‘...The defendant Quanjian Company and another 12 people including Yuhui Shu, was convicted of the crime of organizing and leading pyramid selling activities. According to law, the Quanjian company was fined 100 million RMB, and Yuhui Shu was sentenced to fixed-term imprisonment of nine years, and was also fined 50 million RMB...’
On January 8th, 2020, with the verdict of the judge of Wuqing People’s Court in Tianjin, Quanjian’s health care industry with annual sales of more than 10 billion RMB collapsed, while Quanjian Company’s boss, Yuhui Shu, was stripped of his ‘business wizard’ cloak and exposed as a pyramid selling leader. This company has the ‘bone base magnetic treatment insole’ selling for nearly 1000 RMB, the ‘anti-cancer medicine’ that everybody touts and so on various health products, and also has a hospital specialized in treating cancer as well as a football club. Such a business empire, incredibly also is pyramid selling organization that everybody dislikes and wants to ban it all the time?
Pyramid selling is an illegal running behavior, pyramid selling organization is an organization which relies on developing Person, i.e. calculating payment based on the number of developed people or sales performance, or requiring the developed Person to pay fees to obtain the qualification to join for getting illegal profit. They may have a bright appearance, have a variety of luxury cars and private jets, may be health care products companies, travel agencies, financial investment companies, may also be e-commerce platforms, but these do not change their nature of pyramid selling. No matter how crafty Multi-level marketing organizations change their appearance, there are few common points:
1. Cheating entrance fee. The trap: do you want to join‘the team that can earn a lot of money’? If your answer is yes, come on but you must pay a membership fee first or buy a set ‘product’, and you cannot return.
2. Developing referrals and bringing in more people through propaganda(false, deceptive propaganda). Develop their own off-line clerks to form a hierarchical network, also known internationally as ‘pyramid fraud’.
3. Multilevel calculating payment. Directly or indirectly, the quantity or sales performance of the off-line clerks is the basis for calculating the remuneration and bonus. Usually, these profits are derived from the ‘entry fee’ paid by the off-line clerks. For example, Ming paid 500 RMB membership fee and finally joined the MLM organization. At this time, his superiors would ask him to develop members and collect the corresponding membership fee. The amount of his salary depends on the number of members he developed.
According to online data, Quanjian Company , developed the sales team of nearly 4 million people through pyramid model, whose maximum number of levels is more than 600, involving more than 300 hundred million RMB, completely conforming with the form of pyramid selling. The 12 core members including Yuhui Shu, has violated the criminal law on the crime of organizing and leading pyramid selling activities.
Organizing and leading pyramid selling activities, an unusual crime, refers to in name of running such as selling commodities or providing services, require participants to pay fees or buy goods, services to get the join-qualification. Those participants are in a certain order of hierarchy, directly or indirectly calculating payment or getting profits based on the number of developed off-line clerks. They will entice or coerce another into joining the organization, cheating another property and disturbing the economic social order.
This crime infringes citizen right to property, market economy order and social economy order. As long as the pyramid selling organization staff number is more than 30 and the level is more than three, the organizer and leader shall be filing acase. Note that the criminal law only stipulates the organizers and leaders responsibilities. In 2013, the opinion on the legal application of pyramid selling cases was issued jointly by the Supreme People’s Court, the Supreme People’s Procuratorate and the Ministry of Public Police, which clearly defined the scope of organizers and leaders.
1. Person who initiate, plan and manipulate pyramid activities;
2. Person responsible for management and coordination in pyramid selling activities;
3. Person responsible for publicity and training in pyramid activities;
4. Those who have been imposed criminal punishment for organizing or leading pyramid selling activities, or have been imposed administrative penalty for organizing or leading pyramid selling activities within one year, and have directly or indirectly developed persons who have participated in pyramid selling activities with more than 15 persons and at least three levels;
5. Another person who play a key role in the implementing pyramid activities, establishing and expanding pyramid organizations.
The above five categories of person, simply speaking, the first category is the boss of pyramid selling organization, just as the Quanjian boss Yuhui Shu; the second, third and fifth categories are the boss’s heeler, who are usually the organization’s key persons; and the fourth category is the ‘once’ clause that punish those who refused to correct errors, similar to recidivism.
What about people other than the organizer and the leader? There are 4 million people in Quanjian Company, do not the rest of the people except organizer and leader bear punishment? According to the criminal law, those who are assigned by the unit and only engaged in labor work in the large pyramid selling organization, such as receptionist, security, financial staff and cashier, generally are not investigated for criminal responsibility. As for the rest of the people, in accordance with the regulations on prohibiting pyramid selling activities, those who introduce, lure, coerce another to participate in pyramid selling activities, in addition to stop illegal behavior, confiscation of illegal property and illegal income, also may be imposed a fine of not less than 100,000 RMB and not more than 500,000 RMB. The lowest level who participate in pyramid selling, may also be fined not more than 2000 RMB. And those units and individuals who provide places for pyramid selling activities, or offer goods and other help, or provide Internet information services, shall bear corresponding administrative penalties.
Quanjian case made countless people pay expensive IQ tax, also gave us all an open pyramid selling class about‘cure-all’,‘expert consultation’ and‘high rebate’. Pyramid selling words and traps are everywhere, the following is a reminder to everyone:
1. Keep calm, alert and rational when you see ‘original stock’, ‘dynamic and static earnings’, ‘free experience’ and other pyramid selling idioms, as well as ‘earning one million RMB within one year even if you do nothing’, ‘overnight rich’ and other business slogans, because these seem to be candy but actually traps set by pyramid selling organizations.
2. If your friends and relatives or those who have not contacted with you for a long time suddenly borrow money from you, introduce investment, blind date or job opportunities for you, you must verify it carefully because the brainwashed pyramid selling person usually develop off-line they are familiar with first;
3. There was once a case that pyramid selling organization set up employment trap on the formal recruitment website, so we should verify the company address, evaluation and other related information carefully, and refuse the remote interview location. If the other party changes interview location after arriving to the location or puts forward to send someone to pick you up, be alert because this may be a pyramid selling trap;
4. If you unfortunately join the pyramid selling organization, you’d better overcome fear and pretend to cooperate, as far as possible keep your ID card, bank card, mobile phone and another key property and prepare distress note, looking for the right opportunity to escape or ask for help from passers-by or police.
The harm and terror of pyramid selling are apparent, but there still are many people falling into the pyramid selling trap, which inevitably caused by ignorance and greed. To quote one sentence from China Daily, ‘Any mysterious force and illusory are the distortion of science; and any unearned, get-rich-quick proxy myth is a travesty of success.’
