直销管理条例
Regulation on Direct Selling Administration

Chapter I General Provisions

Article 1   This law is enacted for the purpose of regulating the direct Selling behaviors, strengthening the supervision on the direct selling activities, preventing fraud and protecting consumers’ legitimate rights and the social and public interests.

Article 2     Direct selling activities conducted in the territory of People’s Republic Country of China, shall observe this law.

The State Council Ministry of Commerce, together with the State Administration for Industry and Commerce shall determines and issues the direct selling product range with reference to the development status of direct selling industry and the needs of consumers.

Article 3     Direct selling as used herein means a type of business model, which direct selling enterprise recruits distributors, and distributor sells products directly to end consumers away from a fixed retail location. 

Direct selling enterprise as used herein means the enterprise, which is approved to sell products by adopting the direct selling model according to this law.

Distributor as used herein means the sales promoter who sells products to consumer away form a fixed retail location.

Article 4     Enterprise established in the territory of People’s Republic of China (named enterprise for short), can apply to be direct selling enterprise according to this law, and can sells the products manufactured by itself, its parent companies or subsidiary companies.

Direct selling enterprise has the right to trade and distribute.

Article 5   When conducting direct selling activities, direct selling enterprises and its distributor may not propagandize and sell by means of fraud and misleading.

Article 6   The State Council Ministry of Commerce and the State Administration for Industry and Commerce shall, within the scope of their respective duties and the provisions of this law, be responsible for the supervision on the activities conducted by the direct selling enterprises and its distributors.

Chapter II Incorporation and Change of direct selling enterprise and its branches

Article 7   The following conditions must be fulfilled for applying to be direct selling enterprise

1)   Investor must have sound business credit, with no illegal operation records during the past five years. And for foreign investors, it must have been involved in the direct selling business for at least three years outside China.

2)   The pay-up registered capital is not less than 80 million Yuan

3)   Enterprise shall make in full the amount of the deposit to appointed bank according to this law.

4)   Enterprise shall establish the information record and disclosure system.

Article 8   An applicant for direct selling enterprise shall fill in the application form, and submit the application documents and data listed below.

1)   Verification materials, which conform to the article 7 of this law

2)   Enterprise’s article of association. Chinese-foreign joint venture and Chinese-foreign cooperative venture shall submit the join-venture or cooperative-venture contract.

3)   Market Plan Report, including the service center plan for direct selling activities approved by country level or above government

4)   Products specification, which conform to country standard.

5)   Sample of sales promoter contract.

6)   Verification certificate issued by accounting firm.

7)   Agreement on use of deposit with appointed bank according to this law.

Article 9     Applicant shall submit the application to State Council Ministry of Commerce via the commerce department of province, autonomous region, municipality directly under the central government. the commerce department of province, autonomous region, municipality directly under the central government shall submit the application documents and data within 7 days upon receiving. State Council Ministry of Commerce shall make a decision of approval or not within 90 days upon receiving and issue the direct selling license after asking State Administration for Industry and Commerce for advice.

Applicant shall apply for the change in registration to Administration for Industry and Commerce according to any law by force of the direct selling license.

State Council Ministry of Commerce shall censor and issue the direct selling license with reference to the national security, social and public interests and the development of direct selling industry.

Article 10  When conducting direct selling activities, direct selling enterprise must establish a branch in the administrative zone of province, autonomous region, municipality directly under the Central government where it plans to operate (named branch for short in the following).

Direct selling enterprise shall establish service center in the zone where it operate convenient for products price learning, products returning or changing and other service for consumers and distributors. The establishment of the service center shall conform to the requirements of local country level government.

Direct selling enterprise shall submit verification documents and materials, which meet the requirement mentioned in the pre-paragraph when applying to establish branch, and shall register in Administration of Industry and Commerce if approved.

Article 11  Any substantial changes in the content listed in article 8 of this law occur, direct selling enterprise shall apply for approval to State Council Ministry of Commerce according to the procedure fixed in the provision 1 of article 9.

Article 12  The State Council Ministry of Commerce shall issue the name list of direct selling enterprises in the governmental website, and shall update it in time.

Chapter III Distributor Recruitment and training

Article 13     Direct selling enterprise and its braches can recruit distributors. Natural persons, other legal persons or organizations are not permitted.

The legitimate sales promotion activities shall not be punished by the reasons of no business license.

Article 14     Direct selling enterprise and its branches must no issue the advertisements to propagandizing the sales payment, nor chose paying entry fee or purchasing products to be the conditions of being distributors.

Article 15     Direct selling enterprise and its branches must not recruit the below persons as distributor.

1)   Persons under age 18.

2)   Persons with limited capacity for civil conduct or without capacity for civil conduct.

3)   Full time Student.

