The right to start the old case: Where is the border of health products direct sales and pyramid schemes?



Graphic | Judgment book right from the old case, where is the border of health products direct sales, pyramid schemes?

According to, the Tianjin Joint Investigation Team announced on the 10th day after the establishment of Quanjian Company that 18 suspects such as Shu Moumou, the actual controlling shareholder of Quanjian Natural Medicine Technology Development Co., Ltd., have been criminally detained according to law. Judging from the results published by the investigation team, it has been basically determined that Quan Jian and illegal pyramid schemes cannot be separated.

From the allegedly exaggerating propaganda to the suspected organization, leading the pyramid scheme activities and false advertising crimes were investigated, and the right-selling company holding the direct sales license was doing illegal pyramid schemes.


What is the difference between MLM and direct sales?

Although China's "Prohibition of MLM Regulations" and "Direct Sales Management Regulations" promulgated in China, it clearly distinguishes between pyramid schemes and direct sales in sales.

The right to start the old case: Where is the border of health products direct sales and pyramid schemes? -The-right-to-start-the-old-case-Where-is-the-border-of-health-products-direct-sales-and-pyramid-schemes

In the explicit provisions of relevant laws and regulations, the differences between MLM and direct sales include sales activities, products and prices, sales purposes, personnel systems and after-sales.

The main purpose of MLM is to continuously develop the offline, the essence of which is the transfer and redistribution of funds. Most of the products sold are only "smoke bombs". The MLM organization is a typical "pyramid" structure, with the development of the downline as a means of profit, the more downline, the more compensation.

In contrast, direct sales focus on the price of the product, word of mouth and consumer experience, there is a fixed business place to match after-sales service. Direct sales organizations or enterprises need to obtain the direct sales license of the Ministry of Commerce, and the internal salesmen are employees who sign labor contracts.

The Prohibition of MLM Regulations provides thatfrom

As long as it meets the requirements of pulling the head type, charging the entry fee type, and team compensation type, it can be considered as a pyramid scheme. from

 However, real-life MLM and direct sales are sometimes very similar and difficult to distinguish.

澎湃News reporters searched for Openlaw (legal documents database) with the words “health products, pyramid schemes” as the key words. The case of “organization and leadership of pyramid schemes” was only 282 cases in 585 judgments. Due to the complexity of the case and the complexity of the people involved, there are a large number of cases involving pyramid schemes arising from other disputes such as civil entrusted financial contract disputes, illegal detention, and disruption of the socialist market order.


Many senior executives were sued in the old case, but Quan Jian Company retired

In these 282 cases involving the crime of “organizing and leading pyramid schemes”, Quan Jian had a criminal case in 2012. Many senior executives were prosecuted and Quan Jian Company retired. In this typical MLM case, Quan Jian uses direct sales as the outer shell, and MLM is the kernel's management method.

The right to start the old case: Where is the border of health products direct sales and pyramid schemes? -1547114668_805_The-right-to-start-the-old-case-Where-is-the-border-of-health-products-direct-sales-and-pyramid-schemes


From the perspective of direct sales, Quanjian has a complete organizational structure and staffing, a real service network, and the entity's “Guanjian Natural Medicine Health Products” as products. However, from the confession of the four defendants and the testimony of 53 witnesses, it can be found that the core of Quan Jian is actually a pyramid scheme.

Quanjian Company adopted the sales method of “head-type, charging entry fee, and team compensation”, and established the sales team “Everyone System” (with Yongcheng and Yongli and the three systems of Quanjian). The products sold by the company have little effect. Formal invoices, after the bonus is generated, can not be returned, and even witnesses said that they have "developed" 113 downlines without knowing it.

Therefore, the court found that the defendants Meng Moumou, Xu Moujia, Zhan Moumou, Dai Moumou in the name of selling "quanjian" goods, asked the participants to qualify for the purchase of goods, and in accordance with a certain level, directly or indirectly The number of personnel is used as a basis for remuneration or rebate, and induces participants to continue to develop other participants to join, defrauding money, and committing crimes of “organization and leadership of pyramid schemes”. Although the four defendants have close ties with Quanjian, among them Meng Moumou is the top leader of the Quanjian company's personal system, and is also the vice chairman of the Quanjian Strategic Management Committee. Xu Mou and Zhan Mou are Quan Jian's strategy. Member of the Management Committee; however, Quan Jian Company, which provides products in this case, has not been held accountable.

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According to the regulations, as long as it meets the three types of the head type, the entry fee type, and the team compensation type, it can be considered as a pyramid scheme. Judging from the rights-based membership system and reward mechanism disclosed in the judgment, Quanjian Company involves the above three types of pyramid schemes.

The developer is required to pay 960 yuan to purchase "bone-based magnetic therapy insoles" or "probiotics", "probiotics" and other products to become "Meijian Natural Medicine Technology Development Co., Ltd." members. To become a member, you can develop its off-line personnel, personally or a one-time consumption of 6,720 yuan Quan Jian company's products, can become a dealer. In this way, a strict sales network is formed to obtain commissions. On-line sales and promotion based on offline sales, from the lowest level of ordinary members to the top crown ambassador, must directly or indirectly reach the sales amount of 196,000.


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