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Pyramid Scheme Alert (PSA) provides current and historical news items that are of interest to our members and visitors. None of the reports or commentaries is intended to imply that any of the referenced companies have been charged or convicted as illegal pyramid schemes.

China has Outlawed MLM as It Is Practiced in the USA

September , 2005

In a stunning upset against MLM schemes and promoters, the government of China has passed a law that outlaws the payments of commissions on purchases made by "downline" recruits in the scheme. News reports from China indicate that legitimate direct selling, based on retail selling to the public, not endless chain recruiting, has been approved in the country. The new law was urgently awaited by the MLM companies, which had been banned in China since 1999, following riots and the revelation of pyramid schemes masquerading as "direct selling" companies.

Most MLM companies believed China would legalize US-style recruitment scams. Technically such scams are illegal in America, but the Federal Trade Commission seldom prosecutes them. MLM companies have contributed millions to Bush administration and successfully lobbied against law enforcement. They expected China to follow America's example in allowing recruitment schemes.

PSA worked diligently with Chinese authorities in providing information about the harm caused by MLM recruitment-based schemes, as Amway operates in the US. The booklet, Pyramid Nation, published by PSA Director, Robert FitzPatrick, was translated into Chinese and used as a resource. The NBC Dateline report aired in 2004 was also provided. This report showed that Amway's Kingpin recruiters earned most of their money from recruiting gullible consumers, not from selling Amway products on a retail basis.

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This page last updated on 2/25/06