Defendant 1 and five others

Defendant 1 and one other and the prosecutor

Kim Tae-tae

Law Firm Hanjin et al.

Seoul Central District Court Decision 2008 Godan7199 Decided June 29, 2010

The part of the lower judgment against Defendant 1 and Defendant 6 on each of the violation of the Door-to-Door Sales, etc. Act is reversed.

Defendant 1 shall be punished by imprisonment for one year, and by a fine of 10,000,00 won for Defendant 6 corporation, respectively.

However, with respect to Defendant 1, the execution of the above punishment shall be suspended for two years from the date this judgment becomes final and conclusive.

All appeals filed by the prosecutor against Defendant 2, 3, 4, and 5 and those filed against Defendant 1 and Defendant 6 on violation of the Act on the Regulation of Conducting Fund-Raising Business without Permission are dismissed.

1. Summary of grounds for appeal;

A. Defendant 1 and Defendant 6 corporation

(1) misunderstanding of facts and misapprehension of legal principles

(A) Defendant 1’s establishment or acquisition of a multilevel marketing business is only the same company with the name of Nonindicted Co. 3, Nonindicted Co. 4 (hereinafter “Nonindicted Co. 3”), Nonindicted Co. 2 (hereinafter “Nonindicted Co. 4”), and Defendant 6 Co., Ltd. (hereinafter “Defendant 6”). Defendant 1 left Nonindicted Co. 3 and Nonindicted Co. 4 as document-based company and operated multilevel marketing business only in the name of Defendant 6 and Nonindicted Co. 2. Defendant 6 changed the multilevel marketing business registered on November 8, 2006 (hereinafter “Nonindicted Co. 1”). Thus, even if Defendant 1 opened and operated multilevel marketing business in the name of Defendant 6, it cannot be deemed that Defendant 1 did not establish and operate a multilevel marketing business without registering it. Thus, the judgment below erred by misapprehending the legal principles, or by misapprehending the legal principles.

(B) The purchase of goods worth KRW 265,00 is not a requirement for becoming a member of Defendant 6 and Nonindicted Company 2, but merely a requirement for receiving bonuses and recommendation allowances according to a company’s compensation franchise. Defendant 1 and Defendant 6 did not impose an annual burden of KRW 50,000 or more, including the purchase of excessive goods, on condition of the registration or maintenance of qualifications of multi-level marketing salespersons, and the judgment of the court below which convicted Defendant 1 and Defendant 6 of this part is erroneous by misapprehending the legal principles.

(2) Unreasonable sentencing

The punishment sentenced by the court below (Defendant 1: 2 years of suspended sentence for one year of imprisonment, and Defendant 6: fine of KRW 10 million) is too unreasonable.

(b) Prosecutors;

(1) misunderstanding of facts and misapprehension of legal principles

(A) As to Defendant 1’s non-guilty verdict on the violation of the Door-to-Door Sales, etc. Act due to the establishment and operation of a multi-level marketing organization after July 10, 2008, Defendant 1’s acquisition of Nonindicted Co. 2 by Defendant 1 did not have any substance by way of regular merger or transfer, and thus, Defendant 1’s non-guilty verdict is erroneous in the misapprehension of legal principles or in the misapprehension of legal principles.

(B) Of the facts charged against Defendant 1 and Defendant 6, in relation to the violation of the Act on the Regulation of Conducting Fund-Raising Business without Permission and the acquittal of Defendants 2, 3, 4, and 5, in this case, there was an agreement on principal guarantee in this case, and the judgment of the court below which acquitted Defendant 1 and Defendant 6 on this part, even though it cannot be seen as a normal multi-stage business which is mediating the purchase

(2) Unreasonable sentencing

The sentence sentenced by the court below (Defendant 1: 2 years of suspended sentence for one year of imprisonment, and Defendant 6: fine of KRW 10 million) is too unfluent and unfair.

