Seoul City Illegal and Similar Sales Survey, Increase in Multi-Level Marketing Damage Share... Establishment of Private Joint Response System

Analysis of 397 Reports Filed Over the Past 6 Years: Investigation of Sales Methods, Business Types, Products, and Regions
Among Illegal Businesses in Seoul, 3 out of 10 Are Concentrated in Gangnam-gu

[Asia Economy Reporter Lim Cheol-young] The Seoul Metropolitan Government announced on the 15th that although the number of reports on illegal and similar sales activities has decreased, the proportion of multi-level marketing (MLM) sales continues to increase. Therefore, it plans to establish a reporting and management system and prepare legal and institutional improvement measures.

According to the Act on Door-to-Door Sales, etc., door-to-door sales, multi-level marketing, and sponsor door-to-door sales, which are classified as special sales businesses, must be registered or reported. However, recently, unregistered illegal businesses have increased, and new combined activities mixed with similar receipt acts have also appeared.

This investigation was conducted on 397 cases of illegal special sales activities reported to the ‘Illegal MLM Reporting Center’ over the past six years, focusing on ‘sales methods,’ ‘business types,’ ‘products handled,’ and ‘regional status.’

The investigation results showed that the sales methods were 232 cases (58.4%) of MLM sales and 165 cases (41.6%) of similar receipt acts. Although the total number of reports has decreased annually, the proportion of MLM sales is on the rise. In particular, last year, 19 out of 27 reports (70.3%) were concentrated on MLM.

The Seoul Metropolitan Government explained, "The main reason for the increase in ‘MLM sales methods’ is the growing trend of using MLM organizations in various fields such as goods and services transactions and investment inducements," adding, "Such activities may violate the Door-to-Door Sales Act, so systematic management and supervision are necessary."

Regarding business types, 74% (294 out of 397 cases) of companies operated illegally without registration or reporting. Additionally, cases were detected where businesses reported as telemarketing or door-to-door sales engaged in variant MLM operations (22%) or registered as sponsor sales but conducted variant operations (1.5%). The products handled were mostly general goods such as cosmetics and health functional foods (39%), followed by virtual currency (21%) and stocks and bonds (17.6%). The location of companies showed a decreasing trend of illegal businesses based in Seoul over the past six years, but last year, 30% of all companies were concentrated in the Gangnam-gu district, indicating a regional concentration.

Based on the results of this investigation, the Seoul Metropolitan Government plans to establish effective monitoring and supervision systems and continuous management to thoroughly prevent not only the spread of infectious diseases but also economic damage to citizens.

Accordingly, it will form an official cooperation body called the ‘Seoul Metropolitan Government-Fair Trade Commission-Police Agency-Guarantee Association Official Consultative Body’ to carry out joint public-private responses. Since illegal MLM can only be detected through reports, improving the reporting system first and ensuring organic cooperation between agencies for rapid damage relief and processing are important. Regular on-site inspections will be conducted targeting registered and reported door-to-door sales, sponsor door-to-door sales, and MLM companies. Variant operations will be prosecuted, and for practically closed businesses, closure reports will be encouraged and administrative cancellations enforced to prevent citizen damage in advance.

Furthermore, in the long term, it plans to propose legal and institutional improvements such as individual laws that can actively manage and supervise illegal MLM or pyramid schemes and the Act on Similar Receipt Acts. It will also cooperate closely with investigative authorities to ensure active relief for affected citizens.

Seo Seong-man, Director of Labor and Livelihood Policy at the Seoul Metropolitan Government, said, “During the quarantine process, on-site inspections revealed the seriousness of the existence of many illegal and variant MLM companies,” and added, “Based on the results of this investigation, we will do our best to block illegal MLM in advance through public-private cooperation and joint responses and to incorporate them into the administrative management system.”

This content was produced with the assistance of AI translation services.