[1] Where a business operator, etc. who completed the registration of multi-level marketing business continues to manage and operate a multi-level marketing organization without being subject to a disposition of revocation of registration after the revocation of registration, whether it may be punished under Article 51 (1) 1 of the former Door-to-Door Sales, etc. Act (negative)

[2] Where a multi-level marketing organization is established, managed, or operated under several corporations without registering multi-level marketing business, and where a person who establishes, manages, or operates a multi-level marketing organization under several corporations conducts business without entering into a consumer damage compensation insurance contract, etc. with each corporation without entering into a consumer damage compensation insurance contract, etc., or imposes an burden on a multi-level marketing salesperson, such as excessive purchase of goods, etc. due to the registration of multi-level marketing salespersons belonging to each corporation,

[1] In light of the contents and purport of Articles 13(1), 42(1), 42(4)1, 2, and 3, 51(1)1, 53(1)10, and 11 of the former Door-to-Door Sales, etc. Act and Article 50 [Attachment 1] of the former Enforcement Decree of the Door-to-Door Sales, etc. Act (wholly amended by Presidential Decree No. 23947, Jul. 10, 2012), even if a business operator, etc. registered as a multi-level marketing business continues to manage and operate a multi-level marketing organization after the revocation of registration under each subparagraph of Article 42(4) of the Act, the multi-level marketing business operator cannot be punished unless he/she is registered as a corrective order under Article 42(1)1, 2, and 3, 51(1)10, and 11 of the Act, or unless he/she is registered as a multi-level marketing organization after the revocation of registration.

[2] In order for a person who intends to operate a multi-level marketing business under a name of several corporations with independent corporate personality to obtain a multi-level marketing registration, the requirements for registration under Article 13(1) of the former Door-to-Door Sales, etc. Act (amended by Act No. 10171, Mar. 22, 2010; hereinafter “the Act”) and the requirements for qualification under Article 14 of the Act shall be met. If a person opens, manages, or operates a multi-level marketing organization under the name of each corporation without registering the multi-level marketing business, a crime of violation of Article 51(1)1 and Article 13(1) of the Act is established by each corporation. In addition, even if a person who establishes, manages, or operates a multi-level marketing organization under a name of several corporations with independent corporate personality bears the burden of purchasing goods, etc. without entering into a consumer damage insurance contract, etc. for each corporation, or a person who violates Article 51(1)2 and Article 13(1)2(1)3)2 of the Act, and Article 5(1)2)3(1)2 of the Act.

[1] Articles 13(1), 42(1) (see, e.g., current Article 49(1) and (4) (see, e., current Article 49(4) and (5)), 51(1)1 and 2 (see, e.g., current Article 58(1)1 and 3), 53(1)10 and 11 (see, e., current Article 60(1)10 and 11 of the former Door-to-Door Sales, etc. Act; Article 50(1) and (4) (see, e.g., current Article 49(4) and (5)); Article 51(1) of the former Enforcement Decree of the Door-to-Door Sales, etc. Act (wholly amended by Presidential Decree No. 10171, Jul. 10, 2012); Article 20(1) [Attachment 1] [see, e.g., current Article 201(1) of the former Door-to-to-Door Act]

Defendant 1 and five others

Defendant 1, Defendant 6, and Prosecutor

Law Firm Hanjin, Attorneys Han Han-soo et al.

Seoul Central District Court Decision 2010No2463 Decided January 13, 2011

The part of the lower judgment against Defendant 1 and Defendant 6’s conviction is reversed, and that part of the case is remanded to the Seoul Central District Court Panel Division. The Prosecutor’s appeal is dismissed.

1. Determination on Defendant 1 and Defendant 6’s grounds of appeal

A. Whether a multi-level marketing organization is managed and operated without registration of multi-level marketing business

(1) The main sentence of Article 13(1) of the former Door-to-Door Sales, etc. Act (amended by Act No. 10171, Mar. 22, 2010; hereinafter “the Act”) provides that “multi-level marketing business entities shall register with the Fair Trade Commission, under the conditions as prescribed by the Presidential Decree, or register with the Special Metropolitan City Mayor, Metropolitan City Mayor, or Do Governor, along with the following documents.” Article 51(1) provides that “any person who falls under any of the following subparagraphs shall be punished by imprisonment for not more than seven years or by a fine not exceeding 200 million won. In this case, if a person falling under any of the following subparagraphs exceeds 200 million won, he/she shall be punished by imprisonment for not more than seven years or by a fine not exceeding three times the total amount of the price of sales or transactions, and Article 13(1)1 provides that “any person who opens and manages a multi-level marketing organization or a person who commits a fraudulent act under Article 13(1)3) or (2)1).”

