If the person concerned suspects that it may be suspected of being a pyramid scheme, he or she can report it to the local public security authorities or the Industry and Commerce Bureau.
The Regulations on the Prohibition of Distribution
Article 2 Distribution, as referred to in these regulations, refers to the development of people by the organizer or operator, through the development of people on the basis of the number of people developed directly or indirectly by the number of people developed or the sales performance of the basis for calculating and paying compensation, or require the development of people to pay a certain amount of fees as a condition to obtain the qualification of joining the way to obtain illegal benefits, disrupting the economic order, affecting social stability, and so on. Behavior that affects social stability.
Article 3 The local people's governments at or above the county level shall strengthen their leadership in investigating and dealing with pyramid schemes, and support and urge the relevant departments to fulfill their supervisory and management duties in accordance with the law.
Local people's governments at or above the county level shall, as needed, establish a coordination mechanism for investigating and dealing with pyramid schemes, and coordinate and solve major problems in the work of investigating and dealing with pyramid schemes in a timely manner.
Article 4 The administration for industry and commerce and the public security organs shall, in accordance with the provisions of these regulations, investigate and deal with pyramid schemes within their respective areas of responsibility.
This is to be determined from the business model of this company, whether its business model is in line with the definition of pyramid selling in national laws, and whether it is a legal direct selling or illegal pyramid selling.
To determine whether a company's business behavior is a pyramid scheme, don't let those complicated business models interfere with your independent thinking. And currently the vast majority of companies doing MLM from the new packaging, confuse direct selling and MLM business model to build channels. Therefore, the correct distinction between direct selling and MLM two business models, you can judge a company's business behavior is not a pyramid scheme.
Direct selling itself is the normal business behavior of enterprises, and there is a fundamental difference between pyramid schemes.
Difference 1: with or without an entry fee
Illegal pyramid schemes usually have several obvious characteristics, the first is the presence of a relatively high entry fee. Some illegal pyramid schemes charge a stiff entry fee, ranging from three to five hundred to one thousand dollars. Of course, there are some "smart" illegal pyramid scheme companies, they will have other alternative forms, such as: to subscribe to the product as the reason for the entry to charge a few hundred to a thousand dollars in fees. It is understood that these illegal pyramid schemes participants through the payment of an initiation fee or subscription of goods and other disguised payment of the initiation fee, to obtain the qualification to join, introduce or develop others, and in return. And in the regular direct selling company is not this piece of cost.
Difference two: there is no reliance on quality products
This is also a fundamental difference between illegal pyramid schemes and direct selling companies, illegal pyramid schemes often rely on products that are worthless but high-priced products, a set of cosmetic products worth tens of dollars can be priced at hundreds or even thousands of dollars. The standardized direct selling company's product price tag is value for money.
Difference three: whether the product circulation
Illegal pyramid selling enterprises is just a "crowd financing" game, high entry fees coupled with the market can not be circulated in the low-quality high-priced products, will not be maintained for too long. Their sales approach is to take the entry of all sales representatives to subscribe to the product, but these products do not circulate in the market, only as a sample of the next sales staff to pull in or promotional products. The final situation is that all sales people have a copy of the product, and the product is not circulated or sold in the market at all.
And the organizers of these illegal pyramid schemes also derive most of their revenue from the fees paid by participants in the form of initiation fees or subscriptions to commodities, etc. Because the products do not circulate, the organizers most often use some of the fees paid by later participants to pay for the remuneration of earlier participants to maintain their operations.
But direct selling enterprises are completely opposite, on the one hand, the enterprise products require good quality. For direct selling companies, the product is good or not is the fundamental reason to determine the sales of the product, because the distribution channel of the product is from the manufacturer through the marketing representative to the hands of the customer, there is no other link in the middle, and there is less advertising.
Difference 4: whether there is a return guarantee system
It is understood that illegal pyramid selling companies can not return the product once the sale, or find ways to return customers to set up obstacles.
This is completely different in direct selling companies. Any regular direct selling company will provide customers with a perfect purchase guarantee. For example, to the general customer commitment in the purchase of goods within 7 days after the return of the product still has a sales value, you can get 100% cash refund. For high-quality customers, some direct selling companies also promise that within 10 days of purchase can be returned once used or non-sales value of the product (the remaining amount of at least half) can get 50% cash refund or 50% of the equivalent purchase amount.
Difference 5: the structure of the sales force with or without transcendence
To pull the head to realize the gains of illegal pyramid selling companies, the structure of the sales force is often presented as a "pyramid" type, such a sales structure leads to whoever comes in first on the first, and at the same time, the first participants in the development of the downline members from the entrance fee paid by the members to obtain income, and the amount of income by the lower line members. The first participant receives income from the initiation fee paid by the members of the downline, and the amount of income is determined by the order of their joining, and the consequence is that the first participant will always be ahead of those who come after them.
This kind of unsurpassed in the direct selling company does not exist, in the direct selling enterprise regardless of the participants to join the successive in the earnings of the performance of "more work, more pay".
Difference six: with or without store operation
China experienced a comprehensive rectification of pyramid selling in 1998, many foreign direct selling enterprises have been transformed. Since then, the "store to hire salesmen" model has become the main sales model of the standardized direct selling enterprises. This particular direct selling operation allows the salesman to be attributed to the store, which not only has a direct relationship with the company but is also easy to manage.
Illegal pyramid selling enterprises often stay in the development of personnel, organizational networks engaged in the state of business activities without stores. Until today, the presence or absence of stores is still an intuitive distinction between illegal pyramid schemes and direct selling in our market.