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[Apha Biz=(Chicago) Reporter Paul Lee] The Fair Trade Commission issued a correction order on the 31st for unregistered Ponzi scheme business activities by Coway and j&coceu, which sell cosmetics. Coway is a business that has made its name known to consumers as a water purifier rental (rental) business.
The two companies are door-to-door vendors registered with the FTC. If a particular salesperson performs well, it is allowed to pay sponsorship allowances, which are incentive concepts, only to the top salespersons above the first level. If the sponsorship allowance goes to the top salespersons in the second and third stages, it should be considered Ponzi scheme and registered as a multi-level vendor with the Fair Trade Commission.
Coway and j&coceu sold cosmetics using three or more stages of sales from September 2010 and September 2017, respectively. In the process, the head of the business bureau, who is in charge of sales at the two companies, directly recruited and managed sub-salespeople. The headquarters gave the business director a sponsorship allowance linked to the overall salesperson's performance. In other words, as the number of salespeople increases and there are new steps, the structure in which top salespeople, such as business directors, sit down and make money has become stronger.
The FTC ruled that the two companies' unregistered Ponzi scheme sales business was in violation of the Door-to-Door Sales Act and issued a correction order. During the FTC's investigation, the two companies decided to abolish the method of paying excessive support allowances to business directors and others.
"The correction order was issued for some sales organizations in the past," Coway said. "We have already converted the sales organization into an agency before the disposal decision and will continue to make efforts to create a sound business environment and comply with related laws."
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
