(Promulgated by the State Council on 23 August 2005 and effective as of 1 November 2005.)

PART ONE　GENERAL PROVISIONS 

Article 1　These Regulations have been fmulated in der to prevent fraud， protect the lawful rights and interests of citizens， legal persons and other ganizations， safeguard the economic der of the socialist market and maintain social stability. 

Article 2　F the purposes of these Regulations， the term “pyra selling” means acts that interfere economic der and affect social stability by which an ganizer operat recruits personnel and seeks illegal benefits by means of calculating and paying remuneration to the recruited personnel on the basis of the number of personnel directly indirectly recruited by them their sales perfmance， requiring the recruited personnel to pay certain fees as a condition of being qualified f participation. 

Article 3　Local people‘s governments at and above the county level shall strengthen their leadership in investigating and handling pyra selling， and suppt and urge the relevant departments to perfm their regulaty duties in accdance with the law. 

Local people‘s governments at and above the county level shall set up such mechanisms as required f codination in investigating and dealing with pyra selling and provide timely codination and solution to maj issues that arise in investigating and handling pyra selling. 

Article 4　The administration f industry and commerce and the public security authity shall investigate and handle pyra selling within their respective scope of responsibilities in accdance with the provisions hereof. 

Article 5　While investigating and handling pyra selling in accdance with the law， the administration f industry and commerce and the public security authity shall adhere to the principle of integrating education with punishment， and educate citizens， legal persons and other ganizations to conscientiously abide by the law. 

Article 6　Every wk unit and individual has the right to rept pyra selling act to the administration f industry and commerce and the public security authity. Upon receipt of such rept， the administration f industry and commerce and the public security authity shall immediately investigate and verify the case and handle it in accdance with the law， and shall keep the identity of the infmant confidential. If a rept is proven to be true upon investigation， the infmant shall be granted a reward in accdance with the relevant State provisions. 

PART TWO　TYPES OF PYRAMID SELLING AND THE INVESTIGATION AND HANDLING AUTHORITY 

Article 7　The following acts are pyra selling acts：
1. an ganizer operat seeks illegal benefits by recruiting personnel， requiring the recruited personnel to recruit other personnel to participate， and calculating and paying remuneration (here and hereinafter including material rewards and other economic benefits) to the recruited personnel on the basis of the number of personnel directly indirectly recruited by them through rolling recruitment；
2. an ganizer operat seeks illegal benefits by recruiting personnel and requiring the recruited personnel to pay fees， fees in disguised fms such as der of commodities， as a condition to being qualified f participation recruiting other personnel to participate； and
3. an ganizer operat seeks illegal benefits by recruiting personnel and requiring the recruited personnel to recruit other personnel so that an upline-downline relationship is fmed， and calculating and paying remunerations to an upline personnel on the basis of the sales perfmance of his downline personnel. 

Article 8　The administration industry and commerce shall be responsible f investigating and handling the pyra selling acts specified in Article 7 hereof in accdance with the provisions hereof. 

Article 9　Where media such as the internet are utilized to disseminate infmation of pyra selling specified in Article 7 hereof， such case shall be investigated and handled by the administration f industry and commerce in conjunction with other relevant authities such as the telecommunications authity in accdance with the provisions hereof. 

Article 10　If anyone in pyra selling deceitfully lures other personnel in the name of job referral and engagement in business activities， etc. to leave their place of residence to illegally gather in another place and restrict their personal freedom， such case shall be investigated and handled by the public security authity in conjunction with the administration f industry and commerce. 

Article 11　The relevant authities and wk units such as those in ge of commerce， education， civil affairs， finance， labour security， telecommunications and taxation shall， pursuant to their respective responsibilities and the provisions of the relevant laws and administrative regulations， cooperate with the administration f industry and commerce and the public security authity in their investigation and handling of pyra selling acts. 

Article 12　Grass-root ganizations such as rural villagers committees and urban residents committees shall， under the guidance of the local people‘s government， assist the relevant authities in investigating and handling pyra selling conduct. 

