Article 1 With a view to preventing frauds, protecting the legitimate rights and interests of citizens, legal persons and
other organizations, maintaining the socialist market economic order and preserving social stability, this Regulation is
formulated.

Article 2 The term"pyramid selling" as mentioned in this Regulation refers to such an act whereby 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 in investigating
and handling the pyramid selling,support and urge all relevant departments to perform their administrative and supervisory
duties according to law.
The local people's government at or above the county level shall,in light of actual needs,establish a coordinative
mechanism for the investigation and handling of pyramid selling,and timely coordinate and solve those significant
problems occurred in the work relating to the investigation and handling of pyramid selling.

Article 4 The department of industry and commerce administration and the public security organ shall,pursuant to
this Regulation,investigate and handle the pyramid selling within their respective duties.

Article 5 When investigating and handling the pyramid selling,the department of industry and commerce administration
and the public security organ shall,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 All entities and individuals are entitled to report
any pyramid selling to the department of industry and commerce
administration or the public security organ,which shall,after
receiving such a report,promptly carry out investigation and
verification,handle it in accordance with the law and keep
secret for the informer. Where the report is found to be true
upon investigation,the informer shall be rewarded pursuant to
the relevant state provisions.

Chapter II Types of Pyramid Selling and the Investigation and
Handling Authority
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,the same below)
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; and
(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 department of industry and commerce
administration shall,under this Regulation,be responsible for
investigating and handling the pyramid selling as prescribed
in Article 7 of this Regulation.
Article 9 The release of pyramid selling information as set
out in Article 7 of this Regulation via the internet or any
other public media shall be investigated and handled by the
department of industry and commerce administration jointly
with the telecommunication department in accordance with 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 in conjunction
with the department of industry and commerce administration.
Article 11 The administrative departments or entities of
commerce,education,civil affairs,public finance,labor
security,telecommunication and taxation shall,in pursuance of
their respective duties and the relevant laws and
administrative regulations,cooperate with the department of
industry and commerce administration and the public security
organ in investigating and handling the pyramid selling cases.
Article 12 Such grassroots organizations as the rural
villagers' committee or the urban residents' committee 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 department of industry and commerce
administration shall investigate and handle any pyramid
selling,and shall,if it may constitute a crime,transfer it to
the public security organ for placing the case on file for
investigation. The public security organ shall place the case
on file for investigation and shall,if the pyramid selling
does not constitute a crime upon investigation,transfer it to
the department of industry and commerce administration for
investigation and handling.

Chapter III Measures and Procedures of Investigation and
Handling
Article 14 The department of industry and commerce
administration at or above the county level may,when
investigating and handling the suspected pyramid selling,take
the following measures:
(1) Ordering the violator to cease pertinent activities;
(2) Making investigations against the organizer,operator or
individual suspected of being involved in pyramid selling and
making inquiries;
(3) Carrying out on-the-spot inspections by entering into the
business,training 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 the products
(commodities),tools,equipment,raw materials and properties
that are suspected of being involved in pyramid selling;
(6) sealing up business places suspected of being involved in
pyramid selling;
(7) Consulting accounts,accounting vouchers,account books and
statements of account regarding the deposits of the organizer
or operator suspected of being involved in pyramid selling;
and
(8) Applying to the judicial organ for freezing the unlawful
funds if there is evidence showing that they are to be
transferred or concealed.
In case the department of industry and commerce
administration adopts any of the measures as prescribed in the
preceding paragraph,it shall report it,in speech or writing,to
the principal leader of the department of industry and
commerce administration at or above the county level for
approval. Where it is necessary to adopt any of the measures
as prescribed in the preceding paragraph under emergency
conditions,the department of industry and commerce
administration shall report it promptly and make up the
relevant formalities afterwards. In particular,the
implementation of seal-up or seizure or any measure as
prescribed in Item (7) or (8) shall be subject to obtaining a
written approval of the principal leader of the department of
industry and commerce administration at or above the county
level in advance.
Article 15 When the department of industry and commerce
administration investigates and handles any suspected pyramid
selling,there shall not be less than 2 law enforcers.
Any law enforcer that has a direct interest with the party
involved shall withdraw.
Article 16 When investigating and handling a suspected
pyramid selling,the law enforcer of the department of industry
and commerce administration shall produce his identity
documents to the parties involved or the relevant persons.
Article 17 When the department of industry and commerce
administration seals up or seizes properties and materials,it
shall deliver to the parties involved on the spot a written
decision on the seal-up or seizure and a list of properties
and materials to be sealed up or seized.
Where it is in an inconvenient 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 carried out 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 department of industry and
commerce administration to carry out the seal-up or seizure
may not be more than 30 days as is a general rule; if the case
is complicated,it may be extended for another 15 days upon the
approval of the principal leader of the department of industry
and commerce administration at or above the county level.
The department of industry and commerce administration shall
properly keep properties that are sealed up or seized,and may
not use or destroy them. It shall be liable for any loss
incurred unless the loss is caused by force majeure.
Article 19 When the department of industry and commerce
administration carries out a seal-up or seizure,it shall
ascertain the facts in a timely manner,and make a handling
decision during the period of seal-up or seizure.
Where the pyramid selling case is verified upon
investigation,the illegal properties that are sealed up or
seized shall be confiscated in accordance with the law.
Where,upon investigation and verification,there is no pyramid
selling activity or the seal-up or seizure is no longer
required,the seal-up shall be canceled and the seized
properties shall be promptly returned in a prompt manner upon
the handling decision.
If the department of industry and commerce administration
fails to make a handling decision within the prescribed time
limit,the properties sealed up shall be regarded as having
been unsealed and the seized properties shall be returned. If
the department of industry and commerce administration refuses
to return them,the party involved may file an administrative
litigation in the people's court.
Article 20 If the department of industry and commerce
administration 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 assume the responsibility for
compensation .
Article 21 When the department of industry and commerce
administration investigates and handles a suspected pyramid
selling case,the party involved has the right to make
statements and defend himself.
Article 22 When the department of industry and commerce
administration investigates and handles a suspected pyramid
selling case,it shall make records on the spot.
The records made on the spot and the list of properties and
materials sealed up or seized shall be signed or stamped by
the parties involved,witnesses and law enforcers. In case the
party involved is absent or the party involved or the witness
refuses to sign or seal,the enforcers shall indicate it down
in the on-the-spot records.
Article 23 As for the verified pyramid selling case,the
department of industry and commerce administration and the
public security organ may promulgate a warning or a notice to
remind the general public.
The release of a warning or notice to the general public
shall be subject to the approval of the principal leader of
the department of industry and commerce administration or the
principal leader of the public security organ at or above the
county level.

