(Effective Date 1997.01.10)
CHAPTER I GENERAL PROVISIONS CHAPTER II APPROVAL FOR REGISTRATION OF ENTERPRISES ENGAGED IN PYRAMID MARKETING CHAPTER III PARTICIPANTS IN PYRAMID MARKETING ACTIVITIES CHAPTER IV PYRAMID MARKETING ACTIVITIES CHAPTER V SUPERVISION AND INSPECTION CHAPTER VI LEGAL RESPONSIBILITY CHAPTER VII SUPPLEMENTARY PROVISIONS Article 1 The regulations have been formulated according to State laws, regulations and relevant policies with a view to strengthening Article 2 Pyramid marketing refers to direct selling by a production enterprise of its products to consumers through the medium of Multi-level pyramid marketing refers to such a kind of marketing through multiple levels (two or more levels) of sales agents waith Single-level pyramid marketing refers to the same kind of marketing through only one level of sales agents. Article 3 An enterprise should get the examination and approval of relative administration for industry and commerce in undertaking Administrations for industry and commerce shall exercise supervision and control over pyramid marketing activities. Article 4 Foreign enterprises and individuals are forbidden to engage in pyramid marketing within the territory of the People’s Republic Article 5 All enterprises and individuals engaged in pyramid marketing within the territory of the People’s Republic of China must observe
CHAPTER II APPROVAL FOR REGISTRATION OF ENTERPRISES ENGAGED IN PYRAMID Article 6 For engaging in pyramid marketing, an enterprise should meet the following condition: 1. It has the status of a corporate legal person; 2. It has at least a registered capital of RMB5 million; 3. It sells products it produces within the territory of China; 4. Quality of its products has been verified as up to standard; 5. It has a pyramid marketing plan and a sound pyramid sales agents management system. Article 7 For carrying out pyramid marketing, an enterprise and its subsidiaries should file an application with an administration Article 8 In applying for pyramid marketing, an enterprise should submit the following documents: 1. An application form signed by the legal representative; 2. Business license of the corporate legal person or business licenses of its subsidiaries; 3. Business conditions, including investment scale, production sites, technical conditions and subsidiaries; 4. A plan for the marketing operations, including requirements and formalities for participating in pyramid selling, computation 5. Areas for pyramid marketing; 6. Varieties, specifications and trademarks of the products for pyramid marketing; 7. Certificates certifying the quality of the products for pyramid marketing; 8. Costs and selling prices of the products for pyramid marketing; 9. Rules for returning goods, claiming for damages and after-sales services; 10. Sample contracts between the enterprise and pyramid sales agents and sample of the certificates for the pyramid agents; 11. Other materials deemed as necessary by laws and regulations or by organizations of examination and approval. The term “organizations of examination and approval” used in the preceding paragraph refers to the administration for Article 9 The State Administration for Industry and Commerce shall, according to the relevant regulations and the provisions of this An enterprise approved to engage in multi-level or one-level pyramid marketing should, within 15 days after receiving the Article 10 An enterprise approved to engage in multi-level or single- level pyramid marketing should change the registration according to In changing the contents provided for in 4, 8, 9 and 10 of Article 8 of this set of regulations, an enterprise should report to Article 11 An enterprise engaging in pyramid marketing should not transfer or consign its right of the marketing concerned. It is forbidden for an enterprise engaged in single-level pyramid marketing to engage in multi-level pyramid marketing. CHAPTER III PARTICIPANTS IN PYRAMID MARKETING ACTIVITIES Article 12 Citizens at the age of 18 and above and with the full ability of performing civil acts may serve as agents for a pyramid marketing. The following people are not allowed to serve as such agents: 1. Government functionaries; 2. Military persons in service; 3. Students of full-time schools; 4. Other people who are forbidden to engage in part-time sales by law and regulations. Multi-level pyramid sales agents should have permanent resident ID card in the administrative area in which the enterprise Article 13 An enterprise engaged in pyramid marketing should inform its sales agents of the following matters before they start operations: 1. Items registered in the Business License of Corporate Legal Person and the Business Licenses of its subsidiaries; 2. The varieties of products to be put on sales by the pyramid marketing and the areas for the marketing as approved by the administration 3. Development and plans for pyramid marketing; 4. Operational rules and notices for the trading; 5. Prices, properties, uses and results of quality inspection of the products for pyramid marketing; 6. Requirements for participating in pyramid marketing. The matters mentioned above should be affirmed by the agents concerned of notice in a written form. Article 14 An enterprise with pyramid marketing operations should sign written contracts with pyramid sales agents to define each other’s 1. Rights and obligations of pyramid sales agents; 2. Conditions, method of computation and procedures of payments to the agents concerned and the means of withholding their individual 3. Responsibility of the quality of products; 4. Time limit, procedures and costs of returning of products; 5. Procedures for withdrawal from pyramid marketing; 6. Settlement of disputes; 7. Other matters as prescribed by law and regulations. Article 15 An enterprise approved to carry out pyramid marketing is not allowed to ask the sales agents to pay membership fees, honest money Article 16 A pyramid sales agent is free to withdraw from the marketing activities. When withdrawing from pyramid sales, a pyramid sales When a pyramid