Laws of the People's Republic of China

State Administration for Industry and Commerce

Circular of the State Administration for Industry and Commerce on Carrying out the Special campaign concerning Severe Crackdown on Pyramid Selling and Disguised Pyramid Selling

Gong Shang Ming Dian [2004] No.16

April 5, 2004

The administration for industry and commerce in all provinces, autonomous regions, municipalities directly under the Central Government and the cities specifically designated in the state plan,

In the recent years, upon the unified arrangement of the State Council, the administrative departments of industry and commerce at all level have regarded crackdown on pyramid selling and disguised pyramid selling as an important task of rectifying and standardizing the order of the market economy, and under the leadership of the CCP committees and people's departments at all levels and in close cooperation with other relevant departments, obvious effects have been obtained. However, since this year pyramid selling and disguised pyramid selling have risen to some extent so the situation is still serious in cracking down on pyramid selling and disguised pyramid selling. A new situation appeared that in-school students in some regions gathered to participate in the pyramid selling activities; some illegal organizations, under various banners, by expanding members and organizing networks, are engaged in pyramid selling and disguised pyramid selling; even in some non-focus regions appears the situation that pyramid sellers gathered and carried out illegal activities. Recently, with regard to the activities of pyramid selling and disguised pyramid selling which appeared in Guangdong Maoming, Hubei Wuhan, Jiangsu Wuxi and Chongqing, leaders of the State Council attached much importance and explicitly indicated that once found, pyramid selling and disguised pyramid selling shall be clamped down. For the purpose of implementing the spirits of the instruction of the leaders of the State Council, the State Administration for Industry and Commerce has decided that as of the issuance date of this Circular till July 30, a special campaign shall be organized and carried out to severely crack down on pyramid selling and disguised pyramid selling. Relevant issues are hereby notified as follows:

1.

Guiding thoughtWe shall take the important thought of the "Three Represents" as our guide and seriously put into practice the guidelines of the 16th National Party Congress and the Third Plenary Congress and the Central Economic Working Conference. We shall lay emphasis on politics, overall situation and stability and further strengthen the sense of political responsibility and mission. We shall take every effective measure to severely crack down on pyramid selling and disguised pyramid selling and continuously consolidate the progress achieved.

2.

FocusThe focus of special campaign shall be: to continue the full swing implementation of crackdown on pyramid selling, ban all kinds of pyramid selling and disguised pyramid selling behavior, investigate and treat major cases of pyramid selling and disguised pyramid selling, firmly prevent the surge of large-scale pyramid selling and disguised pyramid selling activities. We shall focus on clamping down on hideouts and severely crack down on pyramid selling and disguised pyramid selling which mainly employs the method of "counting the number of people". We shall ban the use of Internet for pyramid selling and disguised pyramid selling. We shall investigate and treat in a strict manner the illegal activities by both domestic and overseas enterprises that participate in pyramid selling and disguised pyramid selling. We shall strictly punish in accordance with the law those enterprises situated at the intersection of transformation, who are engaged in pyramid selling and training activities against the regulation.

3.

Major regions and targeted enterprisesThe major regions in special campaign are Guangxi, Guangdong, Hebei, Henan, Jilin, Liaoning, Shandong, Shanxi, Jiangsu, Sichuan, Chongqing and Beijing. We shall also allocate personnel in other regions and concentrate both the personnel and time to launch a powerful and dynamic special campaign in a nationwide scale. During the action, we shall resolutely ban the illegal activities of a group of pyramid selling and disguised pyramid selling organizations, such as "Wuhan Xintian", "Shenzhen Wenbin", "Elite 88", "US Distance Learning" and "US Internet Fund", once it is found that they take part in those activities.

4.

Specific measures

(1)

We shall crack down on every sign of activities and continue to remain highly alert. Each region shall start with implementing the responsibility system and fault-prosecution system. They shall strengthen daily oversight and management and improve the market inspection system, improve the early-warning mechanism and emergency handling mechanism, and gradually establish administrative oversight and management system to crack down on pyramid selling and disguised pyramid selling. We shall further strengthen the supervision and control of the joining area between cities and rural areas and regions with high density of migrant population. These regions are all characterized by greater potential and higher ratio of cases. The steps taken above are aimed at wiping out pyramid selling and disguised pyramid selling at their embryonic stage and preventing them from becoming a trend.

(2)

We shall lay emphasis on the key points and keep a firm hand on investigating and treating major cases. We shall make full-scale examination of the regions which have turned out a relatively strong response towards pyramid selling and disguised pyramid selling activities. We shall organize and unify the investigation and treatment of trans-regional pyramid selling, cooperate with relevant departments like public security bureau in investigation and treatment of major cases of pyramid selling and disguised pyramid selling and concerned organizations, which have brought great impact on the society and involved wide scope of areas and seriously endangered social stability and damaged the economic order. We shall punish severely the organizers of pyramid selling and disguised pyramid selling and transfer them to judicial organ for criminal liabilities , if they constitute crimes. We shall resolutely clamp down on those enterprises who are engaged in illegal activities of pyramid selling and disguised pyramid selling.

(3)

We shall increase the strength of supervision on enterprises situated at the intersection of transformation. It is important to learn thoroughly the operation of those enterprises within the area under one's jurisdiction, improve every item of supervision system, and to rectify and standardize those enterprises in strict accordance with the state regulation. It is also important to investigate and treat according to the law those engaged in illegal activities like pyramid selling, training in violation of the regulation and trans-regional operation. We shall make public the typical cases and urge the enterprises situated at the intersection of transformation to regulate their business conduct in accordance with the state regulations.

(4)

We shall strengthen publicity and guidance and increase the strength of supervision by the society. We shall take various effective steps to publicize greatly the relevant state regulation and make public and unveil the harm and cheating of pyramid selling and disguised pyramid selling, make public the typical cases, so that the general public can better identify and voluntarily resist them. We shall strengthen the cooperation with relevant departments and do a good job directed at the public consisting college and university students, youth, women, farmers and laid-off workers. We shall mobilize the whole society to take part in crackdown on pyramid selling and disguised pyramid selling, thus forming a favorable trend where the whole society make a joint effort to combat and crack down on illegal activities.