State Council, Regulations on the Prohibition of Pyramid Selling

Promulgated: August 23 2005
Effective: November 1 2005
Applicability: The term 'pyramid selling' refers to an act whereby an organizer or a promoter of a business operator seeks illegal benefits, disturbs the economic order and affects the social stability by calculating and paying remuneration to participants based on the number of persons recruited directly or indirectly by them or based on their sales results, or by requiring participants to pay a certain fee as the condition for admission, or by other means (Article 2).

Main contents: The following acts are regarded as pyramid selling:
(1) in order to seek illegal benefits, organizers or operators through promoters requiring participants to recruit other people and calculating and paying remuneration (hereinafter, including material rewards and other economic benefits) to participants based on the number of persons recruited directly or indirectly by them on a rolling basis;
(2) in order to seek illegal benefits, organizers or operators through promoters requiring participants to pay a fee or pay a fee under another guise by way such as subscribing to goods for admission or for acquiring the qualification of recruiting other members; or
(3) in order to seek illegal benefits, organizers or operators through promoters requiring participants to recruit other people, forming an upline and downline relationship and using sales results downline as the basis for the calculation and payment of remuneration upline (Article 7).
Part Four lists the penalties for organizing and planning pyramid selling; introducing, inducing or coercing others to join pyramid selling; participating in pyramid selling; and providing internet information services for pyramid selling.