Complete detailed information on the regulations prohibiting pyramid schemes

The "Regulations on Prohibition of Pyramid Selling" was passed by the 101st executive meeting of the State Council on August 10, 2005, and came into effect on November 1, 2005. The purpose of issuing the "Regulations on Prohibition of Pyramid Selling" is to maintain the order of the socialist market economy. Basic introduction Chinese name: Prohibition of pyramid schemes Ordinance Extraordinary name: Prohibition of pyramid schemes Ordinance Date: August 23, 2005 Issuer: *** Purpose: Maintain the socialist market economic order Full text of the file, Chapter 1, Chapter 2, Chapter 3, Chapter 4, Chapter 5, File Interpretation, Full Text of File Chapter 1 General Principles Chapter 2 Types of MLM Behaviors and Investigating Agencies Chapter 3 Investigation Measures and Procedures Chapter 4 Legal Responsibilities Chapter 5 Article 1 of Chapter 1 of the Supplementary Provisions These regulations are formulated in order to prevent fraud, protect the legitimate rights and interests of citizens, legal persons and other organizations, safeguard the order of the socialist market economy, and maintain social stability. Article 2 The term "pyramid selling" as mentioned in these Regulations refers to the way in which organizers or operators develop personnel by calculating and paying remuneration to the people being developed based on the number of people they directly or indirectly develop or their sales performance, or by requiring the people being developed to pay a fee. Acts that seek illegal benefits, disrupt economic order, and affect social stability by obtaining membership qualifications in exchange for a certain fee. Article 3 Local people’s governments at or above the county level shall strengthen their leadership in investigating and handling pyramid schemes, and support and urge all relevant departments to perform their supervisory and management duties in accordance with the law. Local people's governments at or above the county level shall, as necessary, establish a coordination mechanism for the investigation and handling of pyramid schemes, and coordinate and resolve major issues in the investigation and handling of pyramid schemes in a timely manner. Article 4 The industrial and commercial administrative departments and public security organs shall investigate and deal with pyramid schemes within the scope of their respective duties in accordance with the provisions of these Regulations. Article 5 When investigating and punishing pyramid schemes in accordance with the law, the industrial and commercial administrative departments and public security organs shall adhere to the principle of combining education and punishment, and educate citizens, legal persons or other organizations to consciously abide by the law. Article 6 Any unit or individual has the right to report pyramid schemes to the industrial and commercial administrative departments and public security organs. After receiving a report, the industrial and commercial administrative departments and public security organs shall immediately investigate and verify the report, investigate and deal with it in accordance with the law, and keep the whistleblower confidential; if the investigation is found to be true, the whistleblower shall be rewarded in accordance with relevant national regulations. Chapter 2, Article 7 The following behaviors are pyramid schemes: (1) The organizer or operator requires the person to be developed to develop other personnel to join through the development personnel, and the personnel to be developed shall be based on the number of personnel directly or indirectly developed on a rolling basis. Calculate and pay remuneration (including material rewards and other economic benefits, the same below) and seek illegal benefits; (2) The organizer or operator requires the development personnel to pay fees through the development personnel or pay fees in disguised form by subscribing for goods, etc. Obtain the qualification to join or develop other personnel to join, and seek illegal benefits; (3) The organizer or operator requires the developed personnel to develop other personnel to join through the development personnel, forming an upline and downline relationship, and calculating based on the sales performance of the downline and paying online rewards to seek illegal benefits. Article 8 The administrative department for industry and commerce shall, in accordance with the provisions of these Regulations, be responsible for investigating and handling the pyramid schemes specified in Article 7 of these Regulations. Article 9 Anyone who uses the Internet or other media to publish pyramid scheme information containing the provisions of Article 7 of these Regulations shall be investigated and dealt with by the industrial and commercial administration department in conjunction with telecommunications and other relevant departments in accordance with the provisions of these Regulations. Article 10: Anyone who deceives others to leave their place of residence to illegally gather and restrict their personal freedom in the name of introducing work, engaging in business activities, etc. in a pyramid scheme shall be investigated and dealt with by the public security organs in conjunction with the industrial and commercial administrative departments in accordance with the law. Article 11 Relevant departments and units such as commerce, education, civil affairs, finance, labor security, telecommunications, and taxation shall cooperate with the industrial and commercial administrative departments and public security organs in investigating and handling pyramid schemes in accordance with their respective responsibilities and the provisions of relevant laws and administrative regulations.

