Why is Cosmetics MLM Prevailing in China?

Though deeply caught in the MLM turmoil, after two investigations, the cosmetic brand TST owned by Zhang Ting and Lin Ruiyang seems to be still operating normally, and the brand's live broadcast and new product launch are not affected.

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On June 16th, China Standard Time (all times in this article are China Standard Time), the topic "Zhang Ting frequently appears in the agency WeChat group" was on the hot search on the Chinese social platform Weibo. In addition, the boss Zhang Ting frequently appeared in the agency WeChat group, and the e-commerce platform stores were also updated as usual.

It is reported that on June 13, the TST brand held a live broadcast of the company's 8th anniversary on the WeChat video account of "Juboyiwang". Shanghai Juboyiwang Industrial Co., Ltd. is a wholly-owned subsidiary of TST's parent company, Daerwei.

CHAILEEDO noticed that during the live broadcast that day, Zhang Ting herself recorded a promotional video for the new product. At the same time, the company is still developing new products. Among them, "Orchid Clear Sunscreen" will be officially launched on June 20, priced at $49/35ml, which is much higher than well-known international sunscreen brands such as ANESSA.

As early as 2021, Yuhua Administration For Market Regulation, Shijiazhuang City, filed an investigation into the alleged pyramid schemes of the Daerwei company owned by Zhang Ting and her husband, and 96 properties under the company's name were seized. Later, the Baokang Administration For Market Regulation of Hubei Province conducted an investigation and found that Daerwei had the circumstances specified in the relevant provisions of the "Prohibition of Pyramid Selling Regulations", which belonged to the nature of pyramid selling. According to the law, 3.03 million US dollars of illegal income was confiscated and a fine of 270,000 US dollars was imposed.

Coincidentally, just this month, the Baise Intermediate People's Court made a final ruling on the case of the "Taiji Gufang" platform suspected of pyramid selling. The four defendants were sentenced to fixed-term imprisonment ranging from 1 year and 8 months to 5 years and 6 months for the crime of organizing and leading pyramid selling activities, fined 390,900 US dollars, and recovered about 36 million US dollars of illegal income according to law. It is understood that the "Taiji Gufang" e-commerce platform mainly sells cosmetics such as repairing liquid and facial masks.

In addition, just over two months ago, Guangzhou Chengze Information Technology Co., Ltd., the operating company of the "Think Shopping Mall", was also investigated for the crime of organizing and leading pyramid selling activities. According to the latest report, 32 people including Mr. Li, a suspect suspected of organizing and leading pyramid selling activities, were arrested by the law. It is reported that the Think Shopping Mall mainly sells daily necessities and household products such as cosmetics, daily chemical products, clothing, electrical appliances, etc.

In China, multilevel marketing(MLM) is a special kind of fraudulent activity, and MLM organization is a special kind of fraudulent organization. It seeks illegal benefits by "charging entry fees, developing offline, and layer by layer commissions".

Chinese regulators have never stopped cracking down on the use of online platforms to organize pyramid schemes. In December 2021, the State Administration for Market Regulation of China issued the "Implementation Outline for the Construction of Market Supervision under the Rule of Law (2021-2025)", requiring more efforts to crack down on pyramid schemes, and use technical means to identify e-commerce, micro-business, and consumer products under the new situation. New types of pyramid schemes carried out in the name of rebates, etc., shall be investigated and punished by the law for violations of laws and regulations in direct selling.

However, although China has always maintained a "zero tolerance" attitude towards pyramid schemes, this illegal activity has never been eradicated. The main reason is that the people involved in pyramid schemes are brainwashed. Affected by the idea of getting rich overnight, most MLM personnel hope to obtain the greatest benefits in the shortest time. This kind of thinking makes them try their best to deceive more people to join the MLM organization and become greedy for it.

Moreover, the MLM organization also has a complete set of rhetoric, which is instilled in the participants in advance. Saying this is "China's macro-control" has led to MLM participants not trusting the police but only MLM organizers.

Li Jinping, a professor at the People's the Public Security University of China, suggested that all functional departments in China can set up offices dedicated to cracking down on pyramid schemes, and implement the rectification responsibility to the area and directly responsible persons so that the rectification work can become a long-term and routine work, and the rectification responsibility is more strict and clarified.

In addition, the general public should also be vigilant in their daily life, and fully understand the fraudulent, concealed, and harmful nature of illegal MLM. When encountering MLM selling activities, everyone should be obliged to report them to the public.