Chapter IV Legal Liabilities
Article 24 Where an individual commits any act as prescribed
in Article 7 of this Regulation and organizes and contrives
pyramid selling,the department of industry and commerce
administration shall confiscate his illegal properties and
gains and impose upon him a fine of 500,000 yuan up to 2
million yuan,and if a crime is constituted,he shall be
investigated for criminal liabilities according to law.
Where an individual commits any act as prescribed in Article
7 of this Regulation and introduces,induces or coerces any
other person to participate in pyramid selling,the department
of industry and commerce administration shall order him to
cease 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 if a crime is constituted,he shall be investigated
for criminal liabilities according to law.
Where an individual commits any act as prescribed in Article
7 of this Regulation and participates in pyramid selling,the
department of industry and commerce administration shall order
him to cease the illegal act and impose upon him a fine of
less than 2,000 Yuan.
Article 25 When the department of industry and commerce
administration imposes punishments under Article 24 of this
Regulation,it can order the violator to suspend operations for
rectification or revoke its/his business license in accordance
with the relevant laws and administrative regulations.
Article 26 Where an entity or individual provides such
conditions as business or training places,goods,custodian or
storage service and so on,for pyramid selling as prescribed in
Article 7 of this Regulation,the department of industry and
commerce administration shall order it/him to cease the
unlawful act,confiscate its/his unlawful gains and impose upon
it/him a fine of 50,000 Yuan up to 500,000 Yuan.
Where an entity or individual provides internet information
services for pyramid selling as prescribed in Article 7 of
this Regulation,the department of industry and commerce
administration shall order it/him to cease 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 Where a party involved illegally puts to
use,replaces,transfers or destroys the properties sealed up or
seized,the department of industry and commerce administration
shall order him to cease the illegal act and impose upon him a
fine of 5% to 20% of the value of the properties
used,replaced,transferred or destroyed. If he refuses to make
corrections,a fine of one to three times the value of the
properties used,replaced,transferred or destroyed shall be
imposed.
Article 28 Where anyone commits any act as prescribed in
Article 10 of this Regulation and refuses or impedes the
enforcers of the department of industry and commerce
administration to make investigations and handle the case and
thus violates the regulations on public security
administration,the public security organ shall impose
punishments on him in pursuance of the laws and administrative
regulations on public security administration; if a crime is
constituted,he shall be investigated for criminal liabilities
according to law.

Article 29 Where the department of industry and commerce
administration,the public security organ and their
functionaries abuse their power,neglect their duties or
practice favoritism and fail to investigate or handle pyramid
selling cases according to the duties and procedures as
prescribed in this Regulation,or fail to investigate or handle
the pyramid selling found,or support,harbor or connive any
pyramid selling,and a crime is thus constituted,the
person-in-charge and other persons directly responsible shall
be investigated for criminal liabilities according to law; if
no crime is constituted,the person-in-charge and other persons
directly responsible shall be subject to administrative
sanctions.

Chapter V Supplementary Provisions

Article 30 This Regulation shall go into effect as of November 1,2005.