The Korea Communications Commission prepared the “Guidelines on Multilevel Marketing of Mobile Communications Services” (the “Guidelines”) with which mobile communications companies and multilevel companies and salesmen have to comply when selling mobile communications services in a multilevel marketing (the “MLM”) platform. These Guidelines enhanced the responsibility for management and supervision of the mobile communications companies by clearly stipulating the detailed standards for violations that could likely occur due to the characteristics of the personal sales method. Moreover, the new Guidelines attempt to prevent damages to users by enhancing transparency of the mobile communications distribution market.

  • Prior Approval for Stores
    • ​Mobile communications companies are required to prepare and implement prior approval requirements and procedures, as well as withdrawal standards, which are equivalent to those of communications sellers or general sellers, including the relevant training and educational programs.
    • Multilevel salesmen are required to make users aware that he/she has received prior approval.
  • Restriction on Excessive Payment of Subsidy
    • ​Since the support allowance and publically notified subsidy provided to multilevel salesmen when they join a mobile communications service as users constitute an additional subsidy, the economic value of such subsidy cannot exceed 15% of the publically notified subsidy when combined with other forms of additional subsidies.
  • Restriction on Excessive Payment of Commissions
    • ​The membership commissions paid by mobile communications companies to attract users constitute incentive payments. Therefore, the mobile communications companies are barred from paying excessive membership commissions that abet unlawful subsidy payments to multilevel salesmen that act as users.
  • Prohibition on Limiting Service Use
    • ​Mobile communications companies and multilevel distributors are barred from limiting users from joining, using (including modification of conditions) and cancelling the mobile communications service by imposing obligations on users to use specific mobile devices or expensive fee plans (including additional services) in connection with the MLM policy, and providing disadvantages to those who violate the foregoing “use obligations”.
  • Prohibition on False and Exaggerated Advertisements
    • ​False and exaggerated advertising that limit reasonable selection of mobile communications services or arouse speculative behaviors are prohibited.
  • Protection of Personal Information
    • ​When preparing a membership application for multilevel salesmen and/or mobile communications service membership agreements, the companies are prohibited from permitting a third party other than the actual subscriber to prepare or sign such documents on behalf of the actual subscriber without a justifiable reason.