Document interpretation of the regulations prohibiting pyramid selling.

Q: Please tell us about the development of direct selling and pyramid selling abroad and the actual situation in China at present?

A: As a business model, direct selling originated in the United States and then spread to Europe, Japan and other countries and regions in the world. Direct selling has the advantages of reducing circulation, saving advertising investment and implementing face-to-face service, so it is rapidly popularized in some countries. However, due to the concealment of its transactions, the dispersion of participants, the uncertainty of trading objects and other characteristics, while gradually developing, some commercial frauds, especially pyramid schemes, "pyramid schemes" and "mouse meetings", have also emerged rapidly, seriously disrupting the normal economic order. To this end, governments all over the world have opened up direct selling activities under the premise of strict norms; At the same time, through legislation to combat fraud in the name of direct selling. For example, the Law on Prohibiting MLM Plans in the United States, the Law on Prevention of Unlimited Chain in Japan and the Law on Direct Selling in Malaysia.

In the early 1990s, some foreign direct selling companies began to enter China. As China is in the primary stage of the development of socialist market economy, the degree of market development is low and the relevant management regulations are not perfect, direct selling has gradually developed into various forms of pyramid selling activities. Some illegal units and individuals, under the banner of "get rich quickly", trick people into participating in pyramid schemes, collect money by false propaganda, form a closed interpersonal network, and charge high entry fees. Others use pyramid schemes to engage in superstition, cliques, price fraud, selling fake and shoddy products and other illegal and criminal activities, which not only interferes with the normal economic order, seriously damages the interests of the people, but also seriously affects China's social stability. In view of the above situation,1April 1998, the State Council issued the Notice of the State Council on Prohibiting MLM Business Activities (Guo Fa [1998]10, hereinafter referred to as the Notice). The notice clearly pointed out that pyramid selling does not conform to China's current national conditions and is seriously harmful, so pyramid selling activities must be resolutely banned. In August this year 10, the State Council 10 1 executive meeting passed regulations, which further explicitly prohibited pyramid selling activities in the form of administrative regulations and intensified the crackdown.

Q: Why should we make laws and regulations?

A: Since 1998 the State Council issued a notice banning pyramid schemes, under the unified deployment of the State Council, the departments of industry and commerce, public security and other departments have earnestly performed their duties and severely cracked down on various pyramid schemes, and achieved remarkable results. Large-scale and open pyramid schemes have been effectively curbed.

In recent years, pyramid selling has further developed into an illegal and criminal activity with "soliciting customers' heads" as the main form. In order to escape the attack, pyramid selling activities have also turned from public to underground, taking more covert and worse means to carry out illegal activities, which have intensified in recent years, not only seriously disrupting the normal market economic order, but also directly endangering people's lives and property safety and undermining social stability. The harm of pyramid selling is highlighted in:

First, pyramid selling not only violates the provisions of the State Council on prohibiting pyramid selling, but also violates the provisions of relevant national laws and regulations. A large number of illegal acts, such as tax evasion, manufacturing and selling fake and shoddy goods, smuggling, illegal trading of foreign exchange, illegal fund-raising, false propaganda, infringement of consumers' rights and interests, have damaged the financial order and market economic order.

Second, pyramid schemes are mostly aimed at vulnerable groups. Most of the people cheated to participate in pyramid schemes are farmers, laid-off workers, the elderly and other socially disadvantaged groups. In recent years, there have also been cases in which students and ethnic minorities have been tricked into participating in pyramid schemes. Most of the participants have lost their money after being cheated, and some even lost their lives.

The third is to trigger public security crimes. Some people are deceived and take the road of theft, robbery, fighting, prostitution and whoring, which brings hidden dangers to social security; In addition, some criminal gangs of black forces also participate in other illegal and criminal activities, which has caused serious harm to social stability.

Fourth, it has an impact on social ethics. Tragedy of husband and wife turning against each other, father and son facing each other, and even family destruction and death have occurred from time to time, which not only caused economic losses to MLM participants, but also caused great harm to their families and seriously undermined the construction of socialist spiritual civilization.

