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Chapter Law Content

Article 17
A multi-level sales enterprise may not engage in any of the following activities:
requiring a participant to pay any fee obviously incommensurate with the cost in the name of training, seminars, social activities, meetings, or other like activities; requiring a participant to pay or undertake any security deposit, breach penalty, or other liability, where such is obviously unreasonable; requiring a participant to purchase goods in a quantity that would obviously be impossible for an average person to sell out in a short period, unless it is agreed that the price shall be paid only after the goods are re-sold; unjustifiably withholding commissions, bonuses, or other economic benefit payable to a participant after rescission or termination of the contract; stipulating that a participant shall be paid greater benefits only after he pays training fees obviously incommensurate with the cost or pays other obviously unjustifiable consideration; giving specific persons preferential treatment in a manner contrary to the multi-level sales organization or plan, such that the commissions, bonuses, or other economic benefits that should be available to other participants would be diminished; improperly hindering a participant from returning goods arising from rescinding the contract or terminating the contract; requiring a participant to undertake obviously unfair obligations.
The provisions of the preceding paragraph shall apply mutatis mutandis to participants.
Article 18
For purposes of regulating the activities of its participants in respect of multi-level sales, a multi-level sales enterprise shall stipulate that the following are breaches of contract by the participant, and shall prescribe methods for handling such breaches and faithfully enforce them:
promoting or selling goods or services, or recruiting participants to the sales organization, by deceptive or misleading means; raising funds from other persons in the name of the multi-level sales enterprise or through its organization; engaging in sales activities by means that run counter to public order or good morals; affecting the market trading order or creating heavy losses to consumers by improper direct sales calls; engaging in sales activities that violate the Criminal Code or other laws or regulations governing industry and commerce.
Article 19
When recruiting participants by advertising or other means of communication to the public, a multi-level sales enterprise shall make it clearly known that it is engaged in multi-level sales activities; neither may it recruit participants under the guise of recruiting employees or on other pretense.
The provisions of the preceding paragraph shall also apply to participants.
Article 20
When promoting or selling goods or services or recruiting participants by means of declared cases of success, a multi-level sales enterprise or its participants shall concretely explain the time periods, benefits obtained, and course of development of such cases, and may not make false or misleading representations.
Article 21
After a participant joins the sales organization or plan of a multi-level sales enterprise, the enterprise shall educate and train the participant with respect to laws and regulations relevant to multi-level sales and to channels for filing complaints about infractions of law by enterprises.