The Korea Fair Trade Commission (KFTC) has initiated a settlement process for Unicity Korea, which is accused of bypassing commission limits for multi-level marketing agents. This decision follows the company's proposal for self-correction measures, including improvements to its commission payment system and an extension of the consumer return period. This marks the first time the KFTC has decided to commence such a procedure since the introduction of the settlement system under the Direct Selling Act.
On October 21, the KFTC announced that it accepted Unicity Korea's application for a settlement regarding alleged violations of the Direct Selling Act. The settlement process allows businesses accused of legal violations to voluntarily propose corrective measures aimed at remedying harm and improving transaction order, enabling the KFTC to conclude the case without determining the legality of the actions.
The core issue in this case is whether Unicity Korea's payment of commissions to domestic multi-level marketing agents through its U.S. headquarters constitutes a bypass of the legal payment limits. According to Article 20, Section 3 of the Direct Selling Act, the total amount of commissions that a multi-level marketing business can pay to agents cannot exceed 35% of the sales revenue from goods supplied to those agents.
The KFTC has been investigating Unicity Korea's actions after the company changed the affiliation of its top agents to Unicity International, its U.S. headquarters, which then paid commissions to those agents. If the commissions paid by the U.S. headquarters are included in Unicity Korea's total commission payments, it would exceed the legal limit from 2021 to 2024.
However, a civil court in the second instance handling a related case ruled that the commissions paid by the U.S. headquarters could not be viewed as a circumvention of regulations by Unicity Korea. The prosecution also decided not to pursue charges on the grounds that it did not constitute a bypass.
In light of this, Unicity Korea opted to apply for a settlement rather than continue to contest the legal judgment, stating its intention to improve its commission payment system and enhance cooperation with agents and consumers. The proposed corrective measures include registering agents affiliated with the U.S. headquarters under Unicity Korea.
The company also plans to adjust the point value (PV) of major products and their prices to comply with the commission payment limit and establish a monitoring committee to oversee payment statuses.
Additionally, Unicity Korea has proposed consumer protection measures, including extending the return period for consumers from the current 20 days to three months. The company will conduct compliance training for agents and local customer support centers and enhance the functions of its agent consultation center. It will also provide information on preventing illegal multi-level marketing through its website for three days each month and improve its IT systems for agent convenience.
The KFTC has determined that these proposals meet the initial requirements for commencing the settlement process.
The settlement system under the Direct Selling Act was introduced following a legal amendment in January 2022 and has been in effect since July of that year. This is the first case to initiate such a procedure since the system's introduction. According to relevant laws, the KFTC must prepare a provisional settlement plan and provide stakeholders with an opportunity to submit opinions for a period of at least 30 days. The final plan will be confirmed after review and approval by the commission, and failure to implement the approved corrective measures without justifiable reasons may result in penalties.
The KFTC stated, "We will work with Unicity Korea to prepare a specific provisional settlement plan and conduct stakeholder consultations and discussions with relevant agencies. The final plan will be presented to the commission for a decision on whether to confirm the settlement."
* This article has been translated by AI.
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