Article 13　If， in investigating and handling pyra selling acts， the administration f industry and commerce suspects that an act may constitute a criminal offence， it shall transfer the case to the public security authity to be put on file f police investigation. If a case of pyra selling put on file f police investigation by the public security authity is found after police investigation not constituting a criminal offence， the case shall be transferred to the administration f industry and commerce f investigation and handling. 

PART THREE　MEASURES AND PROCEDURES FOR INVESTIGATION AND HANDLING PYRAMID SELLING 

Article 14　Administrations f industry and commerce at the county level above may adopt the following measures when investigating and handling suspected pyra selling acts：
1. der the cessation of the relevant activities；
2. investigate and understand relevant circumstances from the suspected pyra selling ganizer， operat and individual；
3. enter the business premises and venues f training and assembly activities that are suspected to be involved in pyra selling to conduct on-site inspection；
4. inspect， reproduce， seal up distrain materials such as contracts， instruments and account books that are suspected to be related to pyra selling；
5. seal up distrain property such as products (commodities)， tools， equipment and raw materials that are suspected to be used specifically f pyra selling；
6. seal up the business premises that are suspected to be involved in pyra selling；
7. inquire the accounts of the suspect pyra selling ganizer operat and the accounting vouchers， books and statements relating to their deposits； and
8. apply to the judicial authity f freezing the illegal funds where there is evidence in suppt of the transfer concealment of such funds. 

To adopt the measures stipulated in the preceding paragraph， the administration f industry and commerce shall rept in writing verbally to and obtain approval from the principal person in ge of the administration f industry and commerce at the county level above. In emergencies that require adoption of the measures set out in the preceding paragraph on-the-spot， a rept shall be made and the relevant procedures shall be completed immediately after the incident. If sealing up distrainment stipulated in the preceding paragraph the measures stipulated in Items (7) and (8) above are to be enfced， pri written approval shall be obtained from the principal person in ge of the administration f industry and commerce at the county level above. 

Article 15　When the administration f industry and commerce investigates and handles suspected pyra selling acts， there shall be no less than two enfcement officers. 

Enfcement officers that have direct interests with the party concerned shall withdraw. 

Article 16　When investigating and handling suspected pyra selling acts， the enfcement officers of the administration f industry and commerce shall produce their identity documents to the party the relevant personnel. 

Article 17　When enfcing sealing up distrainment， the administration f industry and commerce shall deliver on-site to the party the seal-up distrainment warrant and a list of the property and materials sealed up distrained. 

In places where transpt is inconvenient where the investigation and handling of the case may be affected if seal-up distrainment is not enfced in time， the seal-up distrainment may first be enfced， and the seal-up distrainment warrant shall be obtained and served on the party within 24 hours thereafter. 

Article 18　The time limit of seal-up distrainment enfced by the administration f industry and commerce may not exceed 30 days. If the case is complicated， the time limit may be extended f 15 days upon the approval of the principal person in ge of the administration f industry and commerce at the county level above. 

The administration f industry and commerce shall keep safe the property sealed up distrained， and may not use destroy them. If it causes any loss to such property， it shall be liable f compensation unless such loss is caused by events of fce majeure. 

Article 19　If the administration f industry and commerce has enfced seal-up distrainment， it shall find out the facts in a timely manner and make a decision on the case during the time limit of the seal-up distrainment. 

If an act is found to be pyra selling upon investigation and verification， the illegal property sealed up distrained shall be confiscated in accdance with the law. If， upon investigation and verification， no pyra selling act is found there is no need f sealing up distrainment， the seal-up shall be removed and the distrained property shall be returned immediately after a handling decision is made. 

If the administration f industry and commerce fails to make a decision on the case within the time limit， the items sealed up shall be deemed unsealed and the distrained property shall be returned. If the administration refuses to return the property， the party may institute an administrative action at the people‘s court. 

Article 20　If the administration f industry and commerce and its wking personnel use destroy the sealed distrained property， thereby causing economic losses to the party， they shall be bear the liability f compensation. 