Fifth, the organizers and planners of MLM exercise mental control over the participants. By brainwashing the participants and propagating the so-called get rich quickly and other pyramid schemes, pyramid schemes make people addicted to the dream of making money and induce participants to engage in fraud by any means.

In view of this, in order to safeguard the vital interests of the broad masses of the people and the market economic order, the State Council requires people's governments at all levels and law enforcement departments to strictly enforce the law, and once discovered, resolutely ban pyramid schemes. In order to further intensify the crackdown on pyramid schemes, prevent fraud, protect the legitimate rights and interests of citizens, legal persons and other organizations, maintain the order of socialist market economy, maintain social stability and build a harmonious society, the State Council promulgated regulations explicitly prohibiting any unit or individual from engaging in pyramid schemes, and clearly stipulated the definition, manifestations, working mechanism, measures and procedures, and legal responsibilities of pyramid schemes.

Q: What is the guiding ideology of the Regulations?

A: In the process of formulating laws and regulations, we mainly follow the following guiding ideology:

First, further clarify the legal boundaries and ban pyramid schemes according to law. Accurately define pyramid selling, resolutely crack down according to law, protect the legitimate rights and interests of citizens, legal persons and other organizations, and safeguard China's market economic order and social stability.

The second is to maintain the stability and continuity of national policies. On the basis of the existing national policies, we should fully learn from the relevant foreign laws and regulations and the effective practices of supervision and crackdown, carefully analyze the manifestations and characteristics of pyramid schemes, and combine the practical experience of law enforcement in China to draft and formulate laws and regulations to make the long-term work of cracking down on pyramid schemes more legal and rule-based.

The third is to establish an effective mechanism to crack down on pyramid schemes, and adhere to the principle of combining crackdown with prevention, combining punishment with education, and treating both the symptoms and the root causes. Resolutely curb pyramid selling in the bud to avoid harming the interests of the broad masses of the people and bringing greater harm to the market economic order and social public order. Actively carry out comprehensive management and establish a long-term mechanism to combat pyramid schemes.

Q: What kind of behavior belongs to pyramid selling? What are the manifestations of pyramid selling?

A: With reference to a series of documents on combating pyramid schemes in the State Council in recent years, combined with the law enforcement practice in recent years, the regulations define pyramid schemes, stipulating that organizers or operators develop personnel, calculate and pay remuneration based on the number of people directly or indirectly developed or sales performance, or require the developed personnel to obtain the qualification to join on the condition of paying a certain fee. Any act that disturbs the economic order and affects social stability belongs to pyramid selling. At the same time, in order to make it easier to understand, the regulations also list three forms of pyramid schemes, namely, pyramid schemes with the reward of developing offline sales (that is, "pulling people's heads"), pyramid schemes with the reward of developing offline sales performance (that is, "team reward"), and pyramid schemes that defraud entry fees.

Q: What are the requirements of the regulations for local people's governments at all levels and their relevant departments?

A: The "Regulations" clearly stipulate the working mechanism of cracking down on pyramid schemes and the division of responsibilities of various departments. MLM has become a public hazard. Practice has proved that the prevention and control of MLM must take measures such as government leading, joint management by all departments, social participation and comprehensive management. Guangdong, Shandong and other provinces and cities have incorporated the fight against MLM into the comprehensive management of social security, which has played a positive role in curbing MLM and severely punishing MLM leaders. For this reason, the regulations stipulate that the government should take the lead, the public security and industry and commerce should take the lead, and the relevant departments such as justice, commerce, telecommunications and education should actively participate in cooperation according to their respective responsibilities, forming a working mechanism to crack down on pyramid schemes with their own duties, mutual cooperation and consistent powers and responsibilities.

According to the regulations, the industrial and commercial departments are mainly responsible for investigating pyramid schemes that "pull people's heads", "pay by team" and defraud entry fees. At present, because MLM organizers often combine violence and mental control with participants, they restrict their personal freedom, illegally detain them, and even appear vicious cases such as robbery, kidnapping and murder. According to the regulations, in the name of introducing work and engaging in pyramid selling business activities, anyone who lures others away from their residence to gather illegally and restricts their personal freedom shall be investigated and dealt with by the public security organs in conjunction with the industrial and commercial departments. Suspected criminal acts investigated by the industrial and commercial departments shall be transferred to the public security organs for investigation according to law. In view of the increasingly prominent use of the Internet to engage in pyramid schemes in recent years, the Regulations stipulate that those who use the Internet to publish pyramid schemes to encourage or trick others into participating in pyramid schemes shall be investigated and dealt with by the industrial and commercial departments in conjunction with telecommunications and other departments in accordance with the provisions of the Regulations.