Article 12 Rural villagers' committees, urban residents' committees and other grassroots organizations shall, under the guidance of the local people's government, assist relevant departments in investigating pyramid schemes. Article 13 The industrial and commercial administrative department investigates and handles pyramid schemes. If a crime is suspected, it shall be transferred to the public security organ for investigation and investigation in accordance with the law; the public security organ files a pyramid scheme case for investigation, and if the investigation does not constitute a crime, it shall transfer it to the industrial and commercial administrative department for investigation and punishment in accordance with the law. Chapter 3 Article 14 When the industrial and commercial administration departments at or above the county level investigate suspected pyramid schemes, they may take the following measures: (1) Order the cessation of relevant activities; (2) Investigate organizers, operators and individuals suspected of pyramid schemes , understand the relevant situation; (3) Enter the business premises and training, gathering and other activity venues suspected of pyramid schemes, and conduct on-site inspections; (4) Review, copy, seal up, and seize relevant contracts, bills, account books and other materials suspected of pyramid schemes; (5) ) Seize and detain products (commodities), tools, equipment, raw materials and other property suspected to be specially used for pyramid schemes; (6) Seize business premises suspected of pyramid schemes; (7) Inquire about the accounts and deposits of organizers or operators suspected of pyramid schemes Relevant accounting vouchers, account books, statements, etc.; (8) If there is evidence to prove that illegal funds have been transferred or concealed, you can apply to the judicial authority for freezing. When the administrative department for industry and commerce takes the measures specified in the preceding paragraph, it shall report in writing or orally to the principal person in charge of the administrative department for industry and commerce at or above the county level and obtain approval. In the event of an emergency requiring on-the-spot measures stipulated in the preceding paragraph, a report shall be made immediately afterwards and relevant procedures shall be completed; among them, the sealing and detaining stipulated in the preceding paragraph, as well as the measures stipulated in Items (7) and (8) shall be implemented. It must be approved in advance by the principal person in charge of the industrial and commercial administration department at or above the county level. Article 15 When the industrial and commercial administrative department investigates and handles suspected pyramid schemes, there shall be no less than two law enforcement officers. Law enforcement officials who have a direct interest in the parties should recuse themselves. Article 16 When investigating and punishing suspected pyramid schemes, law enforcement officers of the industrial and commercial administrative departments shall present their certificates to the parties or relevant persons. Article 17 When the administrative department for industry and commerce implements sealing or detaining, it shall deliver to the parties on the spot a decision on sealing or detaining and a list of the properties and materials to be seized or seized. If the case is in an area with inconvenient transportation or failure to implement sealing or detaining in a timely manner may affect the investigation and handling of the case, the sealing or detaining may be implemented first, and a supplementary sealing or detaining decision letter must be issued within 24 hours and served to the parties. Article 18 The period for sealing or detaining the case by the industrial and commercial administrative department shall not exceed 30 days; if the case is complicated, it may be extended by 15 days with the approval of the principal person in charge of the industrial and commercial administrative department at or above the county level. The industrial and commercial administrative department shall properly keep the property that has been sealed up or detained and shall not use or damage it; if any loss is caused, it shall be liable for compensation. However, losses caused by force majeure are excluded. Article 19 When the administrative department for industry and commerce implements seal-up or seizure, it shall promptly ascertain the facts and make a decision during the period of seal-up or seizure. If it is investigated and verified that it is a pyramid scheme, the illegal property that has been sealed up or detained shall be confiscated in accordance with the law; if it is investigated and verified that there is no pyramid scheme or it is no longer necessary to seal or detain, the seizure shall be lifted immediately after a decision is made and the seized property shall be returned. property. If the administrative department for industry and commerce fails to make a decision within the time limit, the seized items shall be deemed to have been released from seizure, and the seized property shall be returned. If the refund is refused, the party concerned may file an administrative lawsuit with the People's Court. Article 20 If the administrative department for industry and commerce and its staff violate the provisions of these Regulations by using or damaging sealed or impounded property, thereby causing economic losses to the parties concerned, they shall be liable for compensation. Article 21 When the industrial and commercial administrative department investigates and handles suspected pyramid schemes, the parties concerned have the right to make statements and defend themselves. Article 22 When investigating and handling suspected pyramid schemes, the industrial and commercial administrative departments shall prepare on-site records. The on-site transcripts and the list of seals and seizures shall be signed or stamped by the parties, witnesses and law enforcement officers. If the parties are not present or the parties or witnesses refuse to sign or seal, the law enforcement officers shall indicate this in the on-site transcripts.