2. Determination

A. Violation of the Door-to-Door Sales Act, etc. by opening and operating a multi-level marketing organization with respect to Defendant 1 and Defendant 6

(1) Summary of this part of the facts charged

(A) Defendant 1

In order to establish, manage, or operate a multi-level marketing organization, the competent authority shall be registered.

피고인 1은 대구 수성구 (이하 주소 생략) 소재 공소외 4 회사 본사 사무실 및 전국 135개 센터 및 지사 사무실에서 ‘우리 회사는 항균화장품 등 생활용품을 유통비용 없이 판매함으로써 고수익을 창출하는 회사다. 265,000원을 내고 주1) 20만PV 에 해당하는 물품을 구매하면 후원수당과 추천수당을 받을 수 있는 다단계판매원이 될 수 있고, 하위 판매원의 모집 실적에 따라 후원수당 및 추천수당의 액수도 증가할 뿐만 아니라 판매원⇒실버⇒골드⇒에메랄드⇒다이아⇒더블다이아⇒폴라스타’로 직급이 승급되면서 추가로 영업지원금, 사이클수당, 직급공유수당을 지급받을 수 있다‘고 말하여 공소외 4 회사 등 4개 회사의 다단계판매원 등록 또는 자격 유지조건으로 판매원이 되고자 하는 자들로부터 265,000원을 교부받고 주2) , 위와 같은 다단계판매조직을 운영하였다.

However, Defendant 1's multi-level marketing organization operated by the multi-level marketing organization was not registered as multi-level marketing organization.

Accordingly, Defendant 1 operated multi-level marketing business without being registered with the competent authority from January 16, 2008 to October 30, 2008.

(B) Defendant 6 Company

Defendant 6 Company operated multi-level marketing business without registering the business of Defendant 6 with the competent authority, as described in the foregoing paragraph (a), at the time and place described in the foregoing paragraph (a).

(2) The judgment of the court below

The lower court found Defendant 1 and Defendant 6 guilty of all charges with respect to the violation of the Door-to-Door Sales, etc. Act due to the establishment and operation of a multi-level marketing organization without registration from January 16, 2008 to July 9, 2008, and found Defendant 1 not guilty on the grounds of the violation of the Door-to-Door Sales, etc. Act due to the establishment and operation of a multi-level marketing organization after July 10, 2008, but did not render any judgment with respect to Defendant 6.

(3) Judgment of the court below

However, according to the evidence duly adopted and examined by the court below and the court below, Defendant 1 acquired the non-indicted 1 company which had completed the multilevel marketing registration and revoked the registration ex officio on November 12, 2008 on June 11, 2007 by acquiring the trade name of the non-indicted 1 company. The fact that on October 17, 2008, the non-indicted 1 company was changed to "the fact that the change to the defendant 6 company was made, the report on discontinuance of the business was made on October 17, 2008 (the proviso to Article 13 (3) of the Door-to-Door Sales, etc. Act becomes void when the report on discontinuance of the business was made). Defendant 1 acquired the non-indicted 2 company which completed the multilevel marketing registration on May 10, 2008, and the non-indicted 2 company was terminated by the mutual aid contract on November 3, 2008.

On the other hand, if the laws and regulations stipulate that the person who completed registration or reporting should comply with the legal obligations under the name of the non-indicted 10, the act of removing the legislative intent of the non-indicted 2 by formally satisfying the requirements is not registered or reported (see Supreme Court Decision 2003Do4141, Jan. 15, 2004). The non-indicted 2's non-indicted 10 company's non-indicted 6 company's non-indicted 10 company's non-indicted 6 company's non-indicted 8 company's non-indicted 6 company's non-indicted 7 company's non-indicted 6 company's non-indicted 8 company's non-indicted 10 company's non-indicted 6 company's non-indicted 10 company's non-indicted 6 company's non-indicted 4 company's non-indicted 6 company's non-indicted 7 company's non-indicted 6 company's non-indicted 10 company's non-indicted 6 company's non-6 company's non-indicted

