Eight years into its crackdown on pyramid selling schemes, China
still faces an uphill battle against an illegal activity that
authorities say has disturbed economic order and sparked rioting
against police.
Market regulators and public security officers yesterday said a
September campaign had "tentatively contained" the rampancy of the
notorious marketing mode. They pledged to strike harder at the
"economic evil."
"We will particularly target pyramid selling groups who operate
under the guise of direct selling, at a time when most people know
little about (new) statutes concerning direct marketing," Gao Feng,
a senior economic crimes investigator, said yesterday.
Pyramid selling, which is banned in many countries, is a method
of selling products or services through a multi-level hierarchy of
salespeople. It relies on funding from new recruits, which is
provided to people above them in the pyramid.
In line with its promise for World Trade Organization accession,
China reinstated direct selling in 2005. It was suspended in 1998
in a blanket ban on all varieties of direct and pyramid selling to
curtail the latter from further spreading.
The country enacted regulations on direct selling administration
and anti-pyramid selling almost simultaneously last year, hoping
that rectifying direct selling will help eliminate pyramid sales,
according to Zhao Xiaoguang, a division director of the State
Council Legislative Affairs Office.
However, at a time when many people are desperately in need of
jobs, some ringleaders have made use of the country's opening up of
the direct selling businesses to induce people into pyramid
selling, Zhao said.
Public security departments detained on average 32 suspects a
day in the first nine months of the year, when they investigated
1,499 cases concerning pyramid selling, Gao, deputy director of the
Ministry of Public Security's Economic Crime Investigation Bureau,
said.
He did not specify how many of the cases were pyramid activities
conducted in the name of direct selling.
Following repeated crackdowns in recent years, pyramid selling
has been curbed in most parts of China, Gao told a press conference
in Beijing.
However, easy-money traps thrive in some regions and are showing
signs of spreading, resulting in a chain of social woes that
adversely affect market order and stability, he said.
In addition to depriving many participants of their life
savings, pyramid selling has illegally absorbed at least 40 billion
yuan (US$493 million) of funds, Gao estimated.
Branding it an "economic cult," the officer said pyramid selling
organizers usually incite participants to challenge law enforcement
personnel.
As a result, at least 83 police were wounded in anti-pyramid
selling efforts between January and September, he said.
Gao disclosed that the marketing schemes have caused 58 cases of
death, looting and other serious crimes and at least 400 public
security offences in the same period.
Gao said the Ministry of Public Security will cooperate with the
State Administration for Industry and Commerce (SAIC) and other
departments to deal with all forms of illegal pyramid selling,
including those through the Internet.
"Whenever this type of illegal activity appears on our radars,
we will waste no time in smashing it."
The SAIC has dismantled 24,446 pyramid selling schemes through
October this year, taking at least half a million people out of the
illegal work force and transferring 1,553 to judicial departments,
SAIC deputy chief Zhong Youping said yesterday.
Both Gao and Zhong said public education was the key to the
success of the country's efforts to ultimately eliminate the
illegal marketing mode.
To enhance the public's prevention awareness, the SAIC and
ministries of education and public security will launch
anti-pyramid selling seminars at schools, he said.
With regard to direct selling, Zhong said his agency will step
up supervision of the practices of approved direct sellers to
safeguard the interests of both consumers and sales agents.
(China Daily November 23, 2006)