The Korea Communications Commission is planning to release new guidelines for multi-level marketing for mobile phones within this week. The guidelines signify that multi-level marketing by domestic mobile carriers will be legalized in substance.
Since the implementation of the Terminal Distribution Structure Improvement Act, multi-level marketers in the industry have been forced to purchase terminals and subscribe to the mobile carriers’ calling plans before being paid for the subscribers that they attract. During the course, cases have been exposed where specific phones and more expensive calling plans are forced to be chosen. With regard to this issue, the Korea Communications Commission imposed a penalty of 2.3 billion won (US$2.0 million) on LG U+ in September. The new guidelines are to prevent such illegal practices.
In the meantime, the Fair Trade Commission started its own investigation of mobile carriers’ multi-level marketing, too. According to the current Door to Door Sales Act, a burden exceeding 50,000 won (US$43) a year cannot be imposed on a door-to-door salesperson with regards to registration and qualification maintenance, and an article exceeding 1.6 million won (US$1,381) in price cannot be sold on a multi-level marketing basis.
The price limit applied to mobile phones should include monthly payments, which are compulsory in view of the characteristics of the item, although the average price of the terminals is one million won or less. This means that the multi-level marketing of mobile phones can be banned, depending on the Fair Trade Commission’s upcoming decision.