In light of the above legal principles and relevant laws, even if a multilevel marketing registration is made in the name of Defendant 6 and Non-Party 2 among the above four companies, it is reasonable to deny the validity of the registration as an act deviating from the legislative intent of the Act on Door-to-Door Sales, Etc. with only a formal requirement. Therefore, as stated in this part of the facts charged, Defendant 1 established and operated a multilevel marketing organization without registration from January 16, 2008 to October 30, 2008. Nevertheless, the judgment of the court below acquitted Defendant 1 on the ground of the violation of the Act on Door-to-Door Sales, etc. by establishing and operating a multilevel marketing organization after July 10, 208, it is erroneous in the misapprehension of legal principles or by misapprehending the legal principles, which affected the conclusion of the judgment. Meanwhile, the prosecutor's ground of appeal pointing this out is without merit, and there is no error in the misapprehension of the part of the judgment below as to Defendant 6's appeal as to the above part of the judgment below.

B. Violation of the Door-to-Door Sales, etc. Act due to Defendant 1 and Defendant 6’s liability to purchase excessive goods, etc. on the condition of registration

In light of the following circumstances acknowledged by the evidence duly adopted and investigated by the court below, namely, Defendant 1's own purchase of goods of more than 265,00 won at least once or cumulatively, the first recommendation allowance and the first bonus, etc. may be paid to the sales force of the company of this case, and the "consumer" who purchased goods of more than 10,000 won and less than 265,000 won and less than 260 won is a person who is not in a position to receive such bonus, the court below's decision that found Defendant 1 and Defendant 6 guilty of this part of the facts charged is just, and this part of this part of this case's argument is reversed on the grounds as seen in paragraph 3 (a) (3) of the above Article, and this part of this part of this case's appeal against Defendant 1 and Defendant 6 is not dismissed separately from the order).

C. Violation of the Act on the Regulation of Conducting Fund-Raising Business without Permission to Defendants

(1) The judgment of the court below

The court below found Defendant 6 not guilty on the ground that it is difficult to view the transaction of this case as the transaction of this case under pre-sale or pre-sale without actual transaction of goods, and thus, it is difficult to conclude that the act of raising funds of this case by Defendant 1, 2, 3, 4, and 5 constitutes an act of fund-raising under Article 2 subparag. 1 of the Act on the Regulation of Conducting Fund-Raising Business without Permission. In addition, Defendant 1’s act by the representative director is difficult to be deemed as the act of fund-raising and it is hard to view it as the act of fund-raising and there is no other evidence to support

(2) Judgment of the court below

In light of the following circumstances acknowledged by the evidence duly adopted and examined by the court below, there are cases where some buyers ordered the goods or ordered the goods in a successive order one week after paying the price of the goods, and the goods are stored in the house, or divided into the neighbors, so it is necessary to actually purchase the goods, and there is room to regard the goods as being provided with support allowances and operating support, rather than the purchase of the goods. In light of the above, it is doubtful that the goods transaction in this case is not intended to escape from the act of fund-raising prohibited by the above law.

However, according to the evidence duly adopted and examined by the court below, the defendants supplied goods at a price equivalent to 30% of the goods by the non-indicted 6 company and supplied them to its members. The 130 kinds of goods supplied as above cannot be viewed as goods without value. Although some members delayed orders, it seems that they did not place orders, but they did not place orders for goods. 3) Even if members choose 5 million won rather than 6 million won and 12 million won more than 12 million won more than 6 million won, the court below's assertion that the above goods are no more than 12 million won more than 6 million won and it is not reasonable to determine that the goods were purchased by the non-indicted 6 company or 12 million won more than 1.8 million won, and it is difficult to find that the above goods were actually purchased by the non-indicted 4 company and the goods were no more than 6 million won more than 6 million won. The reasons for the court below's decision that the goods were actually purchased by the non-indicted 1's company and no more than 12 million won.

