The meaning of Article 44(1) of the former Door-to-Door Sales, etc. Act (amended by Act No. 42) and the meaning of “where it is difficult to prevent damage to consumers only by taking corrective measures” under the former Door-to-Door Sales, etc.

Article 44 (1) (main sentence) of the former Door-to-Door Sales, etc. Act (amended by Act No. 8259 of Jan. 19, 2007) refers to a case where a violation of this Act is repeated despite the corrective measures under Article 42 of the former Door-to-Door Sales, etc. Act (amended by Act No. 8259 of Jan. 19, 2007), and "where it is difficult to prevent damage to consumers only by taking corrective measures" refers to a case where an order to suspend all or part of the business or impose a penalty surcharge on behalf of the extraordinary sales business operator for the purpose of preventing damage to consumers is valid and appropriate means of punishment. In such case, even if the extraordinary sales business operator was ordered to take corrective measures under Article 42 of the former Door-to-Door Sales Act, it does not require that the violation of this Act is repeated.

Article 44(1) of the former Door-to-Door Sales, etc. Act (amended by Act No. 8259 of Jan. 19, 2007)

Plaintiff (Attorney Han-soo et al., Counsel for the plaintiff-appellant)

Fair Trade Commission (Attorney Noh Byung-hee, Counsel for defendant-appellant)

Seoul High Court Decision 2007Nu8272 decided Oct. 31, 2007

The appeal is dismissed. The costs of appeal are assessed against the plaintiff.

The grounds of appeal are examined.

1. As to whether the requirements for a penalty surcharge payment order are met

Article 44 (1) of the former Door-to-Door Sales, etc. Act (amended by Act No. 8259 of Jan. 19, 2007; hereinafter the "Door-to-Door Sales Act") provides that "If a special sales business entity repeatedly commits a violation of this Act despite the corrective measures under Article 42, or it is deemed difficult to prevent damage to consumers only by taking corrective measures, the Fair Trade Commission may order the special sales business entity to suspend all or part of its business for a specified period not exceeding one year, or impose a penalty surcharge on the special sales business entity in lieu of such order within the scope not exceeding the sales amount related to such violation as prescribed by the Presidential Decree." In this context, "revit a violation of this Act despite the corrective measures under Article 42," means a repeated violation of this Act even if the special sales business entity received the corrective measures under Article 42 from the Fair Trade Commission, and on the other hand, "where it is difficult to prevent damage to consumers only by taking into account the matters provided for in Article 44 (2) of the Door-to-Door Sales Act."

According to the facts and records acknowledged by the court below, the plaintiff committed a violation of the law such as payment of bonuses from January 1, 2004 to December 31, 2004, but again committed a violation of this Act during the period from January 1, 2005 to December 31, 2005, and the plaintiff continued to commit a violation of this Act during the period from January 1, 2004 to December 31, 2005, and the exceeding payment rate of bonuses from January 1, 2004 to December 31, 2004 is 44.93%, and it is reasonable to view that the court below erred in the misapprehension of legal principles as to the above corrective measures against damages to consumers, since it was 57.95% from January 1, 205 to December 31, 2005. The plaintiff's ground for appeal is justified.

2. Whether the criteria for calculation of penalty surcharge are legitimate;

The court below determined that the amount of the penalty surcharge of this case is legitimate as an act within the defendant's discretion, in light of the following facts: (a) the plaintiff, as of the end of 2004, had a 5-class market share among multi-level marketing enterprises as of the sales volume of approximately 140 billion as of the end of the year 2004; (b) the plaintiff's act of paying bonus in excess of the ratio of the sales volume of multi-level marketing enterprises to attract mass purchase of multi-level marketing enterprises; and (c) it appears that the plaintiff raised sales volume exceeding 90 billion won during the period of the violation and obtained considerable profits therefrom; and (d) the previous corrective measures were taken after January 1, 2004 to December 31, 204, including the act of paying bonus in excess of the ratio of the payment rate of bonuses, etc., even if the plaintiff's sales decrease considerably after the date of the previous corrective measures, considering the scale of previous sales volume, etc.

According to the records, the above judgment of the court below is just, and there is no error in the misapprehension of legal principles as to the criteria for calculation of penalty surcharge.

3. Conclusion

Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Shin Young-chul (Presiding Justice)