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TABLE OF CONTENTS CHAPTER I GENERAL PROVISIONS CHAPTER II TYPES OF PYRAMID SELLING AND THE INVESTIGATION AND HANDLING ORGAN CHAPTER III INVESTIGATION AND HANDLING MEASURES AND PROCEDURES CHAPTER IV LEGAL LIABILITIES CHAPTER V SUPPLEMENTARY PROVISIONS CHAPTER I GENERAL PROVISIONS Article 1. This Regulation is formulated for the purpose of preventing frauds, protecting the lawful rights and interests of citizens, legal persons and other organizations, maintaining the socialist market economic order and preserving social stability. Article 2. The term "pyramid selling" mentioned in this Regulation refers to such an act by which an organizer or operator seeks for unlawful interests, disturbs the economic order and affects the social stability by recruiting persons, calculating and paying remunerations to recruiters on the basis of the number of persons a recruiter has directly or indirectly recruited or the sales performance, or asking the recruiters to pay a certain fee for obtaining the qualification for participation. Article 3. The local people's government at or above the county level shall strengthen the leadership of the work relating to the investigation and handling of pyramid selling, support and urge all pertinent departments to fulfill their supervisory and administrative functions according to law. The local people's government at or above the county level shall, where it so requires, establish a coordinative mechanism for the investigation and handling of pyramid selling, and timely mediate and solve those significant problems occurred in the work relating to the investigation and handling of pyramid selling. Article 4. The industrial and commercial administrative department and the public security organ shall, under this Regulation, investigate and handle the pyramid selling within their respective functions. Article 5. The industrial and commercial administrative departments and the public security organs shall, when investigating and handling the pyramid selling, adhere to the principle of combining education with punishment, and shall instruct citizens, legal persons or other organizations to voluntarily abide by the law. Article 6. Any and all entities and individuals are entitled to report any pyramid selling to the industrial and commercial administrative department or the public security organ, which shall, after receiving such a reporting, promptly conduct investigation and verification, handle it according to law and keep secret for the informer. If the reporting is found to be true upon survey, the informer shall be rewarded according to the relevant state provisions. CHAPTER II TYPES OF PYRAMID SELLING AND THE INVESTIGATION AND HANDLING ORGAN Article 7. The following acts belong to the pyramid selling: (1)An organizer or operator seeks for unlawful interests by recruiting persons to participate in pyramid selling, asking the recruiters to persuade others to participate in pyramid selling, calculating and paying remunerations (including material awards and other economic interests, similarly hereinafter) to the recruiters on the basis of the number of persons a recruiter has directly or indirectly recruited in a rotating way; (2)An organizer or operator seeks for unlawful interests by recruiting persons to participate in pyramid selling and asking the recruiters to pay fees explicitly or in any disguised form like purchasing commodities for obtaining the qualification for participating in pyramid selling or recruiting others to participate in pyramid selling; (3)An organizer or operator seeks for unlawful interests by recruiting persons to participate in pyramid selling, asking the recruiters to persuade others to participate in pyramid selling so as to form a multi-level relationship, and calculating and paying the remuneration to an upper-level promoter on the basis of the sales performance of the promoters below. Article 8. The industrial and commercial administrative department shall, under this Regulation, be responsible for investigating and handling the pyramid selling prescribed in Article 7 of this Regulation. Article 9. The release of pyramid selling information prescribed in Article 7 of this Regulation on the internet or any other public media shall be investigated and handled by the industrial and commercial administrative department together with the telecommunication administrative department according to this Regulation. Article 10. Where any organizer or operator deceives others into leaving their homes for unlawful gathering and restricts their liberties in the name of introducing jobs or engaging in business operations in pyramid selling, the public security organ shall make investigations and handle it together with the industrial and commercial administrative department. Article 11. The commercial, educational, civil affairs, public finance, labor security, telecommunication and taxation administrative departments or entities shall, according to their respective functions and the relevant laws and administrative regulations, cooperate with the industrial and commercial administrative department and the public security organ in investigating and handling the pyramid selling cases. Article 12. Grassroots organizations such as the villagers' committee in the countryside or the residents' committee in the city shall cooperate with the relevant administrative department in investigating