Unicity Korea seeks consent order in first case under door-to-door sales law

Unicity Korea, a multilevel marketing company, has entered a consent order process — offering voluntary corrective measures in lieu of sanctions — over allegations that it circumvented the legal cap on distributor bonuses. It is the first case to reach the consent order stage since the system was introduced under the Door-to-Door Sales Act.

The Korea Fair Trade Commission said Wednesday it had decided to open consent order proceedings against Unicity Korea over suspected violations of the Door-to-Door Sales Act.

Under a consent order, a company under investigation proposes voluntary remedies, and if the Fair Trade Commission accepts them, the case is closed without a formal ruling on whether the law was violated.

The commission has been investigating whether Unicity Korea circumvented the statutory cap on distributor bonuses by transferring its top-tier distributors to its US parent, Unicity International, and having the parent pay their bonuses directly.

The Door-to-Door Sales Act limits the total bonuses a multilevel marketer may pay its distributors to 35 percent of the sales revenue generated from products supplied to them. If the bonuses paid by the US parent are counted as part of Unicity Korea's total, the company would have exceeded the legal ceiling every year from 2021 through 2024.

However, a civil appellate court examining the same facts ruled that the US parent's bonus payments could not be considered a circumvention scheme designed to help Unicity Korea evade regulation. Prosecutors also declined to indict the company on the same grounds.

Rather than contest the legal question, Unicity Korea applied to open consent order proceedings, saying it would build a compliance framework for the bonus payment ratio and pursue cooperative initiatives with its distributors and customers.

The corrective measures the company proposed include re-registering distributors currently enrolled under the US parent as Unicity Korea distributors, and adjusting the Point Value and prices of key products to bring the bonus payment ratio within the legal ceiling. The company also proposed forming and operating a monitoring committee for bonus payments to establish a compliance management system.

Consumer protection and distributor support measures were also included. The company proposed extending the product return window from 20 days to three months and conducting compliance education for distributors and regional customer support centers. It also outlined plans to strengthen its distributor counseling center, publish information on illegal multilevel marketing schemes through its website for three days each month, and upgrade its IT systems for distributor convenience.

The commission determined that these proposed measures meet the threshold requirements for opening consent order proceedings. However, the decision does not constitute a finding on whether Unicity Korea violated the law, nor does it represent final approval of a consent order.

The commission plans to work with Unicity Korea to draft a provisional consent order, then gather input from stakeholders and consult with relevant agencies before submitting a final proposal to the full commission. Whether a consent order is ultimately granted will be decided through a commission review.