of a mutual aid association or to inspect the mutual aid association's account books or other documents.
Providing Customized Promotion and Education for Consumer Damage Prevention
The KFTC runs educational programs for municipal government officials in charge of consumer damage prevention.
The KFTC organizes promotional activities and on-site educational programs, in cooperation with relevant ministries, for college students, graduates, and the elderly.
The KFTC coordinates workshops for public officials at municipal governments, employees at relevant organizations, and academic experts to discuss issues in door-to-door sales, etc.