Crackdown targets 'pyramid sales' firms

PUBLISHED : Monday, 12 September, 1994, 12:00am
UPDATED : Monday, 12 September, 1994, 12:00am

THE Chinese Government has issued a new regulation to control the growth of 'pyramid selling'.

Quoting a notice issued by the State Administration for Industry and Commerce at the weekend, Xinhua (the New China News Agency) said industrial and commercial departments across the country would carry out a 'clean-up' inspection immediately.

Most pyramid sales companies came from Hong Kong and their agents were required to pay the companies a fee or buy a quantity of their products before they would be given permission to join the firms as sales agents, the agency said.

Under the new regulation, companies found to have broken the law will be prosecuted.

According to the notice, China will ban all pyramid sales companies, which earn their profits mainly through admission fees paid by their sales agents, and companies which require agents to buy their products before admission.

Departments concerned would also crack down on companies if their advertisements are found to contain false information on the quality, application and origin of production of their products.

Stressing that commercial and industrial departments would intensify their supervision of pyramid sales business, the administration said businesses without official approval had to be wiped out.

Meanwhile, all government cadres have been forbidden from joining pyramid sales companies as agents.

The Government said pyramid selling was a factor behind the soaring rate of commercial fraud in recent years.

Some companies were able to sell their goods at unreasonably high prices, officials warned.

Not only were some of the products carried found to be fake, some were brought into the country through illegal channels, it was alleged.