Meanwhile, Article 42 (1) of the Act provides that a business entity may be ordered to take corrective measures in cases of violations of Article 13 (1) of the Act; and Article 42 (4) of the Act provides that if a violation is repeated despite such corrective measures or fails to comply with such corrective measures, the order may be issued to suspend all or part of such business for a fixed period not exceeding one year, as prescribed by Presidential Decree; however, where a business has been registered under Article 13 (1) of the Act (Article 13 (1) of the Act (Article 13 (1) of the Act subparagraph 1) or where a consumer damage compensation insurance contract, etc. under Article 14 of the Act has been terminated (Article 3) or 34 (1) of the Act has been terminated (Article 42 (4) of the Act; Article 42 (1) of the Act provides that a business entity shall be punished separately for a violation of Article 13 (1) of the former Enforcement Decree of the Door-to-Door Sales, etc. Act (amended by Presidential Decree No. 130647, Jul. 27, 1, 20, 20). 1).

In light of the contents and purport of the above provisions, even if a business operator, etc. who has completed the registration of multi-level marketing business, continues to manage and operate a multi-level marketing organization after the revocation of registration under each subparagraph of Article 42(4) of the Act, insofar as the multi-level marketing organization is not subject to a disposition of revocation of registration after going through the stage of corrective order, business suspension order, etc. pursuant to the above Acts and subordinate statutes, it shall not be punished pursuant to Article 51(1)1 of the Act by deeming that the multi-level marketing organization

(2) According to the reasoning of the lower judgment and the evidence duly admitted, ① A company that registered the multilevel marketing business around April 23, 2002 (hereinafter “non-indicted 1 company”) and the Korea Special Sales Mutual Aid Association notified the competent authority of the suspension of the mutual aid contract for non-indicted 1 company around November 8, 2006, but the competent authority did not take any particular administrative measures against the non-indicted 1 company. ② Defendant 1 acquired the non-indicted 1 company and taken over the non-indicted 1 company as the representative director on March 27, 2007 and took over the non-indicted 1 company as of June 14, 2007, and completed the registration change of the name of the non-indicted 6 company to the non-indicted 1 company and made notification of the closure of the special sales business in the name of the non-indicted 1 company on October 17, 2008; ③ Defendant 1 should complete the multilevel marketing agreement with the non-indicted 21 company and paid the price to the non-indicted 21 company.

The court below held that Defendant 1’s establishment and operation of a multilevel marketing company with Defendant 6, Nonindicted Co. 3 (hereinafter “Nonindicted Co. 3”), and Nonindicted Co. 4 (hereinafter “Nonindicted Co. 4”) after acquiring a multilevel marketing company, which was registered as a multilevel marketing business, constitutes a single company, and thus, it is reasonable to deny the validity of Defendant 1’s registration of the multilevel marketing business with Defendant 6 and Nonindicted Co. 2, a multilevel marketing organization, without registering the multilevel marketing business and having been punished as a violation of the Door-to-Door Sales Act. Accordingly, Defendant 1’s establishment and operation of a multilevel marketing organization with Defendant 6 and Nonindicted Co. 2, a multilevel marketing organization without registering the multilevel marketing business.

(3) However, considering the above facts in light of the legal principles as seen earlier, it is difficult to accept the above judgment of the court below.

Even if Defendant 6’s company’s business operation from November 8, 2006 to October 16, 2008 was not subject to a disposition of revocation of registration, such circumstance alone alone cannot be readily denied the validity of registration, insofar as the registration was not taken, even though it was not due to the failure of the competent administrative agency’s business operation. Defendant 1’s management and operation of Defendant 6 company, a multi-level marketing organization, during the period when the above registration remains effective as representative director of Defendant 6, shall not be punished pursuant to Article 51(1)2 of the Act, deeming that Defendant 1’s management and operation of the multi-level marketing organization, a multi-level marketing organization, is in violation of Article 23(1)12 of the Act (the prohibition of running business without entering into a consumer damage compensation insurance contract, etc.) and may be punished pursuant to Article 51(1)1 of the Act.