4)   Teacher, doctor and nurse, official and army man in service.

5)   Staff of direct selling enterprise.

6)   Foreigners.

Article 16     Direct selling enterprise shall sign up the sales promotion contract with its recruited distributors, and makes sure that distributors only operate in the administrative zone of province, autonomous region, municipality directly under the Central government, where the enterprise has established a branch and service center.

Persons, who has not signed up sales promotion contract with direct selling enterprise, is not permitted to conduct direct selling activities by all manner of means.

Article 17     Distributor has the right to cancel the contract within 60 days from the date he signed up the contract. And if the distributor cancels the contract after 60 days from the date he signed up, he shall make notice to direct selling enterprise 15 days in advance.

Article 18     Direct selling enterprise shall train and exam his recruited distributors. If the distributor passes the exam, the enterprise shall issue the distributor certificate. The distributor without certificate is not permitted to conduct direct selling activities.

Direct selling enterprise must not charge the distributor for the sales training and exam.

Others legal persons, organizations and nature persons, must not organize the sales training for distributors by any manner of means.

Foreigner shall be conduct

Article 19  The trainer for the distributor sales training shall be as the staff of direct selling enterprise, and shall conform to the following conditions.

1)   One year working experience in enterprise.

2)   Bachelor degree and above, with professional knowledge about law and marketing.

3)   No crime committing records.

4)   No illegal operation records.

Direct selling enterprise shall award the certificate to the trainers, who meet the requirements of the pre-provision, and shall submit the trainer list to the State Council Ministry of Commerce for record. The State Council Ministry of Commerce shall promulgate the trainer list in the official website.

Foreigners shall not conduct the sales training activities.

Article 20  The distributor certificate and the trainer certificate issued by direct selling enterprise shall be made and pressed according to the sample determined by State Council Ministry of Commerce.

Article 21     Direct selling enterprises shall be responsible for the validity of the sales training for distributors and the safety of the training order and training place.

Direct selling enterprise shall be responsible for the validity to the training content.

State Council Ministry of Commerce, State Administration for Industry and Commerce and other relevant departments shall formulate the detailed rule on the distributor sales training.

Chapter IV Direct selling activities

Article 22     Distributor shall abide to the following when promoting to consumers

1)   Shows his distributor certificate and the sales promotion contract.

2)   Intrusion into a consumer’ home for hard sell is prohibited without any permission. And the distributor shall stop selling and withdraw from the consumer’s home if required.

3)   Introduces the detailed products return policies of the direct selling enterprise before arriving at an agreement.

4)   Provides the invoice or other vouchers, with the content of the products returning policy, address and telephone number of local service center, etc. after arriving at an agreement.

Article 23     Direct selling enterprise shall label the price on the direct selling products, which shall be consistent with the price of the product displayed in the service center. A distributor shall sell the products with labeled price.

Article 24     Direct selling enterprise shall at least pay the distributor by month. Payment to the distributor including the commission, bonus and other kinds of benefits, shall be calculated only based his own sales, and may not exceed 30 percent of the sales of the product to consumers.

Article 25     Direct selling enterprises shall establish and implement consummate product returning and replacing policies

A consumer, within 30 days from the buying date, may require returning or replacing the products via direct selling enterprise, its branches and local service centers, or via the distributor who provides service if the products have not been used. The consumer shall provide the buying invoice or other vouchers provided by direct selling enterprise. The direct selling enterprise, its branches and local service center and distributor must pay the refund or replace the products within 7 days from the date being required.

A distributor, within 30 days from the buying date, may require returning or replacing the products via direct selling enterprise, its branches and local service centers if the products have not been used. The distributor shall provide the buying invoice or other vouchers provided by direct selling enterprise. The direct selling enterprise, its branches and local service center must pay the refund or replace the products within 7 days from the date being required.

Under other circumstances, the direct selling enterprise, its branches and local service centers shall handle the products returning and replacing according to the relevant laws and administrative regulation, and the provisions of the contract if required.

Article 26  It is the duty of a direct selling enterprise to provide evidence to support its allegations when any dispute about products returning and replacing occurs between enterprise and its distributors, or between enterprise, distributor and the consumers.

Article 27     Direct selling enterprise shall hold jointly liabilities for its distributors’ activities. However, in the circumstance that the distributor’s activity is proved to be independence of direct selling enterprise, the liability shall be exempted.

Article 28     Direct selling enterprise shall establish and implement the information record and disclosure system according to the regulation issued by the State Council Ministry of Commerce, together with the State Administration for Industry and Commerce.

The content, method and other requirement of the information record and Disclosure system shall be otherwise stipulated by State Council Ministry of Commerce, together with State Administration for Industry and Commerce.