Article 23 For any conduct that is verified to be a pyramid scheme, the industrial and commercial administrative departments and public security organs may publicly issue warnings and reminders to the public. The public release of warnings and reminders to the public must be approved by the principal person in charge of the industrial and commercial administrative department at or above the county level or the principal person in charge of the public security organ. Chapter 4 Article 24 If any person engages in the conduct specified in Article 7 of these Regulations and organizes and plans pyramid schemes, the industrial and commercial administrative department shall confiscate illegal property and illegal gains, and impose a fine of not less than 500,000 yuan but not more than 2 million yuan; this constitutes a crime. , be held criminally responsible in accordance with the law. Anyone who engages in the behavior specified in Article 7 of these Regulations and introduces, induces or coerces others to participate in pyramid schemes shall be ordered by the industrial and commercial administration department to stop the illegal behavior, confiscate illegal property and illegal gains, and impose a fine of not less than 100,000 yuan but not more than 500,000 yuan; If a crime is constituted, criminal liability shall be pursued in accordance with the law. Anyone who commits any of the acts stipulated in Article 7 of these Regulations and participates in pyramid schemes shall be ordered by the industrial and commercial administration department to stop the illegal acts and may be fined not more than 2,000 yuan. Article 25 When imposing penalties in accordance with the provisions of Article 24 of these Regulations, the industrial and commercial administrative department may order the company to suspend business for rectification or revoke the business license in accordance with the provisions of relevant laws and administrative regulations. Article 26 Whoever provides business premises, training venues, supply of goods, custody, warehousing and other conditions for pyramid selling activities stipulated in Article 7 of these Regulations shall be ordered by the industrial and commercial administration department to stop the illegal activities, confiscate the illegal gains, and impose a fine of more than 50,000 yuan A fine of less than 500,000 yuan. Anyone who provides Internet information services for pyramid schemes stipulated in Article 7 of these Regulations shall be ordered by the industrial and commercial administration department to cease illegal activities and notify relevant departments to impose penalties in accordance with the "Internet Information Services Management Measures". Article 27 If a party uses, exchanges, transfers or damages the sealed or impounded property without authorization, the industrial and commercial administrative department shall order it to stop the illegal act and impose a fine of not less than RMB 5 but not more than RMB 20 per value of the property used, exchanged, transferred or damaged; Failure to make corrections will result in a fine of not less than 1 time but not more than 3 times the value of the property used, exchanged, transferred or damaged. Article 28 Anyone who commits the acts specified in Article 10 of these Regulations or refuses or obstructs the law enforcement personnel of the industrial and commercial administration department from investigating and handling pyramid schemes in accordance with the law, which constitutes a violation of public security management, shall be punished by the public security organs in accordance with the laws and administrative regulations on public security management. ; If it constitutes a crime, criminal responsibility shall be pursued in accordance with the law. Article 29 The administrative departments for industry and commerce, public security organs and their staff abused their powers, neglected their duties, engaged in malpractice for personal gain, failed to investigate and deal with pyramid schemes in accordance with the duties and procedures stipulated in these regulations, or failed to investigate and deal with pyramid schemes when they were discovered, or supported or protected them. . If the connivance of pyramid schemes constitutes a crime, the directly responsible person in charge and other directly responsible persons shall be held criminally responsible in accordance with the law; if it does not constitute a crime, administrative sanctions shall be imposed in accordance with the law. Chapter 5 Article 30 These Regulations shall come into effect on November 1, 2005. File Interpretation Question: Please introduce the development history of foreign direct selling and pyramid selling, as well as the current actual situation in our country? Answer: Direct selling as a business model first originated in the United States, and was later introduced to Europe, Japan and other countries and regions around the world. Direct selling has the advantages of reducing circulation links, saving advertising investment, and implementing face-to-face services, so it has spread rapidly in some countries. However, due to its characteristics such as the concealment of transactions, the dispersion of participants, and the uncertainty of transaction objects, as it gradually developed, it also quickly derived some commercial fraud, especially pyramid schemes and "pyramid scams". "Bullying" and "Rat Club" have seriously disrupted the normal economic order. To this end, governments in various countries are opening up direct selling activities under strict regulations; at the same time, they have passed legislation to severely crack down on fraudulent activities carried out in the name of direct selling. Such as the United States' "Prohibition of Pyramid Schemes" Act, Japan's "Infinite Chain Prevention Act", Malaysia's "Direct Selling Act", etc. In the early 1990s, some foreign direct selling companies began to enter China. Since our country is in the primary stage of the development of the socialist market economy, the market development level is low, and the relevant management regulations are not perfect, direct selling has gradually developed into various forms of pyramid selling activities.