In addition, even if Defendant 1 was punished as a violation of the Door-to-Door Sales Act, and thus, Defendant 1 was refused to join the special sales mutual aid association, and was engaged in multilevel marketing business by acquiring Nonindicted 2 company registered as a multilevel marketing business, Defendant 1 was notified of the summary order for the criminal facts of running a multilevel marketing organization without being registered as a representative director of Defendant 6, and Nonindicted 3 company without reporting as a representative director of Nonindicted 3, and thus, it does not constitute grounds for disqualification for multilevel marketing business under each subparagraph of Article 14 of the Act. As long as the registration remains in force without being revoked, the validity of the registration is not denied. Accordingly, Defendant 1’s acquisition of Nonindicted 2 company, a multilevel marketing organization, and management and operation of the multilevel marketing organization during the period in which the registration remains valid, and thus, it cannot be punished pursuant to Article 51(1)1 of the Act.

Supreme Court Decision 2003Do4141 Decided January 15, 2004 cited by the court below is different from this case and it is not appropriate to invoke this case.

Nevertheless, the lower court found Defendant 1 guilty on the grounds stated in its reasoning that Defendant 1’s act of managing and operating the above two companies constitutes a violation of Article 51(1)1 of the Act, and thus, the lower court erred by misapprehending the legal doctrine on the interpretation and application of Articles 51(1)1 and 13(1) of the Act, thereby adversely affecting the conclusion of the judgment. The allegation in the grounds of appeal assigning this error is with merit.

(b) Whether he/she has committed an act imposing excessive burden on the condition of registration, etc. of multi-stage salesmen;

Based on the circumstances stated in its holding, the lower court determined to the effect that a consumer, who purchased goods of not less than 10,000 won but less than 265,000 won and less than 10,000 won and less than 265,000 won, is not in a position to receive such allowance, and thus, it can be deemed that a multilevel salesman bears an burden of not less than 50,000 won per year, such as the purchase of excessive goods, etc., under the condition that multilevel salesman is registered or qualified.

Examining the reasoning of the lower judgment in light of the relevant statutes and the evidence duly admitted, the lower court’s aforementioned determination is justifiable, and contrary to what is alleged in the grounds of appeal, there were no errors by misapprehending the legal doctrine regarding interpretation and application of Articles 53(1)6 and 22(1) of the Act, or by exceeding the bounds of the principle of free evaluation of evidence in violation

(c) Whether it does not constitute multi-level marketing because it does not solicit retail profit;

Defendant 1 recommended that the sales clerks belonging to the above four companies including Defendant 6 can only obtain bonuses and recommended that they may gain retail profits. Thus, the argument in the grounds of appeal that the business method of the above four companies does not constitute multi-level marketing is first asserted in the final appeal, and thus, it cannot be a legitimate ground of appeal. Examining the relevant legal principles and the evidence duly adopted, it can be seen that various allowances, such as bonuses paid by the sales clerks according to the sales of products, include a certain percentage of the sales price and cost (see, e.g., Supreme Court Decision 2011Do1313, Apr. 11, 2013). Thus, the above argument based on the premise that the sales clerks only recommended bonuses and did not recommend retail profits cannot be accepted.

2. Judgment on the grounds of appeal by the prosecutor

Based on the circumstances stated in its reasoning, the lower court affirmed the first instance judgment that acquitted the Defendants and the Defendant 6 on this part of the charges on the ground that it is difficult to readily conclude that the instant transaction did not constitute “the act of fund-raising” as provided by Article 2 subparag. 1 of the Act on the Regulation of Conducting Fund-Raising by Defendants 1, 2, 3, 4, and 5, on the grounds that it is difficult to view that the instant transaction did not constitute “the act of fund-raising without permission” under Article 2 subparag. 1 of the Act on the Regulation of Conducting Fund-Raising without Permission

Examining the reasoning of the judgment below in light of the relevant legal principles and evidence, the above judgment of the court below is just, and there is no error in the misapprehension of legal principles as to the interpretation and application of Article 2 subparagraph 1 of the Act on the Regulation of Conducting Fund-Raising Business without Permission or in violation of the principle of free evaluation of evidence

3. Ex officio determination

A. A person who intends to operate a multi-level marketing business under a name of several corporations with independent legal personality meets the requirements for registration under Article 13(1) of the Act and the requirements for qualification under Article 14 of the Act for each corporation in order to obtain a multi-level marketing registration. If a person opens, manages, or operates a multi-level marketing organization under the name of each corporation without registering the multi-level marketing business by each corporation, the crime of violation under Articles 51(1)1 and 13(1) of the Act is established by each corporation, and the crime of violation is established by each corporation. In addition, even if a person who establishes, manages, or operates a multi-level marketing organization under a name of several corporations with independent legal personality engages in a business without concluding a consumer damage compensation insurance contract, etc. with each corporation, or imposes an burden on the purchase of excessive goods, etc. on each corporation under the conditions of registration or maintenance of qualifications of multi-level marketing operators, the crime of violation of Articles 51(1)2 and 23(1)2 of the Act is established by each corporation.

