On October 19, in Shanghai, the National Market Regulatory Administration (NRA) of China hosted an international seminar on direct selling regulation and enforcement. During the event, insights were shared regarding new regulatory initiatives being considered to promote the healthy and standardized development of the direct selling industry in China.
XU Xinjian, the Director of Anti-Monopoly at the NRA, highlighted, “For many years, China has balanced regulation with service, enhancing governance capabilities while ensuring a healthy direct selling market.” Since the issuance of the Direct Selling Regulations in 2005, the regulatory framework for the direct selling industry has become increasingly refined.
Under systematic regulatory guidance, the direct selling sector has steadily progressed. Preliminary statistics indicate that in 2023, China had 88 direct selling enterprises, 823 branches, and over 14,000 service outlets. From 2013 to 2023, the 61 companies that maintained uninterrupted direct selling operations achieved a total business volume of 205.3 billion yuan (approximately $31 billion), with total revenues of 878.5 billion yuan and tax contributions of 16.41 billion yuan.
However, while the direct selling industry has made significant strides, it also faces new challenges. The rapid advancement of mobile payments, 5G technology, and live commerce in the internet realm presents fresh complexities for achieving high-quality development in the direct selling market, making revisions to the Direct Selling Regulations essential.
Zhang Hongyan, Director of the Platform Management Division at the Central Cyberspace Administration of China, pointed out that while a series of relevant regulations have been introduced, they lag behind the realities of the internet age. He emphasized the necessity for new measures to combat online pyramid schemes, refine definitions, and provide a robust framework for regulatory enforcement.
Although direct selling and pyramid selling are only one word apart, their implications are fundamentally different. In essence, direct selling involves genuine product sales, while pyramid schemes operate contrary to this principle. Unscrupulous individuals have exploited this distinction to initiate online pyramid schemes masquerading as direct selling.
Wang Jian, a senior prosecutor at the Supreme People’s Procuratorate, noted that criminals are taking advantage of the internet’s inherent anonymity and convenience, utilizing virtual currencies, forex trading, and social e-commerce to craft various payment scams. Online pyramid schemes are notably more flexible, covert, and involve broader financial movements, resulting in quicker dissemination, larger affected populations, and greater financial losses compared to traditional schemes.
To effectively regulate the direct selling industry and combat pyramid selling, participants stressed the importance of maintaining a secure and stable environment while implementing more scientific and effective regulatory measures.
Ni Jun-nan, Director of the Shanghai Market Supervision Bureau, emphasized the need to align with international best practices. He advocated for the development of a comprehensive legal and regulatory framework for direct selling that suits the industry’s characteristics and the practical demands of enforcement, thereby offering substantial support for industry growth. Moreover, he recommended leveraging technology to enhance the application of big data and cloud computing in direct selling regulation, promoting effective data collection, analysis, and assessment.
According to CHI Xinxin, a secondary investigator at the Legal Affairs Division of the NRA, the revision of the Direct Selling Regulations and the Prohibition of Pyramid Schemes Regulations has been incorporated into this year’s legislative agenda by the State Council. Currently, the market regulatory department is working on or participating in the drafting of these revisions, ensuring a broad consultation process to refine and advance the regulations in a collaborative manner.
