Tuesday, 6 February 2018

So-called 'MLM/Direct Selling Income Opportunities' remain banned in China.

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Statutory Warning

More than half a century of quantifiable evidence, proves beyond all reasonable doubt that:
  • what has become popularly-known as 'Multi-Level Marketing' (aka 'Network Marketing') is nothing more than an absurd, cultic, economic pseudo-science.
  • the impressive-sounding made-up term 'MLM,' is, therefore, part of an extensive, thought-stopping, non-traditional jargon which has been developed, and constantly-repeated, by the instigators, and associates, of various, copy-cat, major, and minor, ongoing organised crime groups (hiding behind labyrinths of legally-registered corporate structures) to shut-down the critical, and evaluative, faculties of victims, and of casual observers, in order to perpetrate, and dissimulate, a series of blame-the-victim rigged-market swindles or pyramid scams (dressed up as 'legitimate direct selling income opportunites'), and related advance-fee frauds (dressed up as 'legitimate training and motivation, self-betterment, programs, recruitment leads, lead generation systems,' etc.).
  • Apart from an insignificant minority of exemplary shills who pretend that anyone can achieve success by following their example and duplicating a step-by-step-plan, the hidden overall loss/churn rate for participation in so-called 'MLM income opportunities,' has always  been effectively 100%

Despite the above statutory warning, an anonymous reader has sent me a deeply-misleading comment in which he/she claims that I am 'lying' when I say that MLM was kicked out of China in 1998. He/she then goes on to say that it was 'only American direct selling companies' that were 'banned by the anti American Chinese leaders in the 1990s,' but that 'the Chinese admitted they had had a mistake when they allowed American direct selling companies to return in 2005.'

Although it is true to say that today, traditional door to door direct selling is legal in parts of China, just to set the record straight, the document posted below from 1998, presents what is essentially still the official policy of the Chinese government towards so-called 'MLM/direct selling income opportunities,' even though this policy has not been too successfully enforced.

In reality, the Chinese government didn't simply make a public announcement outlawing so-called 'MLM/direct selling income opportunities.' 

The Chinese government issued comprehensive statements identifying so-called 'MLM/direct selling income opportunities' as camouflaged pyramid schemes and cults, and completely banned them as part of a much-wider effort to stamp out all pyramid schemes and cults, no matter how devious their camouflage might be.

David Brear (copyright 2018)


Circular of the State Council on the Ban of Operational Activities of Pyramid Sales (Apr. 18, 1998).

The State Council has instituted a ban on the operational activities of pyramid sales to protect the legitimate rights and interests of consumers, to promote fair competition, to maintain economic order, and to sustain social stability.

 The reasons for the ban are as follows:

 I. Pyramid sales operations are not appropriate for China at its present stage of development, and have resulted in serious damage. Pyramid selling as a mode of operation is inappropriate due to its traits of organizational closeness, the concealed nature of transactions, and its spread out systems of sales persons. In addition, the Chinese market is not sophisticated enough for such business operations, corporate management skills and experience are underdeveloped, and mass consumer mentality has yet to mature. Unlawful individuals have taken advantage of pyramid sales to promote heretical beliefs, gangs, superstition and racketeering, seriously undermining China's spiritual and cultural establishment and social stability. These unlawful individuals take advantage of pyramid selling to recruit government and party officials, soldiers and students, and thus have seriously disrupted state order in governance and education. These individuals use pyramid selling to engage in fraud, extortion of money and property, promotion of the sale of imitation, fake and inferior quality products and smuggled goods for the purpose of profiteering and tax evasion. This has seriously harmed the interests of consumers and interfered with the normal economic order. Therefore, pyramid sales must be immediately and completely banned.

 II. The operational activities of pyramid sales in any form shall be banned as of the date of issuance of this Circular. Registered enterprises engaged in the operation of pyramid sales shall cease immediately all operational activities related to pyramid sales, engage in the rehabilitation of pyramid sales persons, settle all debts, convert to other modes of business operation, and modify or withdraw business registration with the industry and commerce administration before October 31, 1998. Failure to comply with these registration requirements will result in the revocation of the business license. Those currently engaging in pyramid sales without an authorized business license are also subject to this ban, and must cease such activity or face prosecution.

 III. Efforts will be intensified in the enforcement of the ban and investigation of any suspected pyramid sales activity. As of the date of issuance of this Circular, people's governments at all levels, the department of industry and commerce administration, the department of public security, and other involved departments must adopt strong measures to enforce the ban and prevent: 

(1) pyramid sales from becoming an underground activity; 

(2) pyramid sales in the form of double-win or online sales system;

(3) pyramid sales in the form of restricted exclusive sales, licensing rights, special permits, franchise membership operation, direct sales, chains and network sales;

(4) pyramid sales in the form of distribution of membership cards, savings cards, lotteries and vocational training to gain membership fees, franchise membership fees, licensing fees and training fees by cheating; and 

(5) any other acts of pyramid sales in any form.

Any activity suspected of being related to pyramid sales shall be investigated and penalized by the industry and commerce administration in pursuance with the relevant state provisions. Pyramid sales used to engage in fraud, promote the sales of imitated, fake, inferior quality, and smuggled products, and to spread heresy, gangs, superstition, and racketeering shall be investigated and handled by the departments concerned. Where such activity constitutes criminal action, the case shall be transferred to a judicial organ for prosecution in accordance with the law. 

IV. All central and local governments must strengthen leadership and cooperate closely with one another in firmly yet safely implementing the ban on pyramid sales. The ban on pyramid sales is an expansive order with broad impact and scope, and will be a difficult order to implement. Government agencies at all levels must attach great importance to this order and coordinate under the command of an appointed government official, to be in charge until the ban is fully implemented. Organs of the industry and commerce administration must sternly investigate and prosecute any acts of pyramid sales which contravene the spirit of this Circular. Departments of public security must prohibit any activity that involves pyramid sales, in open or disguised forms, to maintain social order and stability. Commercial banks must support and cooperate with organs of the industry and commerce administration and public security in the work of investigation and prosecution of pyramid sales. Media and propaganda departments must intensify their efforts in publicity, extensively publicizing the harm of pyramid selling, exposing the fraudulent acts of pyramid selling, and exposing typical illegal cases of pyramid selling to educate the public and raise their awareness, encouraging the public to consciously boycott pyramid sales activity. The media should also make reports on the progress made by the departments involved in implementation of the pyramid sales ban. 

All government organizations involved in the execution of the pyramid sales ban must be steadfast and proactive and, at the same time, must be painstakingly careful in their implementation of the ban so as to maintain economic order and social stability.


  1. By the time it hits the economist, it is serious. Seems like only a matter of time before American MLMs will no longer be able to use "direct selling" as camouflage.


    1. Thanks Rogier.

      One wonders what the Chinese authorities are going to do about their own monster home-grown 'Amway' copy-cat 'MLM' cultic racket, 'Tiens?'

      You probably observed that I had already re-posted the 'Economist' article.