Chapter V Deposit

Article 29     Direct selling enterprise shall establish an account for deposit in the bank jointly designated by the State Council Ministry of Commerce and the State Administration for Industry and Commerce and delivery the deposit.

The deposit is 20 million Yuan when applying. And when the enterprise starts operation, the deposit should remain at 15 percent of their sales in the previous month. The deposit is not higher than 100 million Yuan, also not less than 20 million Yuan. The interest of the deposit belongs to the direct selling enterprise.

Article 30  The State Council Ministry of Commerce and the State Administration for Industry and Commerce may jointly decide to use the deposit under any of the following circumstances.

1)   Refused to pay to distributor, or refused to pay the refunds for returning products without any justifiable reasons

2)   Cannot afford the payment under the circumstances of stopping operation, merge, disbandment and bankrupt.

3)   Refused to pay, or cannot afford the payment of, the losses caused by the products, which shall be paid according to the law without any justifiable reasons.

Article 31     Direct selling enterprise shall complement the deposit up to what stipulated in provision 2 of article 29 within 1 month once the deposit is used according to the article 30.

Article 32     Direct selling enterprises may not use the deposit for guaranty, or assume debts against this law.

Article 33     Direct selling enterprises may resume the deposit from the bank, with the warrant jointly provided by the State Council Ministry of Commerce and the State Administration for Industry and Commerce, if it decides not to conduct direct selling activities anymore.

Article 34  The State Council Ministry of Commerce and the State Administration for Industry and Commerce are jointly responsible for the daily supervision on the deposit.

The State Council Ministry of Commerce and the State Administration for Industry and Commerce shall otherwise enact the detailed rule on deposit

Chapter VI Supervision

Article 35The Administration for Industry and Commerce is responsible for the daily supervision on the direct selling activities of direct selling enterprise and its distributors. And it may exercise the following functions and powers for conducting on-the-spot inspection.

1)   Entering into enterprise for conducting inspection.

2)   Ordering to provide relate documents, data and evidences.

3)   Questioning the parties concerned, interested person and other persons concerned, and requesting to provide related materials.

4)   Checking, reproducing, sealing and seizing materials and property concerned the direct selling activities of the direct selling enterprise.

5)   Checking the qualification certificate of distributor, qualification trainer certificate and etc.

When Administration for Industry and Commerce conducts the on-the-spot inspection, there shall be not less than 2 law-enforcing officers, who shall show the identification papers. And it needs to be approved by the persons in charge of country level Administration for Industry and Commerce when conducting sealing and seizing.

Article 36  The Administration for Industry and Commerce is responsible for the daily supervision. It may ordered relevant companies who is suspected violation of this law to cease operation activities after being approved by the persons in charge of the Administrative department for Industry and Commerce at or above country level.

Article 37  The Administration for Industry and Commerce shall setups and publicizes the telephone number for impeaching, accept the impeaching and complaints, investigates and handles it in time.

Administrative department for Industry and Commerce shall keeps secret for the impeacher, and shall rewards him in accordance with relevant regulation.

Chapter VII Legal Liability

Article 38     Where a relevant department and its staff members approve an application for direct selling which does not meet the requirements as stipulated in this law, or performance functions against the law, the persons in charge and others held directly responsibility shall be given administrative sanctions according to the law. If the case constitutes crime, criminal liabilities shall be investigated in accordance with the law. The license for the application, which does not meet the requirements stipulated by this law, shall be cancel by the competent department.

Article 39     Where a enterprise or person that conducts direct selling activities without approval in violation of provisions of Article 9 and 10, it shall be ordered to make rectification, direct selling products and the illegal earnings shall be confiscated, a fine of not less than RMB 50,000 but not more than 300,000 may be imposed. And a fine of not more than 300,000 RMB but not more than 500,000 may be imposed and it shall be disbanded if the circumstances are serious. If the case constitutes crime, the criminal liabilities shall be investigated in accordance with the law.

Article 40     Where an applicant obtains the license according to the provisions of article 9 and 10 by resorting to fraudulence, boodle and other manners, direct selling products and the illegal earnings shall be confiscated, a fine of not less than RMB 50,000 but not more than 300,000 may be imposed, the license shall be revoked by the State Council Ministry of Commerce, and the applicant can not apply any more. If the circumstances are serious, a fine of not less than RMB300, 000 but not more than 500,000 may be imposed, and shall be disbanded in accordance with law. If the case constitutes crime, the criminal liabilities shall be investigated in accordance with the law.

Article 41     Where a direct selling enterprise violates the provisions of article 11, it shall be ordered to make rectification, a fine of not less than 30,000 but not more than 300,000 may be imposed by the Administration for Industry and Commerce. If it does not meet the requirement of direct selling license, the State Council Ministry of Commerce shall revoke its license.

