[1] Whether a multi-level marketing business entity may be punished for establishing and operating a multi-level marketing organization without registration under Article 58 subparag. 1 of the former Door-to-Door Sales Act in a case where the multi-level marketing business entity submitted a report on the change of trade name and revised trade name before its repair is performed (negative)

[2] The meaning of "act of paying economic benefits to the recruitment itself of the subordinate seller" under Article 45 (1) 11 of the former Door-to-Door Sales Act

[3] The case holding that if a multi-level marketing business operator paid allowances to superior sellers only when there are sales records of assistant multi-level marketing business operators, this shall be deemed to have paid support allowances under the former Door-to-Door Sales Act, and it shall not be deemed to have provided economic benefits to assistant multi-level marketing operators

[4] The meaning of the act of fund-raising under Article 3 of the Act on the Regulation of Conducting Fund-Raising Business without Permission

[5] In a case where a multi-level seller puts an advertisement that is likely to mislead a person who wishes to become a multi-level salesman to have medical efficacy, efficacy, and effect on non-pharmaceutical products while providing education to the person who intends to become a multi-level salesman, whether the seller may be punished as a violation of the

[1] Article 28(1) and Article 58 subparag. 1 (see current Article 13(1) and Article 51(1)1 of the former Door-to-Door Sales, etc. Act (amended by Act No. 6688 of Mar. 30, 2002) / [2] Article 45(1)11 (see current Article 23(1)4) of the former Door-to-Door Sales, etc. Act (amended by Act No. 6688 of Mar. 30, 2002) / [3] Article 45(1)11 (see current Article 23(1)4) of the former Door-to-Door Sales, etc. Act (amended by Act No. 6688 of Mar. 30, 2002) / [4] Article 2 subparag. 11 of the former Door-to-Door Sales, etc. Act (amended by Act No. 66888 of Mar. 11, 2002)

[2] Supreme Court Decision 98Do882 delivered on August 21, 1998 (Gong1998Ha, 2369) / [5] Supreme Court Decision 2003Do7911 delivered on June 11, 2004 (Gong2004Ha, 1194)

Defendant 1 and 18 others

Defendants et al.

Attorneys Noh Woo-woo et al.

Seoul High Court Decision 2002No2136 delivered on April 8, 2003

All appeals by the Defendants and the Prosecutor are dismissed.

1. Judgment on the grounds of appeal by the prosecutor

(a) Violation of the Door-to-Door Sales Act (Defendant 1-4, 6-19);

(1) The establishment and operation of a multi-level marketing organization without registration

Article 28(1) and (3) of the former Door-to-Door Sales Act (amended by Act No. 6688 of Mar. 30, 2002) provides that a person who intends to operate a multi-level marketing business shall file an application stating the name and address of the Mayor/Do Governor, the name of his/her representative, etc. shall be registered with the Mayor/Do Governor. Article 28(4) of the same Act provides that a multi-level marketing business operator shall require the Mayor/Do Governor to report to the Mayor/Do Governor as prescribed by Ordinance of the Prime Minister when the matters registered under paragraphs (1) through (3) are modified by Ordinance of the Prime Minister. Article 17 of the Enforcement Rule of the same Act (amended by Ordinance of the Prime Minister No. 739 of Sep. 14, 2002) provides that a person who intends to report shall submit a modified document evidencing the change within 10 days from the date of the change in the matters, and Article 58 subparag. 1 of the same Act provides that a person who establishes and operates a multi-level marketing business without registration shall be accepted within 80 days.

The court below held that the above defendants engaged in multi-level marketing business in the name of the main co-modal network, which caused the multi-level marketing business to be suspended, and the trade name of Healing World (registration as multi-level marketing business operator on January 21, 2002) was changed to the reason network on January 21, 2002, submitted a mutual change report to the Mayor of Seoul Special Metropolitan City on February 17 of the same year, and re-level marketing business was commenced with the trade name of the reason network from February 17 of the same year to February 21 of the same year, the above defendants already registered as multi-level marketing business operator even during the period from February 19 to February 21 of the same year. Thus, the court below reversed this part of the facts charged and acquitted the above defendants. It did not err in the misapprehension of legal principles as to the registered matters of multi-level marketing business operator, as otherwise alleged in the ground of appeal.

(2) The fact that the recruitment of assistant multi-stage salesmen itself is paying economic benefits

In a case where a multi-level marketing operator purchases or sells goods by a multi-level marketing operator, a multi-level marketing operator, and a multi-level marketing operator paid allowances within the statutory limit for the sales amount, it shall be included within the scope of allowances permitted to be paid to multi-level marketing operators under the Door-to-Door Sales, etc. Act. In a case of general, even if a multi-level marketing operator's purchase or sale of goods at the time of joining a multi-level marketing operator causes the payment of the amount to multi-level marketing salesmen, the amount does not constitute an economic interest in recruitment itself (see Supreme Court Decision 98Do882, Aug. 21, 199