On the basis of the country's existing policies, fully draw on relevant foreign legal provisions and effective practices in regulatory crackdowns, carefully analyze the manifestations and characteristics of pyramid schemes, and combine my country's practical experience in law enforcement to draft and formulate regulations to make the long-term work of cracking down on pyramid schemes a reality. , there are more laws to follow and rules to follow. The third is to establish an effective mechanism to combat pyramid schemes, adhering to the principles of combining crackdown with prevention, combining punishment with education, and treating both the symptoms and root causes. We must resolutely curb MLM in its bud, avoid causing damage to the interests of the broad masses of the people, and avoid causing 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 is a pyramid scheme? What are the forms of MLM? Answer: Referring to a series of files on the State Council’s crackdown on pyramid schemes in recent years and combined with law enforcement practices in recent years, the regulations define pyramid schemes, stipulating that organizers or operators develop personnel and directly or indirectly develop the number of personnel or sales performance through the developed personnel. Any behavior that seeks illegal benefits, disrupts economic order, and affects social stability is a pyramid scheme that is based on calculation and payment of remuneration, or requires the persons being developed to obtain membership qualifications on the condition of paying a certain fee. At the same time, in order to facilitate understanding, the regulations also list three forms of MLM, namely, MLM behavior in which remuneration is calculated based on the number of developed downlines (i.e., "pulling people"), and MLM based on the sales performance of the developed downlines. The MLM behavior of calculating rewards (i.e. "team compensation"), and the MLM behavior of defrauding entry fees. Question: What requirements do the regulations impose on local people’s governments at all levels and their relevant departments? Answer: The regulations clearly stipulate the working mechanism for combating pyramid schemes and the division of responsibilities of various departments. MLM has become a social nuisance. Practice has proved that the crackdown on MLM must take the leadership of the Communist Party, the joint action of departments, social participation, and comprehensive management measures. Guangdong, Shandong and other provinces and cities have included the crackdown on MLM in the comprehensive management of social security. To curb MLM, Strictly punishing MLM leaders will play a positive role. To this end, the Regulations stipulate that the government shall take the lead, with the public security, industry and commerce as the main players, and relevant departments such as justice, commerce, telecommunications, and education to actively participate in the cooperation in accordance with their respective responsibilities, forming an anti-pyramid scheme that each performs its duties, cooperates with each other, and has consistent rights and responsibilities. mechanism. The regulations stipulate that the industrial and commercial department is primarily responsible for investigating and handling pyramid schemes such as "buying people," "paying for the team," and defrauding entry fees. Since the organizers of current pyramid schemes often use both violence and mental control over participants, restricting personal freedom, illegal detention, and even vicious cases such as robbery, kidnapping, and murder, the regulations stipulate that those who recommend jobs, engage in business activities, etc. in pyramid schemes Anyone who deceives others to leave their place of residence to gather illegally and restrict their personal freedom will be investigated and dealt with by the public security organs in conjunction with the industrial and commercial departments. Suspected criminal acts investigated and handled by the industrial and commercial departments shall be transferred to the public security organs for filing and investigation in accordance with the law. In response to the increasingly prominent situation of using the Internet to engage in pyramid schemes in recent years, the regulations stipulate that those who use the Internet to publish pyramid schemes information and encourage or trick others to participate in pyramid schemes shall be investigated and punished by the industrial and commercial department in conjunction with telecommunications and other departments in accordance with the regulations. Q: What investigation and punishment measures and systems are stipulated in the regulations? Answer: In order to effectively carry out the work against pyramid schemes and better protect the interests of the people, the regulations empower law enforcement departments