French fragrance marketing scheme under fire for leaving customers 'out of pocket'

Fragrance maker says complex bonus system delivers big profits to those at top of sales chain

PUBLISHED : Tuesday, 01 October, 2013, 12:00am
UPDATED : Tuesday, 01 October, 2013, 4:33am

Customers who buy French fragrance oil from an Asian distributor in Hong Kong using a complicated multi-level marketing scheme may be paying hundreds of dollars more than the usual retail price.

The oil's maker, Lampe Berger Paris, says its product is sold for HK$299 a bottle in shops but more than HK$400 through the controversial scheme operated by Digital Crown Holdings (HK).

John Vullierme, director of LB Hong Kong, whose company commissioned an independent investigation of its former distributor last year, said he believed the discrepancy was a result of the scheme's complex system of bonuses given to members according to their seniority. He said not everyone who joined the chain managed to make big money out of its bonus scheme.

"Only the very top layer of the chain, say like 20 to 30 per cent of the members, is making big money, at the expense of the others," he said.

The South China Morning Post reported yesterday that LB had stopped supplying its fragrance products to DCHL after finding it had exaggerated claims for its brand and used sales tactics the Paris company had not authorised.

In Hong Kong, DCHL encourages members including mainland travellers to make large purchases and become distributors themselves in order to receive bonuses based on the sales of new recruits. On repeated visits to DCHL's sales centres, P o st reporters found them filled with mainlanders visiting Hong Kong as tourists.

In the Causeway Bay centre, instructors were seen telling new members how they made more than HK$60,000 a month under the system just a few months after signing up as distributors three years ago.

Individual distributors from DCHL are divided into seven levels of seniority. At the bottom are the individual distributors who sign up as members to the scheme and then have to recruit other members.

If they recruit five members, who then each recruit five more in turn, they move up the ranking system to become a Baron. This is followed by Count, Marquis, Duke, Arch Duke and Majesty Duke. Each rank is at least five times bigger in terms of membership than the one below it.

At Count level - with accumulated purchases of about HK$100,000 or having developed a structure of three Barons below them - a distributor can form his or her own company. Such welling systems are banned on the mainland and elsewhere including Macau, Australia and the European Union.

In August, a Hong Kong couple who were individual DCHL distributors were arrested in Shaoguan , Guangdong, for illegal sales activities, including encouraging distributors to recruit salespeople aggressively and collecting big membership fees.

DCHL chain was founded in 1989 by its director Kim Huynh, also called Valery Huynh, a businessman from Guangdong who now holds a French passport. Huyhn's wife, Mary Lim Huynh, another director of DCHL, is a Singaporean who once entered the Miss Singapore contest before emigrating to France.

On its website, DCHL says Huyhn "is a gentleman who had high taste in art appreciation", and dedicated his life to introduce "the elegance of French art work to Chinese counterparts."

One of the main items sold is LB fragrance oil, which has a history dating back 115 years. It was invented by a French pharmacy dispenser called Maurice Berger, who created a lamp to remove odours from hospitals in 1898.

But when the brand was brought into the Asia market by DCHL a decade ago, the chain said it could "improve the quality of indoor air, decompose second-hand smoke and kill bugs".

Vullierme said: "It is most definitely not a magical lamp. The lamps are beautiful to look at, and have a special catalytic diffusion system to clear away odour. But there is no health benefit."