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China's Milestone Direct Selling Regulations: A Victory for Single-level Selling over Multi-level Selling

Fulfilling an important WTO commitment, China has ended a seven-year ban on direct selling with the release of new regulations allowing the sale of consumer products away from fixed retail locations. New anti-pyramid regulations also indicate that the government is getting tough on pyramid selling schemes in the country.

Date: 01 October 2005

Keywords (click to search): direct selling pyramid scheme marketing WTO regulation liberalization on direct selling door-to-door sales classification of direct sale single level direct selling

By David Livdahl and Zhongda Wu, Paul, Hastings, Janofsky & Walker LLP, Beijing

Direct selling companies such as Amway and Avon have been anxiously awaiting new rules on direct selling in the PRC. On September 2, 2005, the long-awaited direct selling rules were finally made public following earlier news reports that they were passed by the State Council on August 10, 2005 and endorsed by Premier Wen Jiabao on August 23, 2005. The new rules, including the Regulations for the Administration of Direct Selling (直销管理条例)(zhixiao, the Direct Selling Regulations), effective December 1, 2005, and the Regulations for the Prohibition of Pyramid Selling (chuanxiao, the Anti-Pyramid Regulations), effective November 1, 2005, mark an end to the seven-year ban on direct selling in China and a fulfilment of the country's WTO commitment to lift market access and national treatment restrictions in the area of sales away from fixed locations.

Direct Selling vs. Pyramid...

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