Article 42     Where a direct selling enterprise conducts direct selling activities by exceeding products range, it shall be ordered to make rectification, the products and illegal earnings shall be confiscated, a fine of not less than 50,000 but not more than 300,000 may be imposed by the Administration for Industry and Commerce. If the circumstances are serious, a fine of not less than 300,000 but not more than 500,000 may be imposed and the State Council Ministry of Commerce may revoke the registration authority of branches and even the direct selling license.

Article 43     Where a direct selling enterprise and its distributor propagandizes and promotes by resorting fraud and misleading, for direct selling enterprise, a fine of not less than 30,000 but not more than 100,000 may be imposed. If the circumstances are serious, a fine of not less than 100,000 but not more than 300,000 may be impose and the registration authority of its branches, and even the direct selling license shall be revoked; for distributors, a fine of not more than 50,000 shall be impose, and the direct selling enterprise shall be order to revoked its distributor certificate if the circumstances are serious.

Article 44     Where a direct selling enterprises and its branches violate this law to recruit distributors, a fine of not less than 30,000 but not more than 100,000 may be imposed, a fine of not less than 100,000 but not more than 300,000 may be imposed and the registration authority of branches and even its direct selling license shall be revoked if the circumstances are serious.

Article 45     Where a distributor conducts direct selling activities without qualification certificate against this law, it shall be ordered to make rectification, direct selling products and illegal earnings shall be confiscated and a fine of not more than 20,000 may be imposed. If the circumstances are serious, a fine of not less than 20,000 but not more than 200,000 shall be imposed.

Article 46     Where a direct selling enterprise trains its distributors against this law, it shall be ordered to make rectification, the illegal earnings shall be confiscated and a fine of not less than 30,000 but not more than 100,000 may be imposed. A fine of not less than 100,000 may be imposed, registration authority of its branches shall be revoked by the Administration for Industry and Commerce and the State Council Ministry of Commerce shall revoke even its direct selling license if the circumstances are serious. For the trainer, a fine of not more than 50,000 may be imposed. And if the trainer is with qualification distributor certificate, the direct selling enterprise shall be ordered to revoke the distributor’s qualification certificate.

Where Other legal person, organization and nature person violate this law by organizing distributor’s sales training, it shall be ordered to make rectification, illegal earnings shall be confiscated and a fine of not less than 20,000 but not more than 200,000 may be imposed.

Article 47     Where a distributor violates the provision of article 33 of this law, its illegal earnings shall be confiscated; a fine of not more than 50,000 may be imposed by the Administration for Industry and Commerce. If the circumstances are serious, the direct selling enterprise shall be ordered to revoke the distributor’s qualification certificate and a fine of not less than 10,000 but not more than 100,000 may be imposed.

Article 48     Where a direct selling enterprise violates the provision of article 23 of this law, it shall be given sanctions in accordance with the relevant provisions of the Price Law.

Article 49     Where a direct selling violates the provisions of article 24 and 25, its shall be ordered to make rectification and a fine of not less than 50,000 RMB but not more than 300,000 RMB may be imposed by the Administration for Industry and Commerce. If the circumstances are serious, a fine of not less than 300,000 RMB but not more than 300,000 RMB may be imposed, the registration authority of branches shall be revoked by the Administration for Industry and Commerce and the State Council Ministry shall revoke direct selling license for Commerce.

Article 50     Where a direct selling enterprise implements the information record and disclosure system against the relevant provisions, it shall be ordered to make rectification within limited time, a fine of not more than 100,000 may be imposed. If the circumstances are serious, a fine of not less than 100,000 RMB but not more than 300,000 may be imposed. And if the direct selling enterprise refuses to make rectification, its direct selling license shall be revoked.

Article 51     Where a direct selling enterprise violates the provisions of chapter 5 of this law, it shall be ordered to make rectification within limited time; a fine of not more than 100,000 RMB may be imposed. If it refuses to make rectification, a fine of not less than 100,000 RMB but not more than 300,000 RMB may be imposed and its direct selling license shall be revoked.

Article 52  When conducting activities against this law and Regulation on Prohibition of Pyramid selling, it shall be given sanctions in accordance with the relevant provisions of the Regulation on Prohibition of Pyramid selling.

Chapter IX Supplementary Provisions

Article 53  If direct selling enterprises plan to establish a organization such as Direct Selling Association, it need to be approved by the State Council Ministry for Commerce and apply for registration with the approval documents in accordance with law.

Article 54     Where an Investor from Hong Kong Special Administrative Region, Macao Special Administrative Region and Taiwan Region, invests to incorporate direct selling enterprise and conducts direct selling activities, it shall be preceded with reference to the relevant provisions of this law

Article 55  This law shall enter into force as of December 1, 2005.