Meanwhile, Article 254(4) of the Criminal Procedure Act provides that “The facts charged shall be stated clearly by specifying the time, date, place, and method of a crime.” The purpose of the Act that specifies the facts charged is to limit the trial to the court and facilitate the exercise of defense by specifying the scope of defense against the defendant (see, e.g., Supreme Court Decision 2008Do10885, May 14, 2009). In light of the purport of the provision, in a case where multiple crimes constitute a single comprehensive crime, even if they are not specifically specified for each act constituting a single comprehensive crime, it shall be deemed that the crime was established by specifying the whole period, period, method, and total amount of the crimes or damages, and by specifying the victim or the other party (see, e.g., Supreme Court Decision 2010Do17418, Sept. 13, 2012).

B. Of the facts charged in the instant case, Defendant 1, who was in the representative director of Defendant 6, opened and operated a multi-level marketing organization under the control of four companies, including Defendant 6, Nonindicted 2, Nonindicted 3, and Nonindicted 4, and opened and operated a multi-level marketing organization without registering the multi-level marketing business from January 16, 2008 to October 30, 2008. The multi-level marketing organization was established and operated without concluding a consumer damage compensation insurance contract, etc. from March 1, 2007 to October 30, 208 without concluding the consumer damage compensation insurance contract, etc., and had a multi-level marketing organization bear excessive burden, such as purchasing goods, by receiving KRW 265,00 from those who want to be a multi-level marketing salesperson under the condition to register the multi-level marketing organization or maintain their qualification.

The facts charged as above are that Defendant 1 committed a violation of the Act on Door-to-Door Sales, Etc. under the name of the above four companies, and barring special circumstances, such as that some or all of the above four companies did not have an independent legal personality, each of the above four companies constitutes a substantive concurrent relationship. However, this part of the facts charged does not specify the time, period, place, and method of the crime for each of the above four companies, and accordingly does not distinguish the crimes committed under the above four companies.

In particular, as seen earlier, Defendant 6’s registration of multilevel marketing business was maintained until a report on discontinuance of business on October 17, 2008 was made. In the case of Nonindicted Company 2, the registration of multilevel marketing business was revoked around November 12, 2008 and the validity of a mutual-level marketing agreement was maintained until a mutual-level marketing contract is terminated on or around November 3, 2008. After Defendant 1 acquired Nonindicted Company 6 and Nonindicted Company 2, Defendant 1 asserted that Defendant 3 and Nonindicted Company 4 operated only Nonindicted Company 6 and Nonindicted Company 2 without operating the company. However, even if the time, time, place, and method of the crime committed by each of the above four companies are not specified in the facts charged, the court is limited to this part of the facts charged, or the Defendant 1 and Defendant 6’s exercise their right to defense by specifying the scope of defense.

Therefore, if a violation of the Act on Door-to-Door Sales, Etc. by each of the above four companies is in substantive competition and substantive competition, the court below shall examine which part of the facts charged is specified and not specified. On the ground that the prosecution procedure becomes invalid due to the violation of the provisions of the Act, the court below shall dismiss the prosecution in accordance with Article 327 subparag. 2 of the Criminal Procedure Act, and determine whether the specific part is guilty, and then render a sentence accordingly.

Nevertheless, the lower court found all of the charges guilty without properly deliberating on these matters. Therefore, the lower court erred by misapprehending the legal doctrine on the number of crimes in violation of the Door-to-Door Sales Act and the specification of the facts charged, thereby failing to exhaust all necessary deliberations, which affected the conclusion of the judgment.

4. Conclusion

Therefore, among the judgment below, the part of conviction against Defendant 1 and Defendant 6 is reversed, and that part of the case is remanded to the court below for further proceedings consistent with this Opinion. The prosecutor's appeal is dismissed. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Lee In-bok (Presiding Justice)