Firms must be big, well established and make their goods - on the mainland Direct-sales companies seeking to enter the lucrative mainland market will be required to have investment capital of at least US$10 million and a turnover of 500 million yuan from the past three years, according to draft legislation. The requirements were included in the draft direct sales management law revealed at last week's China International Fair for Investment and Trade in Xiamen, Fujian province. The highly anticipated law, likely to be promulgated in December and go into force early next year, seeks to bring order to an industry that has been rife with unfair competition, fraud, consumer losses, tax evasion and smuggling. Vice-Minister of Commerce Ma Xiuhong told participants at the session, featuring representatives of the world's top direct-sales firms including Amway and Avon, that the legislation would be based on the principles of equality for domestic and foreign businesses, fair competition and common development, the Huaxi Metropolitan News reported. Deng Zhan , deputy director-general of the Commerce Ministry's Foreign Investment Administration, said the draft law would require direct-sales companies to not only produce their own goods, but produce them on the mainland and contribute 20 million yuan to a guarantee fund. The rules also stipulate that direct-sales companies can operate only in the health cosmetics and consumer products sectors. The legislation will set limits on the number of retail outlets a direct-sales firm can operate within a particular jurisdiction and the commissions that agents can earn based on the percentage of products sold. The draft now sets the maximum commission level at 35 per cent of the price of the goods, significantly lower than the 50 to 55 per cent usually adopted elsewhere. The rules are expected to distinguish between valid direct-sales methods and illegal pyramid schemes - where an agent derives most income from sub-agents instead of customers. Beijing is eager to clearly distinguish between valid direct sales and pyramid selling, analysts say, because the latter is more aggressive in its marketing and there is a risk it will get out of control - especially in the countryside. In 1998, the mainland banned all direct selling after the media exposed rampant fraud in the industry. However, direct-sales firms managed to sidestep the ban, which allowed them to sell their products through retail outlets and sales representatives. Meanwhile, more than 1,000 university students in Guangzhou pledged at the weekend to not take part in any pyramid schemes, the Nanfang Daily News reported. A recent investigation found more sthan 2,000 students across the country were involved in a fraudulent direct-sales scandal that originated in Chongqing.