to inquire, inspect, seal, detain, apply for legal departments to freeze illegal funds and other investigation and punishment measures. In order to promptly expose the illegal activities of pyramid schemes, prevent the public from being deceived, and avoid and reduce the greater losses caused by pyramid schemes to society, the regulations stipulate a warning and reminder system. For those that are verified to be pyramid schemes, the industrial and commercial and public security organs may publicly issue warnings or reminders to the public. By issuing early warnings when MLM is in its infancy and publishing investigated MLM cases, we can expose its deceptive nature and reduce and prevent the public from suffering greater losses. In order to mobilize social forces to participate in combating pyramid schemes, carry out mass prevention and treatment, promptly obtain case clues, and quickly and effectively crack down on pyramid schemes, the regulations stipulate a mechanism for reporting and complaining about 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 should investigate and verify the reporting clues and investigate and deal with them in accordance with the law; they should keep the whistleblower confidential. If the whistleblower is found to be true after investigation, certain rewards can be given to the whistleblower in accordance with relevant national regulations.

In addition, in order to administer in accordance with the law and prevent administrative agencies from abusing their powers, the regulations also clearly stipulate the procedures for law enforcement departments to implement administrative coercive measures. For example: when taking the measures stipulated in these regulations, the industrial and commercial department must report in writing or verbally to the main person in charge of the industrial and commercial department at or above the county level and obtain approval; when investigating suspected pyramid schemes, there must be no less than 2 law enforcement officers; it also stipulates avoidance system etc. Question: What legal responsibilities should entities and individuals engaged in pyramid schemes bear? Answer: The regulations set corresponding legal responsibilities for different personnel in pyramid selling activities. Fines of up to 2 million yuan have been set for organizers and key elements of pyramid schemes; those who constitute a crime will be held criminally responsible in accordance with the law. General participants will be warned; MLM participants who have participated many times and have refused to change despite repeated admonitions, and who are not key members but have indeed deceived others and caused losses to others, will be ordered by the industrial and commercial department to stop illegal activities and may be fined not more than 2,000 yuan. fine. At the same time, the regulations also stipulate that for those who provide business premises, training venues, supply of goods, custody, warehousing and other conditions for pyramid schemes, the industrial and commercial departments have the right to order them to stop illegal activities, confiscate illegal gains and impose fines. For those who provide Internet information services for pyramid schemes, the industrial and commercial departments have the right to order them to stop illegal activities, and relevant departments will impose penalties in accordance with relevant Internet regulations. Question: How to implement this regulation? Answer: The promulgation of the regulations is of great significance for cracking down on pyramid schemes, punishing illegal criminals, maintaining market economic order and social stability, and protecting the safety of people's lives and property. In the next step, the State Council will organize relevant departments to focus on the following aspects of work: First, organize local people's police and relevant law enforcement departments to seriously study the regulations, establish and improve the working mechanism to combat pyramid schemes, carry out comprehensive management, effectively perform their duties, and do Laws must be followed, law enforcement must be strict, and violations must be investigated, and we must conscientiously implement the regulations. The second is to organize and carry out legal publicity activities, through news media, newspapers and magazines, radio and television, the Internet and other media, to use various methods to publicize legal provisions, educate the public to know and understand the law, consciously abide by the law, and improve the public's ability to identify, prevent and resist pyramid schemes. ability. The third is to carry out special crackdowns, apply regulations to investigate and deal with a number of major cases, purify market order, severely punish organizers and key elements, deter illegal personnel, and resolutely nip pyramid schemes in the bud.