Contract Procedures

Ordianaces

A MLM company must agree to one of the followings
(Article 34 Paragraph 1 of DDSA)

 

  1. 1. Consumer damage compensation insurance
  2. 2. Guarantee contract with financial organizations to secure consumer damage compensation
  3. 3. Contract with the Mutual Aid Cooperative

 

A direct selling company may establish mutual aid cooperatives with the authorization of Korea Fair Trade Commission in order to guarantee the mutual aid businesses, including the insurance for consumer damage compensation. (MAC&CO was authorized by Korea Fair Trade Commission on December 13, 2002)

Procedure of Contact

  1. 1. The company that intends to sign a contract with the mutual aid cooperative needs to establish a mutual aid limits and submit
       application to the cooperative with other required documents within one week before the starting of mutual aids.
  2. 2. The company must undergo an audition process with Article 1 and must establish a real-time guarantee system.
  3. 3. The mutual aid cooperative must decide the qualification of the application by considering the documents of Article 1, the
       corporate evaluation level, and the company survey results after implementing Article 2.
  4. 4. The mutual aid cooperative may request additional documents for the evaluation of the application.
  5. 5. In case of merging of companies, transfer of business ownership, or replacement of stockholders (transfer of stocks), the
       mutual aid cooperative must be notified in order to maintain the Contract term. Also, The followings should be submitted to the
       mutual aid cooperative; identification for 500 million KRW actual capitals prepared by a certified account, the list of stockholders
       before and after the transfer, and the contact agreement for the transfer of business ownership.

Mutual Aid Business Overview

The MAC&CO decides upon the securities and fees by thorough risk management efforts. Therefore necessary measures of change and improvement as specified in the prescription are taken according to Mutual Aid Regulations. Corporate evaluation, inspection, and monitoring are conducted to prevent consumer damage as a part of thorough risk management.

Corporate Evaluation

The MAC&CO develops appropriate evaluation models for the MLM company to systematically conduct risk management.

Monitoring / Inspection

  1. 1. Regular Monitoring for Member Companies
  2. To prevent consumer damage, the MAC&CO utilizes monitoring agents in checking the actual condition of member companies to eliminate illegal acts. A propriety of the compensation plan for salespeople was put at the center of attention in the 1st half 2004, and sales amount omission for improper use of door-to-door sales companies were issued in the 2nd half.
  3. 2. Inspection for Member Companies
  4. Inspectors from the MAC&CO are dispatched to a place of business to investigate work details, customer complaints, and industry status. Illegal or unethical acts of member companies are fairly eliminated in the process. It is a harvest of the MAC&CO's effort to prevent consumer and distributor damage by creating the wholesome business culture.