and handling pyramid selling cases under the guidance of the local people's government. Article 13. The industrial and commercial administrative department shall, when investigating and handling any pyramid selling case, transfer it to the public security organ for putting on records and investigation if it may constitute a crime. The public security organ shall, when investigating and handling the pyramid selling, transfer it to the industrial and commercial administrative department for investigation and handling if the pyramid selling does not constitute a crime upon investigation. CHAPTER III INVESTIGATION AND HANDLING MEASURES AND PROCEDURES Article 14. The industrial and commercial administrative departments at or above the county level may, when investigating and handling the suspected pyramid selling, take the following measures: (1) ordering the violator to stop pertinent activities; (2) making investigations against the organizer, operator or individual suspected of the pyramid selling and making inquiries; (3) carrying out on-the-spot inspections by entering into the business, training or gathering places suspected of being involved in pyramid selling; (4) consulting, copying, sealing up or seizing the relevant contracts, bills, account books or other materials suspected of being involved in pyramid selling; (5) sealing up or seizing special products (commodities), tools, equipment, raw materials and properties suspected of being involved in pyramid selling; (6) sealing up business places suspected of being involved in pyramid selling; (7) consulting accounts, accounting vouchers, books and statements regarding the deposits of the organizer or operator suspected of pyramid selling; and (8) applying to the judicial organ for freezing if there is evidence showing that the unlawful funds are transferred or hidden. In case the industrial and commercial administrative department adopts any of the measures prescribed in the preceding paragraph, it shall report it to the main principal of the industrial and commercial administrative department at or above the county level in written or oral form for approval. Where it is necessary to adopt any of the measures prescribed in the preceding paragraph in the case of an urgent circumstance, the industrial and commercial administrative department shall make a prompt report and make up the relevant formalities afterwards. The implementation of seal-up or seizure or any measure prescribed in Item (7) or (8) shall be subject to obtaining a written approval of the main principal of the industrial and commercial administrative department at or above the county level in advance. Article 15. When the industrial and commercial administrative department investigates and handles any suspected case of pyramid selling, there shall be two or more enforcers. An enforcer that has any direct interest with any party involved shall withdraw. Article 16. Any functionary of the industrial and commercial administrative department shall, when investigating and handling any suspected case of pyramid selling, show his certificate to the parties involved or the relevant persons. Article 17. When the industrial and commercial administrative department seals up or seizes properties and materials, it shall deliver a decision on the seal-up or seizure and a list of properties and materials to be sealed up or seized to the parties involved on the spot. Where it is in an inconveniently located area or the investigation and handling of the case will be affected if the seal-up or seizure is not timely carried out, the seal-up or seizure may be conducted in advance and the decision on seal-up or seizure shall be made up within 24 hours and be delivered to the parties involved. Article 18. The period for the industrial and commercial administrative department to conduct the seal-up or seizure shall not be more than 30 days as a general rule, and may be extended for 15 days if the case is complex and the extension has been approved by the main principal of the industrial and commercial administrative department at or above the county level. The industrial and commercial administrative department shall properly keep properties sealed up or seized, and shall not use or destroy them. It shall make compensations for any loss incurred unless the loss is caused by force majeure. Article 19. When the industrial and commercial administrative department conducts a seal-up or seizure, it shall make a thorough investigation of facts in a timely manner, and make a handling decision during the period of seal-up or seizure. If the pyramid selling case is verified upon investigation, the illegal properties sealed up or seized shall be confiscated according to law. If there is no pyramid selling or the seal-up or seizure is not required upon investigation and verification, the seal-up shall be promptly canceled and the seized properties shall be promptly returned after the handling decision is made. If the industrial and commercial administrative department fails to make a handling decision within the time limit, the properties sealed up shall be regarded as having been unsealed and the seized properties shall be returned. If the industrial and commercial administrative department refuses to return them, any party involved can lodge an administrative lawsuit to the people's court. Article 20. If the industrial and commercial administrative department or any of its functionaries