Chapter VII Legal Liabilities
Article 38 In case the relevant departments and their staff members that conduct supervision and administration on direct selling companies and sales promoters and their direct selling activities grant license to any application not complying with the conditions as prescribed in the present Regulation or do not perform supervision and administration functions in light of the provisions of the present Regulation, the person-in-charge who is directly responsible and other personnel directly liable shall be given administrative punishments according to law. If a crime is constituted, they shall be subject to criminal liabilities according to law. The license on any application not complying with the conditions as prescribed in the present Regulation shall be revoked by the relevant department that makes the decision on the license.
Article 39 Any direct selling company that violates the provisions of Articles 9 and 10 of the present Regulation and undertakes direct selling activity without approval shall be ordered by the administrative department of industry and commerce to make corrections, be confiscated of the direct selling products and the illegal sales income, and be imposed upon a fine ranging from RMB 50,000 to 300,000 Yuan. If the circumstance is serious, it shall be imposed upon a fine ranging from RMB 300,000 to 500,000 Yuan, and shall be banned according to law. If a crime is constituted, it shall be subject to criminal liabilities according to law.
Article 40 In case any applicant obtains the licenses as established in Articles 9 and 10 of the present Regulation by cheating, bribery or other means, the administrative department of industry and commerce shall confiscate the direct selling products and the illegal sales income, and impose upon the applicant a fine ranging from RMB 50,000 to 300,000Yuan, and the competent department of commerce of the State Council shall revoke its corresponding license, and the applicant shall be prohibited from filing an application again. If the circumstance is serious, it shall be imposed upon a fine ranging from RMB 300,000 to 500,000 Yuan, and shall be banned according to law. If a crime is constituted, it shall be subject to criminal liabilities according to law.
Article 41 In case any direct selling company violates the provisions of Article 11 of the present Regulation, the administrative department of industry and commerce shall order it to correct, and impose upon it a fine ranging from RMB 30,000 to 300,000 Yuan. If any direct selling company no longer complies with the conditions on licensing of direct selling, the competent department of commerce of the State Council shall revoke its direct selling license.
Article 42 In case any direct selling company violates regulations, and undertakes direct selling business by exceeding the scope of direct selling products, the administrative department of industry and commerce shall order it to correct, confiscate the direct selling products and the illegal sales income, and impose upon it a fine ranging from RMB 50,000 to 300,000 Yuan. If the circumstance is serious, it shall be given a fine ranging from RMB 300,000 to 500,000 Yuan, and the competent department of commerce of the State Council shall suspend the business license of the branch of any direct selling company which has illegal operation acts, or the competent department of commerce of the State Council may even suspend the direct selling license of the direct selling company.
Article 43 In case any direct selling company or any of its sales promoters violates the provisions of the present Regulation, and has fraudulent, misleading and other drumbeating and sales promotion acts, the direct selling company shall be imposed upon a fine ranging from RMB 30,000 to 100,000 Yuan by the administrative department of industry and commerce; if the circumstance is serious, it shall be given a fine ranging from RMB 100,000 to 300,000 Yuan, and the administrative department of industry and commerce shall suspend the business license of the branch of any direct selling company which has illegal operation acts, or the competent department of commerce of the State Council may even suspend the direct selling license of the direct selling company. The sales promoters shall be given a fine of less than RMB 50,000 Yuan by the administrative department of industry and commerce; if the circumstance is serious, it shall order the direct selling company to revoke his/her qualification of sales promoter.
Article 44 In case any direct selling company or any of its branches recruits sales promoters in violation of the present Regulation, the administrative department of industry and commerce shall order it to correct, and impose upon it a fine ranging from RMB 30,000 to 100,000 Yuan. If the circumstance is serious, it shall be imposed upon a fine ranging from RMB 100,000 to 300,000 Yuan, and the administrative department of industry and commerce shall revoke the business license of the branch of the direct selling company that has illegal operation acts or the competent department of commerce of the State Council may even revoke the direct selling license of the direct selling company.