sales agent withdraws from the activities within 30 days after the activities start and returns the products In case of goods returned as provided for in the first and second paragraphs of this article, the enterprise may deduct from Article 17 An enterprise should not force an agent to develop a fixed number of sales agents at the next lower level or compute remuneration Article 18 An enterprise engaged in pyramid marketing should strength its control over its pyramid sales agents. An enterprise engaged in pyramid marketing should provide training to its sales agents before they start work. The contents of If a pyramid sales agent is found to be engaged in illegal selling activities and the enterprise concerned has failed Article 19 Employment of foreigners by an enterprise engaged in pyramid marketing should observe the relevant regulations on the entry and Lecturers for professional training must have definite identification certificates and have no criminal records. Employment CHAPTER IV PYRAMID MARKETING ACTIVITIES Article 20 Pyramid marketing of enterprises and agents should be undertaken in areas as having been approved by the State Administration Article 21 Pyramid enterprises can only sell products they produce within the territory of China in varieties approved by the Pyramid marketing enterprises should not sell products whose sales are forbidden or restricted by law and regulations and other Article 22 A consumer may return goods to or claim for damages from pyramid marketing enterprises or agents due to infringement of A request for a return of goods by a consumer should be made within 30 days after the purchase and the pyramid marketing enterprise After accepting goods returned from or paying compensation to the consumer concerned, the sales agent may claim for compensation In pyramid marketing, the sales agent should make immediate settlement with the enterprise concern and is not allowed to Article 23 The prices for pyramid marketing should not be higher than the mean prices of the same or similar products at the same grade, Article 24 Enterprises engaged in pyramid marketing must not induce people to participate in the pyramid selling or buy their products Advertisements, training and gatherings organized by enterprises engaged in pyramid marketing must not include materials that are Article 25 In promoting sales, pyramid sales agents should observe the following rules: 1. Present to the consumers the pyramid sales certificate which should bear the photographs, names, numbers of identification 2. Acknowledge the consumers the addresses of the enterprises engaged in pyramid marketing and of the pyramid sales agents and 3. Explain faithfully to the consumers the quality, property, uses, validity period, method of use, effect, points for attention 4. Demonstrate the use of the products if possible. 5. Carry out the sales at reasonable time of the day. 6. Before carrying out door-to-door sales, agreements of the consumers should be solicited in advance. Once a consumer wishes 7. Present to consumer certificates of the purchases, which should bear the seal of the enterprises engaged in pyramid marketing CHAPTER V SUPERVISION AND INSPECTION Article 26 An enterprise engaged in pyramid marketing should report to the original administration for industry and commerce to which it Article 27 An enterprise engaged in pyramid marketing should report to the original administration for industry and commerce to which it Article 28 Related administrations for industry and commerce may carry out on-the-spot supervisions and checks of the sales and training For acts falling into the jurisdiction of other departments, the acts concerned should be sent to and handled by the related Article 29 An enterprise engaged in pyramid marketing should, apart from keeping related materials as required by law and regulations, 1. The original bills and documents for pyramid marketing of products, accounting books, bank bills and vouchers, bills and 2. Books recording the names, addresses, identification numbers and the numbers of pyramid sales agents; 3. Information about training of pyramid sales agents; 4. Records and documents concerning remunerations paid to pyramid sales agents; and 5. Other materials related to pyramid marketing.
Article 30 Punishments shall be meted out by administrations for industry and commerce according to the following provisions for 1. For cases that have violated the provisions of first paragraph of Article 3 and Article 20 of this set of regulations 2. For cases that have violated the provisions of the second paragraph of Article 11 of this set of regulations, confiscation 3. For cases that have violated the provisions of Article 8 and Article 10 in obtaining the registration for pyramid marketing 4. For cases that have violated the provisions of first paragraph of Article 11 of this set of regulations, punishments shall 5. For cases that have violated the provisions of Article 21 of this set of regulations, the enterprises involved shall be punished 6. For cases that have violated provisions of Article 12, Article 13, Article 14, second paragraph of Article 18, Article 7. For cases that have violated the provisions of Article 15, Article 16 and Article 17, the products, sales amount and illegal 8. For cases that have violated provisions of the first and third paragraphs of Article 22 of this set of regulations, 9. For cases that have violated the provisions of Article 23 of this set of regulations, the administration for industry and 10. For cases that have violated the provisions of Article 24 of this set of regulations, punishments shall be meted out according 11. For cases that have violated the provisions of Article 25 of this set of regulations, a fine ranging from more than RMB500 CHAPTER VII SUPPLEMENTARY PROVISIONS Article 31 The power of interpreting the provisions of this set of regulations rests with the State Administration for Industry Article 32 The regulations shall become effective as of the date of promulgation.
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