violates this Regulation by using or destroying any of the properties sealed up or seized and causes economic losses to the parties involved, it/he shall make compensations. Article 21. When the industrial and commercial administrative department investigates and handles the suspected pyramid selling, any party involved has the right to make statements and defend himself. Article 22. When the industrial and commercial administrative department investigates and handles a suspected case of pyramid selling, it shall make on-the-spot records. The on-the-spot records and the list of properties and materials sealed up or seized shall be signed or stamped by the parties involved, witnesses and enforcers. In case any party involved is not on the spot or any party involved or witness refuses to affix his signature or stamp, the enforcers shall record it down in the on-the-spot records. Article 23. As to the verified pyramid selling, the industrial and commercial administrative department and the public security organ may release a warning to remind the general public. The release of a warning or reminding to the general public shall be subject to the approval of the main principal of the industrial and commercial administrative department or the main principal of the public security organ at or above the county level. CHAPTER IV LEGAL LIABILITIES Article 24. In case an individual commits any act prescribed in Article 7 of this Regulation and organizes and plans any pyramid selling, the industrial and commercial administrative department shall confiscate his illegal properties and gains and impose upon him a fine of 500,000 yuan up to 2 million yuan, and he shall be subject to criminal liabilities if a crime is constituted. In case an individual commits any act prescribed in Article 7 of this Regulation and introduces, induces or coerces any other person to participate in pyramid selling, the industrial and commercial administrative department shall order him to stop the illegal act, confiscate his unlawful properties and gains and impose upon him a fine of 100,000 yuan up to 500,000 yuan, and he shall be subject to criminal liabilities if a crime is constituted. In case an individual commits any act prescribed in Article 7 of this Regulation and participates in pyramid selling, the industrial and commercial administrative department shall order him to stop the illegal act and impose a fine of less than 2,000 yuan. Article 25. When the industrial and commercial administrative department imposes punishments under Article 24 of this Regulation, it can order the violator to shut down for rectification or revoke its/his business license according to the relevant laws and administrative regulations. Article 26. In case an entity or individual provides business or training places, goods, keeping and storing sites for pyramid selling prescribed in Article 7 of this Regulation, the industrial and commercial administrative department shall order it/him to stop the unlawful act, confiscate its/his unlawful gains and impose it/him a fine of 50,000 yuan up to 500,000 yuan. In case an entity or individual provides the network information services for the pyramid selling prescribed in Article 7 of this Regulation, the industrial and commercial administrative department shall order it/him to stop the illegal act and inform the relevant department to mete out punishments according to the Measures for the Administration of Internet Information Services. Article 27. In case any party involved illegally puts to use, exchanges, transfers or destroys the properties sealed up or seized, the industrial and commercial administrative department shall order him to stop the illegal act and impose upon him a fine of 5% up to 20% of the value of the properties used, exchanged, transferred or destroyed. If he refuses to make corrections, a fine of one up to three times the value of the properties used, exchanged, transferred or destroyed shall be imposed. Article 28. In case any organizer or operator commits any act prescribed in Article 10 of this Regulation and refuses or impedes the investigation and handling of the enforcers of the industrial and commercial administrative department and a violation of the regulation on public security administration is thus constituted, the public security organ shall impose punishments on him according to the laws and administrative regulations on public security administration. If a crime is constituted, he shall be subject to criminal liabilities. Article 29. In case the industrial and commercial administrative department, the public security organ or any of their functionaries abuses his authority, neglects his duties or resorts to cheating for selfish purposes and fails to investigate or handle pyramid selling cases according to the functions and procedures prescribed in this Regulation, or fails to investigate or handle the pyramid selling found, or supports, harbors or connives any pyramid selling, and a crime is thus constituted, the person-in-charge and other persons that are held to be directly responsible shall be subject to criminal liabilities. If no crime is constituted, the person-in-charge and other persons that are held to be directly responsible shall be subject to administrative sanctions. CHAPTER V SUPPLEMENTARY PROVISIONS Article 30. This Regulation shall come into force as of November 1, 2005. |
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