Business Intelligence on Retailing, Franchising, and Consumerism in China

Avon China Investigated For Multi-level Marketing

According to Chinese media, Avon (China) Heilongjiang Branch may face a fine of up to CNY2 million and even be asked to take criminal responsibility if it is found to be involved in multi-level marketing.

Avon claims itself to be the world's leading direct seller of beauty and related products. However, it is reported by Chinese media that Avon (China) Heilongjiang Branch was under investigation by Harbin Municipal Department for Industry and Commerce for possible involvement in multi-level marketing. Meanwhile, Avon is asked by 12 retailers to recall outdated goods which were said to be mainly due to the company's bad business practice (luring or threatening the retailers to stock Avon products) and a messy layout in locating retailing outlets.

Under China's Regulations on Forbidding Pyramid Selling, parties who introduce, lure or force others to join in multi-level marketing shall have the relevant assets and illegal income confiscated and fined up to CNY500,000 and serious violators shall be punished by law.

Interestingly, Avon recently signed a self-discipline convention with five other direct marketing companies in Guangdong and declared that it would not only abide by China's laws and regulations, but also exercise self-discipline in doing business in China. The six companies also agreed to jointly crack down cross-province multi-level marketing activities and punish organizations involving in large scale multi-level marketing.

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