What Are the Different Types of MLM Businesses?

Illegal Pyramid selling means that the organizer or operator requires the development personnel to continue to develop other personnel to join through the development of offline personnel. The development personnel are calculated and paid based on the number of direct or indirect rolling development personnel. Including material and other benefits. Driven by huge benefits, many participants even tricked their relatives into joining, resulting in the destruction of their homes and great harm to the society.

Illegal pyramid schemes

The national criminal law stipulates that organizations and leaders use the name of business activities such as sales of goods and services, and require participants to obtain qualifications by paying fees or purchasing goods and services, and form a hierarchy in a certain order, directly or indirectly based on the development of personnel. If the quantity is used as a basis for remuneration or rebate, to induce or coerce participants to continue to develop others to participate in, to defraud property, or to disrupt the economic and social order of pyramid schemes, they shall be sentenced to fixed-term imprisonment or imprisonment for less than 5 years and fined; if the circumstances are serious, they shall be punished for more than 5 years Term of imprisonment and fines. ^[1]

Overview of Illegal MLM

"For the problems that the industry has been worrying about, the new direct selling law adopts" subtraction "to gradually remove the relevant provisions that were not suitable for market development." Wang Wanjun, an expert in direct selling research, believes that from the two regulations introduced, the new regulations have already been established in individual places Modified to make it more in line with the development of the market.

"The first change: direct selling companies have distribution rights", Wang Wanjun revealed that, in addition to direct selling companies' products, they can also sell products produced by their parent companies and holding companies. Direct selling companies can obtain trading rights and Distribution rights, which greatly enriched the product categories of a direct selling company.

"The second change: the restriction on the number of stores, standards, etc., and a new concept of service outlets were proposed." The previous draft stipulated that direct sales companies applying for the establishment of provincial branches must be in more than 10 cities in the province, city, and autonomous region. Establish no less than 10 stores or 20 franchise stores, but the new regulations only require enterprises to have at least one service outlet in the area where they do business. Wang Wanjun believes that service outlets are more responsible for after-sales protection than stores that are responsible for sales tasks, which makes the Chinese direct sales model closer to the international concept of storeless sales.

The third change: the time for returning goods was changed to within 30 days from the date when consumers purchased direct sales products; within 30 days from the date when direct sellers purchased direct sales products, Wang Wanjun revealed that the former rule was within 50 days and the latter was within 60 days Returns. In this regard, Wang believes that as the maximum amount of bonuses paid by direct selling companies based on sales performance will not exceed 30 days, the changes here will to a certain extent avoid the passive return of the company's financial management due to the long return period, and also give direct sellers Set a reasonable cooling-off period.

In addition, "the fourth word of the regulation" production-oriented "was removed; the seventh word of the" production-oriented enterprise "was also removed." Therefore, Wang Wanjun believes that the new rules open up a non-production enterprise Enter the gate of the direct selling industry according to law.

Clear definition of illegal MLM

"For certain actions that may disrupt the market, the regulations have adopted an" addition "to try to avoid the hidden dangers that the opening of direct sales may bring to the market." At the same time, Wang Wanjun believes that the two newly issued regulations clearly divide the difference between illegal pyramid schemes and direct sales, and include pure pull heads and pyramid-shaped sales structures into the governance of heavy punches.

At the same time, as the method of remuneration is the most fundamental basis for the national administrative function management department to identify direct selling and illegal pyramid schemes, Wang believes that the "Direct Sales Management Regulations" also make strict provisions on the method of remuneration for the direct sales system (specifically: The commission obtained can only come from its direct sales; the total amount of various forms of rewards, commissions, and other material rewards must not exceed 30% of its sales.) This shows the government's position to prohibit multi-level direct sales.

The entry threshold is a mandatory requirement, and it also blocks illegal MLM companies from the door and filters a group of unqualified companies for the direct selling market. It is reported that the new regulations make the following requirements for entry thresholds. Enterprises applying for direct sales need to have a registered capital of RMB 80 million and pay a minimum deposit of RMB 20 million. At the same time, there are also requirements for annual sales.

Illegal MLM Application License

The "Direct Sales Management Regulations" and "Illegal MLM Regulations" state that the two regulations will be implemented on December 1, 2005 and November 1, respectively. Therefore, all companies intending to engage in direct sales will submit their license applications to the business management department of their headquarters after December 1st, and the local commerce department will submit them to the Ministry of Commerce for review and issue of licenses.

In this regard, lawyer Liu Zhong, a partner of Dacheng Law Firm and an expert on direct marketing regulations, believes that from the timetable of the promulgation of the regulations on September 1 to the entry into force of the regulations in November and December, the Chinese government has given sufficient time for direct marketing companies to conduct Make timely adjustments. According to Liu Zhong's analysis, according to the current application and approval procedure, it takes 90 working days to calculate. It is estimated that it will not be until March 2012 that the first batch of enterprises that have obtained a Chinese direct sales license can officially operate direct sales in China. Another expert analyzed that the "Illegal MLM Regulations" came into effect one month earlier than the "Direct Marketing Management Regulations", indicating that the government will inspect all enterprises to check whether they have major violation records and sort out the industry through this move.

"As long as everyone competes fairly on the same starting line, we will win more development space in China." Regarding the adjustment of the two regulations or "strict" or "loose", Herbalife's senior management's statement reflects to a certain extent The voice of the enterprise. Data show that in 2004, the turnover of the entire direct selling industry in China was about 35 billion yuan, of which 10 foreign-funded transition companies had a turnover of 30 billion yuan, and the overall turnover of domestic-funded enterprises was less than 5 billion yuan. Relevant experts predict that the annual growth rate of China's direct selling market is expected to reach 20% or even higher.

Based on this, existing direct selling companies in the Chinese market will enter a three-month adjustment period starting this month. "Different companies have different development processes and development models in China, but the same thing is that they will all face change again." In this regard, Yu Lu, Secretary General of the World Direct Selling Chamber of Commerce, believes that the introduction of the regulations is to regain public trust in the direct selling industry Important conditions.