| Regulations on Prohibition of Multi-level Marketing |
| Monday,November 28,2005 Posted: 09:48 BJT(0148 GMT) 研究院商务信息部 |
Chapter I General Provisions Article 1 These regulations are formulated for the purpose of preventing cheat and fraud, defending the legitimate rights and interests of the citizens, legal entities and other organizations, maintaining the order of socialist market economy and keeping stability of the society. Article 2 “Multi-level marketing (MLM)” used in these regulations refers to those acts for the organizers or operators to seek illegal profits, disturb economic order and affect social stability through such means as admitting members and calculating and paying the members they admitted based on the number of the members they admitted in turn directly or indirectly or their sales amount or asking the members they admitted to pay certain amount of money as qualification to joint. Article 3 The local people’s governments above county level shall strengthen leadership of the investigation and punishment of multi-level marketing, and support and urge competent departments to implement their supervision and administrative functions according to law. The local people’s governments above county level shall establish coordinating mechanism for investigating and dealing with multi-level marketing to coordinate and address the important issues occurring in the process of investigating and dealing with multi-level marketing. Article 4 The administrative department for industry and commerce and the public security department shall investigate and deal with multi-level marketing acts within their terms of reference in accordance with the provisions of these regulations. Article 5 In the process of investigating and dealing with MLM acts according to law, the administrative department for industry and commerce and the public security department shall persist in the principle of combining punishment with education and educate the citizens, legal entities and other organization to abide by law conscientiously. Article 6 All units and individuals have rights to inform the administrative department for industry and commerce and the public security department of multi-level marketing acts. Once received the information, the administrative department for industry and commerce and the public security department shall immediately start investigation and verification according to law and keep secret for the reporters. If the information turns out to be true, the reporters shall be awarded according to relative provisions of the state. Chapter II Classes of MLM Doers and the Departments in Charge of Investigation and Punishment Article 7 Following acts belong to multi-level marketing (MLM) acts: (1) The organizers or operators that admit members, ask the admitted members to admit other members and count and pay the admitted members (including material awards and other benefits, the same below) based on the number of members admitted by the admitted member directly or indirectly for the purpose of getting illicit benefits; (2) The organizers or operators that admit members, and ask the admitted members to pay some money directly or in the form of buying some goods so as to get the qualification for others to join in for the purpose of getting illicit benefits; (3) The organizers or operators that admit members and ask the admitted members to admit other member to form connection between higher lines and lower lines and count payment to the higher line based on the sales performance of the lower lines for the purpose of getting illicit benefits. Article 8 The administrative department for industry and commerce shall be responsible for investigating and dealing with the MLM acts prescribed in Article 7 of these regulations according to the provisions of these regulation. Article 9 Anyone that issues MLM information prescribed in Article 7 of these regulations through Internet shall be investigated and punished by the administrative department for industry and commerce and other competent department according to the provisions of these regulations. Article 10 Anyone that cheats others to leave their resident areas for illegal gathering and restrain freedom of others shall be investigated and punished by the administrative department for industry and commerce according to law. Article 11 The departments and units of commerce, education, civil affairs, finance, labour insurance, telecommunications, taxation and others shall cooperate with the administrative department for industry and commerce and the public security department to investigate and deal with the MLM acts according tow the provisions of the laws and administrative rules and regulations within their respective functions and responsibilities. Article 12 The grass-root organizations like village committees in rural areas and neighborhood committees in urban areas shall cooperate with related department to investigate and deal with MLM acts under the leadership of the people’s governments where they are located. Article 13 In the process for the administrative department for industry and commerce to investigate and deal with MLM acts, any case with criminal suspect shall be delivered to the public security department for placing on file for investigation; in the process for the public security department t investigate the MLM cases on file, any case without conditions constituting a crime shall be delivered to the administrative department for industry and commerce for investigation and punishment. Measures and Procedure for Investigation and Punishment Article 14 For the administrative department for industry and commerce to investigate and deal with suspected MLM acts, following measures can be adopted: (1) order to stop related activities; (2) investigate the organizers, operators and individual suspected involved in MLM activities to find out related information; (3) enter into the sites of suspected MLM operation, gathering and other related activities to start field investigation; (4) consult, copy, seal up and detain related contracts, bills, account books and other materials suspected with relation to MLM activities; (5) seal up and detain the products (goods), tools, equipment, raw materials and other property suspected specially used in MLM activities; (6) close down the sites for suspected MLM business operation; (7) query the accounts of suspected MLM organizers or operators and the accounting documents, account books and statement of accounts etc. with relation to their bank deposits; (8) in case there is any evidence that any suspect transfers or hides his illicit money, judicial body can be applied to freeze the money. For an administrative department for industry and commerce to adopt measures prescribed in the preceding item, written or oral report shall be made to the head of administrative department for industry and commerce above county level for approval. In case the measures prescribed in the preceding item are adopted under urgent situation, report shall be made and related formalities shall be gone through afterwards; for an administrative department for industry and commerce to implement closing down and detaining prescribed in the preceding item and the measures prescribed in items (7) and (8), written approval shall be get from the head of administrative department for industry and commerce above county level in advance. Article 15 An administrative department for industry and commerce shall assign at least 2 law enforcement officials to investigate and deal with the suspected MLM acts. The directly interested law enforcement officials shall take challenge. Article 16 The law