In full view of the admitted evidence, the court below acknowledged the facts as stated in its holding, and held that the above defendants paid allowances to high-ranking sellers only when there are actual sales records of assistant multi-stage salesmen, and thus, it cannot be deemed that they provided economic benefits to the recruitment itself, and there is no circumstance to deem that the sales performance required as a premise to pay the above allowances has been determined formally in order to avoid the legal provision, it is just to maintain the judgment of the court of first instance that acquitted the above facts in this part of the charges, and there is no error in the misapprehension of legal principles as to "the act of paying economic benefits to the recruitment of assistant multi-stage salesmen itself" as otherwise alleged in the ground

B. Violation of the Act on the Regulation of Conducting Fund-Raising Business without Permission (Defendant 1, 6-10, 12, 15, 16)

Article 3 of the Act on the Regulation of Conducting Fund-Raising Business without Permission or Approval under the related Acts and subordinate statutes provides that "the act of importing investment money to the future by promising to pay the whole amount of investment money or an amount exceeding it" as one of the acts of fund-raising business without permission or approval. Thus, the legislative intent of regulating fund-raising business without permission or approval under the related Acts and subordinate statutes lies in protecting good customers and establishing sound financial order. Thus, in light of the meaning of the term "contribution" under the legislative purport or the provisions of the Act on the Regulation of Conducting Fund-Raising Business without Permission or Approval, it is difficult to regard the revenue of fund-raising business through the transaction of goods as the revenue of fund-raising business, and thus, it can be viewed as an act of fund-raising without permission under the Act only if it can be viewed as a revenue of fund-raising business without the transaction of goods.

The court below is just in maintaining the judgment of the court of first instance which acquitted this part of the facts charged on the ground that the sales right marketing of this case is promoting transfer marketing, saving advertising expenses, distribution expenses, etc., and it does not seem that the transaction of the goods does not intend to disguise the revenue of the investment, and it does not constitute an error of law by misunderstanding facts due to a violation of the rules of evidence or misunderstanding of legal principles as to the act of receiving similar goods, as otherwise alleged in the ground of appeal.

2. Judgment on the Defendants’ grounds of appeal

(a) Violations of the Pharmaceutical Affairs Act (Defendant 1, 2, 4, 6-10, 12-17);

In light of the adopted evidence, the court below acknowledged that the above defendants introduced and sold e-cars, scams, etc. to multi-stage salesmen at the office of the main reason network, and caused the above defendants to advertise that the above health-subsidized foods have efficacy and effect on chronic livers, high blood pressure, thalvosiss, scopic scopic scopic scopic scopic scopic scopic scopic scopic scopic scopic scopic scopic scopic scopics, etc.

Examining the reasoning of the judgment below in light of the records, the fact-finding and judgment of the court below are just, and there is no error in the misapprehension of legal principles as to the facts against the rules of evidence or the co-principal.

Meanwhile, Article 31 of the former Door-to-Door Sales Act provides that when a multi-stage seller intends to enter into a contract with a multi-stage salesman or consumer, the multi-stage seller or consumer becomes the counterpart of the transaction. Thus, in cases where a multi-stage seller conducts education on the efficacy and effectiveness of the product sold to a person who wishes to become a multi-stage salesman, and where a multi-stage seller puts an advertisement that is likely to mislead the person who wishes to become a multi-stage salesman to believe that the product has medical efficacy and effect, etc. even if the product is not a medicine, it is not merely internal education, but it is not merely a multi-stage seller, but also a party to the transaction of the product purchased the product from a multi-stage seller. Thus, in such a case, Articles 74(1)1 and 55(2) of the Pharmaceutical Affairs Act, which are punished for the act that is not a medicine, may be mistaken as having medical efficacy and effect (see Supreme Court Decision 2003Do711, Jun. 11, 2004).

In the same purport, the court below is just in maintaining the judgment of the court of first instance which found the defendant guilty of this part of the facts charged, and there is no error of law by misapprehending the legal principles as to Article 55 (2) of the Pharmaceutical Affairs Act

(b) Violation of the Securities and Exchange Act (Defendant 1, 2, 5)

In full view of the adopted evidence, the court below affirmed the judgment of the court of first instance which found the above defendants guilty of this part of the charges on the grounds that the above defendants can sufficiently recognize that they engaged in the brokerage business of selling and buying securities without obtaining permission from the Financial Supervisory Commission. In light of the records, the court below's findings of fact and decision are just, and there is no error of law by mistake

C. Part of occupational embezzlement (Defendant 1)

The court below, after compiling the adopted evidence, found the facts as stated in the judgment, and affirmed the judgment of the court of first instance which found the defendant guilty of this part of the facts charged on the ground that the defendant's main capital was in the position of custodian of the above money because he formed a e-sports club and received 300,000 won of annual fees as admission fees and kept them for the operation of the e-sports club, and that the defendant used the funds to be used for the operation of the e-sports club to pay his own personal debts and thus the intent of illegal acquisition can be sufficiently recognized. In light of the relevant legal principles and records, the court below's fact-finding and decision are just, and there is no error of law by misunderstanding the legal principles as to the status of custodian or intent of illegal acquisition due to misconception of facts against the rules of evidence

3. Conclusion

Therefore, all appeals by the Defendants and the Prosecutor are dismissed. It is so decided as per Disposition by the assent of all participating Justices.

Justices Shin Hyun-chul (Presiding Justice)