The State Administrative Bureau of Market Supervision and Management issued a new notice on carrying out special actions to investigate and punish the illegal acts of pyramid selling in the name of direct selling, equity incentive, and capital plate and investment dividend. The detailed actions will be taken out from May 2018.

According to the Notice, the governmental will focus on investigating whether the direct selling enterprises have the following activities:

• the direct selling enterprises enter into the contract with the other companies, sales teams, dealers and required them to sell its products exclusively, or form the affiliated relationship through the cooperation or exclusive selling;
• the direct selling enterprises or their affiliated companies, sales teams, dealers do not want to sell products, but actually in the operation of various capital projects, gain dividends as the investment, stocks or stock options return, and form as the capital plate.
• the direct selling enterprises or their affiliated companies, sales teams, dealers cheat and cause the other person to join in with the excuse and undertaking that the high return will be made and taking the advantage of its direct marketing license or its company name.
• the direct selling enterprises or their affiliated companies, sales teams, dealers are involving in any illegal act mentioned in the Article 7 or Article 26 of the "Regulation on Prohibition of Pyramid Selling".

According to the notice, the work arrangement of special action will be taken out through five stages. In May to June, it is the time to arrange the work and collect the clues; In July, it is the time to put on record and report to the higher authorities; In August to October, it is the time to investigate and case process; In November, it is the time to push to rectify and In December to summary the work.

AC suggests the companies have an internal check on its all business activities and sales contract to avoid the challenge by the local government.