3. Conclusion

Therefore, among the violations of the Door-to-Door Sales Act by opening and operating a multi-level marketing organization without registration against Defendant 1, the appeal by the prosecutor on the non-guilty portion is justified, and the part on the violation of the Door-to-Door Sales Act by opening and operating a multi-level marketing organization without registration against Defendant 6 cannot be maintained as it is, since each of the above parts is concurrent crimes with the part on the violation of the Door-to-Door Sales Act, etc., which is found guilty, and one sentence should be imposed on Defendant 1 and Defendant 6 on each of the above parts. Accordingly, the part on the violation of the Door-to-Door Sales Act against Defendant 1 and Defendant 6 should be reversed in its entirety, without further proceeding to decide on the unfair sentencing of Defendant 1, Defendant 6, and Prosecutor pursuant to Article 364(6) of the Criminal Procedure Act (Article 364(2) added to the Criminal Procedure Act with respect to Defendant 6, Defendant 2, 3, and Defendant 4 and Defendant 6, respectively, are dismissed.

The summary of the facts charged and evidence recognized by this court against Defendant 1 and Defendant 6 is as shown in each corresponding column of the judgment below, except that the facts charged by the court below against Defendant 1 and Defendant 6 constitute “not later than July 9, 2008)” as “not later than October 30, 2008,” and thus, they are quoted as it is in accordance with Article 369 of the Criminal Procedure Act.

1. Article relevant to the facts constituting an offense and the selection of punishment;

(a) Defendant 1: Articles 51(1)1, 13(1) (the fact that a multi-level marketing organization has been established and operated without registration) of the Door-to-Door Sales Act, Articles 51(1)2, 23(1)12, and 34 (the fact that a consumer damage compensation insurance contract has been operated without entering into) of the Door-to-Door Sales, etc. Act, Articles 53(1)6 and 22(1) of the Door-to-Door Sales, etc. Act (the fact that a person who intends to become a seller bears the obligation to purchase excessive goods, etc. on the condition of registration) of the Act on Door-to-Door Sales, Etc., and each sentence of imprisonment

(b) Defendant 6 company: Articles 57(1), 51(1)1, and 13(1) (the establishment and operation of a multi-level marketing organization without registration) of the Door-to-Door Sales, etc. Act; Articles 57(1), 51(1)2, 23(1)12, and 34 (the operation of a multi-level marketing organization without entering into a consumer damage compensation insurance contract) of the Door-to-Door Sales, etc. Act; Articles 57(1), 53(1)6, and 22(1) of the Door-to-Door Sales, etc. Act (the person who intends to become a seller bears the duty to purchase excessive goods, etc. on condition of registration)

1. Aggravation for concurrent crimes;

Article 37 (former part), Article 38 (1) 2, and Article 50 of the Criminal Code

1. Suspension of execution;

Defendant 1: Article 62(1) of the Criminal Act (The following circumstances considered favorable to the reasons for sentencing)

In full view of the following circumstances: (a) the nature of each of the instant crimes and the circumstances of the crimes are not provided against others; (b) Defendant 1 has no particular criminal conviction in addition to fines; and (c) the motive and background leading up to each of the instant crimes; (b) the method and consequence of the commission of the crimes; and (c) the circumstances before and after the commission of the crimes, etc., the punishment as ordered shall be determined.

Judges Limited Governing Judge (Presiding Judge) Lee-hee Kim

Note 1) In general, the reference point that is given to the product as the weak of the Company’s internal allowances, on the basis of the payment of the Company’s internal allowances.

Note 2) A total of 9,398 members who have joined the first sale of KRW 265,00 on one day are total of 2,490,470,000.

3) According to the investigation records No. 1073, the number of cases in which 5 million won or more was purchased without specifying the period and 302 won or more due to the lack of proper release, shall be stated as 302 cases. However, in light of the fact that the number of sales of 5 million won or more during the period from March 1, 2007 to November 6, 2008 is 6,785 cases (No. 853 of the investigation records), it shall not be deemed that the above ratio was high, and that the above 302 of the records did not remain permanently without release thereafter.

Note 4) From No. 1 to 3310 as shown in the judgment of the court below