enforcement officials of the administrative department for industry and commerce shall show their credentials to the parties and persons concerned when start to investigate and deal with suspected MLM acts. Article 17 For administrative department for industry and commerce to adopt measures of sequestration, the written decision to make sequestration as well as the list of the property and materials sequestrated shall be delivered to the parties concerned at the sites. Under the situation that the traffic is inconvenient or delay of sequestration may effect the investment and dealing of a case, the administrative department for industry and commerce can make sequestration and deal with the cases at first and then send the written decision to the parties concerned aftermath within 24 hours. Article 18 The administrative department for industry and commerce should not sequestrate the property and materials concerned longer than 30 days. If the case is complicated, the close-down and detaining period can be extended to 15 days under the approval of the head of the administrative department for industry and commerce above county level. The administrative department for industry and commerce shall properly keep the sequestrated property and shall bear compensation to the damage or losses except those caused by force majeure. Article 19 The administrative department for industry and commerce shall ascertain the facts and make out decision on treatment within the time limit of sequestration. If the MLM has been verified as fact through investigation, what has been sequestrated shall be confiscated as illicit property. If the investigation proves no MLM act and no more investment necessary, the sequestrated property shall be released and return to the owner immediately once the treatment decision is made. If the administrative department for industry and commerce fails to make treatment decision within time limit, the sequestrated property shall be considered released and shall be returned. If the department refuses to return, the party concerned can present an administrative plea to the people’s court. Article 20 Any administrative department for industry and commerce or its staff that violates the provision of these regulations and use or damage the property sequestrated, which causes economic losses, shall bear the responsibility of compensation. Article 21 When an administrative department for industry and commerce adopts sequestration measure against suspected MLM act, the party concerned has the rights to make allegation and defense. Article 22 When an administrative department for industry and commerce makes investigation and treatment on suspected MLM acts, records shall be made on the scene. The records on the scene and the list of property sequestrated shall be signed or sealed by the party concerned, eyewitness and the law enforcement official. If the party concerned is absent, or the party concerned and the eyewitness refuses to sign or seal, the law enforcement official shall mark it in the records made on the scene. Article 23 For the cases verified to MLM acts through investigation, the administrative department for industry and commerce and the public security department shall publicize the fact and issue warning or alert to the public. Issue warning or alert to the public shall be approved by the major head of the higher level administrative department for industry and commerce or public security department. Chapter IV Legal Liabilities Article 24 For any one who commits the acts prescribed in Article 7 of these regulations, organizing and planning MLM activities, the administrative department for industry and commerce shall confiscate his illegal property and income and fine him not less than RMB50,000 yuan but not more than RMB100,000 yuan. If a crime is constituted, criminal liabilities shall be investigated in accordance with law. For any one who commits the acts prescribed in Article 7 of these regulations, introducing, trapping and intimidating others to participate MLM activities, the administrative department for industry and commerce shall order him to stop violation of law, confiscate his illegal property and income and fine him not less than RMB100,000 yuan but not more than RMB500,000 yuan. If a crime is constituted, criminal liabilities shall be investigated in accordance with law. For any one who commits the acts prescribed in Article 7 of these regulations, joining in MLM, the administrative department for industry and commerce shall order him to stop violation of law and fine him no more than RMB2,000 yuan. Article 26 In addition to punish the MLM activities according to the provisions of Article 24 of these regulations, he administrative department for industry and commerce also can order party concerned to stop business for rectification or revoke his license according to related laws and administrative rules and regulations. Article 26 For any one who provides business spaces, training places, supply good, storage, warehouses or other conditions for MLM activities prescribed in Article 7 of these regulations, the administrative department for industry and commerce shall order him to stop violation of law, confiscate his illegal income and fine him not less than RMB50,000 yuan but not more than RMB500,000 yuan. For any one who provides information service on the Internet for MLM activities prescribed in Article 7 of these regulations, the administrative department for industry and commerce shall order him to stop violation of law and inform related department to punish him according to “the Measures for Management of Information Services on Internet”. Article 27 For any party concerned who removes, replace, transfer or damage the sequestrated property without authority, the administrative department for industry and commerce shall order him to stop violation of law and fine him money equivalent to not less than 5% but not more than 20% of the value of the removed, replaced, transferred and damaged property. If the party concerned refuses to rectify, the fine shall be not less than 1 time but not more than 3 times of the value of the removed, replaced, transferred and damaged property. Article 28 For any one who commits the acts prescribed in article 10 of these regulations or refuses or baffle the law enforcement officials of the administrative department for industry and commerce to investigate and deal with the MLM acts or commits acts against the management of public security, the public security department shall punish him according to the laws and administrative rules and regulations on the management of pubic security. If a crime is constituted, criminal liabilities shall be investigated in accordance with law. Article 29 If the administrative department for industry and commerce and the public security department or their officials misuse of authority, neglect their duties or do wrong to serve their friends or relatives, or fail to investigate and deal with MLM acts according the functions, responsibilities and procedures prescribed in these regulations, or refuse to investigate and deal with the MLM acts they found, or support, cover up and connive MLM, which constitute crime, criminal liabilities of the direct and major responsible persons shall be investigated in accordance to law. If a crime is not constituted, administrative punishment shall be imposed on them. Chapter V Supplementary Provision Article 31 These regulations shall enter into force on November 1, 2005. (All information published in this website is authentic in Chinese. English is provided for reference only. ) |
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