Q: What investigation measures and systems are stipulated in the Regulations?

A: In order to effectively crack down on pyramid schemes and better protect the interests of the people, the regulations give law enforcement departments a number of investigation measures, such as inquiring, inspecting, sealing up, detaining and applying to the judicial department for freezing illegal funds. In order to expose illegal pyramid selling activities in time, prevent people from being deceived, and avoid and reduce the greater losses caused by pyramid selling to society, the Regulations stipulate a warning and prompt system. If it is verified to be pyramid selling, the industrial and commercial and public security organs may publicly issue warnings or tips to the public. By issuing an early warning in the embryonic stage of pyramid schemes, the investigated pyramid schemes will be publicized, exposing the essence of fraud and reducing and preventing the people from suffering greater losses.

In order to mobilize social forces to participate in cracking down on pyramid schemes, carry out mass prevention and treatment, obtain case clues in time, and crack down on pyramid schemes quickly and effectively, the Regulations stipulate the complaint mechanism for pyramid schemes. Any unit or individual has the right to report to the industrial and commercial and public security organs. The industrial and commercial and public security organs shall investigate and verify the clues and investigate and deal with them according to law; And keep the whistleblower confidential. If the investigation is true, the whistleblower may be rewarded in accordance with the relevant provisions of the state.

In addition, in order to administer according to law and prevent administrative organs from abusing their powers, the regulations also clearly stipulate the procedures for law enforcement departments to implement administrative compulsory measures. For example, when the industrial and commercial departments take the measures stipulated in these regulations, they must report in writing or orally to the main person in charge of the industrial and commercial departments at or above the county level and obtain approval; When investigating suspected pyramid schemes, there shall be no less than 2 law enforcement officers; It also stipulates the avoidance system and so on.

Q: What legal responsibilities should units and individuals engaged in pyramid schemes bear?

A: The Regulations set corresponding legal responsibilities for different personnel in pyramid schemes. Impose a fine of up to 2 million yuan on MLM organizers and key elements; If a crime is constituted, criminal responsibility shall be investigated according to law. Give a warning to the general participants; For MLM participants who have participated in many times and refused to turn over a new leaf, although they are not backbone elements, they have indeed deceived others and caused losses to others. The industrial and commercial department shall order it to stop the illegal act and may impose a fine of less than 2000 yuan.

At the same time, the regulations also stipulate that the industrial and commercial departments have the right to order those who provide business premises, training places, sources of goods and storage for pyramid schemes to stop illegal acts, confiscate illegal income and impose a fine. For those who provide Internet information services for pyramid schemes, the industrial and commercial departments have the right to order them to stop illegal acts, and the relevant departments will punish them in accordance with the relevant provisions of the Internet.

Q: How to implement this regulation?

A: The promulgation of the Regulations is of great significance for cracking down on pyramid schemes, punishing criminals, maintaining market economic order and social stability, and protecting people's lives and property. In the next step, the State Council will organize relevant departments to focus on the following aspects:

First, organize local people's governments and relevant law enforcement departments to seriously study the regulations, establish and improve the working mechanism to crack down on pyramid schemes, carry out comprehensive management, earnestly perform their duties, ensure that laws are strictly observed and violators are prosecuted, and conscientiously implement the regulations.

The second is to organize publicity activities to popularize the law. Through the news media, newspapers and magazines, radio and television, the Internet and other media, various ways are adopted to publicize the legal provisions, educate the masses to know and understand the law, consciously abide by the law, and improve their ability to identify, prevent and resist pyramid schemes.

The third is to launch a special crackdown, apply laws and regulations to investigate and deal with a number of major cases, purify the market order, severely punish organizers and key elements, deter criminals, and resolutely curb pyramid schemes in the bud.