Article 21　When the administration f industry and commerce investigates and handles suspected pyra selling acts， the party has the right to present his statement and defence. 

Article 22　The administration f industry and commerce shall make on-site written recds when investigating and handling suspected pyra selling acts. 

On-site written recds and the list of property sealed up distrained shall be signed by affixed with the seals of the party， the witness and the enfcement officers. If the party is not present， if the party the witness refuses to sign affix his seal， the enfcement officers shall make a note in the on-site written recds. 

Article 23　If an act is found to be pyra selling upon investigation and verification， the administration f industry and commerce and the public security authity may issue a warning reminder to the public. 

Issuance of warning reminder to the public shall be approved by the principal person in ge of the administration f industry and commerce at the county level above the public security authity. 

PART FOUR　LEGAL LIABILITY 

Article 24　If anyone has an act specified in Article 7 hereof such as ganizing and planning pyra selling， the administration f industry and commerce shall confiscate his illegal property and illegal gains， and impose a fine of not less than Rmb 500，000 and not me than Rmb 2 million. If the case constitutes a criminal offence， criminal liability shall be pursued in accdance with the law. 

If anyone has an act specified in Article 7 hereof such as referring， luring fcing other people to participate in pyra selling， the administration f industry and commerce shall der him to cease the illegal act， confiscate his illegal property and illegal gains， and impose a fine of not less than Rmb 100，000 and not me than Rmb 500，000. If the case constitutes a criminal offence， criminal liability shall be pursued in accdance with the law. 

If anyone has an act specified in Article 7 hereof such as participating in pyra selling， the administration f industry and commerce shall der him to cease the illegal act， and may impose a fine of not me than Rmb 2，000. 

Article 25　When imposing penalty in accdance with Article 24 hereof， the administration f industry and commerce may der the suspension of business operation f rectification revoke the business licence in accdance with the provisions of the relevant laws administrative regulations. 

Article 26　If anyone provides business premises， training venue， sources of goods， safekeeping， warehousing other conditions f the pyra selling acts specified in Article 7 hereof， the administration f industry and commerce shall der the party to cease the illegal act， confiscate his illegal gains and impose a fine of not less than Rmb 50，000 and not me than Rmb 500，000. 

If anyone provides internet infmation services f the pyra selling acts specified in Article 7 hereof， the administration f industry and commerce shall der the party to cease the illegal act and notify the relevant authity to impose penalty in accdance with the Administration of Internet Infmation Services Procedures. 

Article 27　If the party uses， replaces， transfers destroys any sealed distrained property without authization， the administration f industry and commerce shall der the party to cease the illegal act and impose a fine of not less than 5% and not me than 20% of the value of the property used， replaced， transferred destroyed. If the party refuses to carry out rectification， a fine of not less than one time and not me than three times the value of the property used， replaced， transferred destroyed shall be imposed. 

Article 28　If anyone has any acts specified in Article 10 hereof refuses obstructs the investigation and handling of pyra selling acts in accdance with the law by the enfcement officers of the administration f industry and commerce， and such act constitutes a violation of security administration， the public security authity shall impose penalty in accdance with the provisions of the laws and administrative regulations on security administration. If the act constitutes a criminal offence， criminal liability shall be pursued in accdance with the law. 

Article 29　Where the administration f industry and commerce， the public security authity and their wking personnel abuse their power， are derelict in their duties practise graft， and fail to investigate and handle pyra selling acts in accdance with the responsibilities and procedures stipulated herein， fail to investigate and handle the pyra selling acts discovered， suppt， shield connive pyra selling acts， if the case constitutes a criminal offence， the criminal liability of the person in ge that is directly responsible and other directly responsible persons shall be pursued in accdance with the law. If the case does not constitute a criminal offence， administrative penalty shall be imposed in accdance with the law. 

PART FIVE　SUPPLEMENTARY PROVISIONS 

Article 30　These Regulations shall be implemented as of 1 November 2005.