Article 45 In case anyone violates the provisions of the present Regulation and undertakes direct selling activity without obtaining the certificate of sales promoter, the administrative department of industry and commerce shall order him/her to correct, confiscate the direct selling products and the illegal sales income, and may impose upon him/her a fine of less than RMB 20,000 Yuan. If the circumstance is serious, he shall be imposed upon a fine ranging from RMB 20,000 to 200,000 Yuan.
Article 46 In case any direct selling company makes vocational training on its sales promoters in violation of the provisions of the present Regulation, the administrative department of industry and commerce shall order it to correct, confiscate the illegal gains, and impose upon it a fine ranging from RMB 30,000 to 100,000 Yuan. If the circumstance is serious, it shall be imposed upon a fine ranging from RMB 100,000 to 300,000 Yuan, and the administrative department of industry and commerce shall revoke the business license of the branch of the direct selling company that has illegal business acts or the competent department of commerce of the State Council shall even revoke the direct selling license of the direct selling company; and the teaching staff members shall be imposed a fine of less than RMB 50,000 Yuan, if they are the direct selling trainers, and the direct selling company shall be ordered to revoke their qualifications of direct selling trainer.
In case any entity or individual outside a direct selling company organizes vocational training on sales promoters, the administrative department of industry and commerce shall order it/him to correct, confiscate its/his illegal gains, and impose upon it/him a fine ranging from RMB 20,000 to 200,000 Yuan.
Article 47 In case any sales promoter violates the provisions of Article 22 of the present Regulation, the administrative department of industry and commerce shall confiscate his/her illegal sales income, and impose upon him/her a fine of less than RMB 50,000 Yuan. If the circumstance is serious, the direct selling company shall be ordered to revoke his/her qualification of sales promoter, and shall be imposed upon a fine ranging from RMB 10,000 to 100,000 Yuan.
Article 48 Any direct selling company that violates the provisions of Article 23 of the present Regulation shall be punished according to the relevant provisions of the price law.
Article 49 In case any direct selling company violates the provisions of Articles 24 and 25 of the present Regulation, the administrative department of industry and commerce shall order it to correct and impose upon it a fine ranging from RMB 50,000 to 300,000 Yuan. If the circumstance is serious, it shall be imposed upon a fine ranging from RMB 300,000 to 500,000 Yuan, and the administrative department of industry and commerce shall revoke the business license of the branch of the direct selling company that has illegal business acts or the competent department of commerce of the State Council may even revoke the direct selling license of the direct selling company.
Article 50 In case any direct selling company fails to make information reporting and disclosure in light of the relevant provisions, the administrative department of industry and commerce shall order it to correct within a prescribed time limit, and impose upon it a fine of less than RMB 100,000 Yuan. If the circumstance is serious, the administrative department of industry and commerce shall revoke the business license of the branch of the direct selling company that has illegal business acts or the competent department of commerce of the State Council may even revoke the direct selling license of the direct selling company.
Article 51 In case any direct selling company violates the relevant provisions of Chapter V of the present Regulation, the administrative department of industry and commerce shall order it to correct within a prescribed time limit, and impose upon it a fine of less than RMB 100,000 Yuan. If it refuses to correct, it shall be imposed upon a fine ranging from RMB 100,000 to 300,000 Yuan, and the competent department of commerce of the State Council shall revoke its direct selling license.
Article 52 In case any illegal act in violation of the present Regulation also violates the Regulation on Prohibiting Pyramid Selling at the same time, it shall be subject to the punishment according to the relevant provisions of the Regulation on Prohibiting Pyramid Selling.
Chapter VIII Supplementary Provisions
Article 53 In case any direct selling company plans to establish direct selling companies association and other social organizations, it shall be subject to the approval of the competent department of commerce of the State Council, and shall apply for registration according to law on the basis of the Document of Approval.
Article 54 The relevant provisions on foreign investors of the present Regulation shall be followed when the investors of Hong Kong Special Administrative Region, Macao Special Administrative Region, and Taiwan region invest in establishing direct selling companies and carry out direct selling activities within China.
Article 55 The present Regulation shall become effective as of December 1st, 2005.
