The Consumer Affairs Agency has ordered Amway Japan G.K. to suspend certain operations in connection with illegal solicitation, the CAA said Friday.
The agency ordered the Tokyo-based company to stop trading for six months -- Oct. 14 to April 13 -- for violating the Specified Commercial Transactions Law in connection with a multilevel marketing scheme, also known as "pyramid selling."
The agency also issued an instruction to the company demanding it take measures to prevent a recurrence.
It is the first time for Amway Japan to receive an administrative punishment for violation of the law.
According to the announcement, members of a company scheme had solicited people via social media since March last year.
The firm wooed people without offering the name of the company or explaining the purpose of the venture and persistently solicited individuals who had already refused to become involved.
Staff members also committed other unlawful acts such as withholding documents after contracts were signed.
The law defines such deals as "multilevel marketing transactions." Under such schemes, members receive referral fees if they attract new sign-ups.
Though the law does not prohibit such enterprises per se, it stipulates obligations and prohibited actions. One clause states that business operators must explain the purpose of solicitations, as such schemes have a tendency to cause trouble.
The agency has the power to punish business operators if business scheme members violate the law.
Following the CAA's ruling, Amway Japan cannot solicit or sign contracts with new customers. However, the firm will still be allowed to operate in fields other than multilevel transactions, such as selling goods via its online shopping website.
"We regard the punishment very seriously," an official of Amway Japan said.
The Amway group originated in the United States, and the Japanese unit was established in 1977.
Amway Japan has more than 600,000 business scheme members, and, according to a private business research company, annual sales that amounted to about 99 billion yen, as of December last year.
The Kyoto prefectural police arrested two members of Amway Japan in November last year on suspicion of violating the law, alleging that they solicited a person without informing them of the proposed scheme's purpose and tried to persuade the person to become a member.
One suspect was given a summary order to pay a fine.
Read more from The Japan News at https://japannews.yomiuri.co.jp/
