The boundary between direct selling and pyramid selling is usually vague, but it is also defined by the state management department in the Regulations on Direct Selling Management. The remuneration paid by direct selling enterprises to direct sellers can only be calculated according to the income of direct sellers selling products to consumers, and the total remuneration shall not exceed 30% of the income of direct sellers selling products to consumers.
The revenue of Perfect Company in China not only has multi-level accumulation similar to pyramid selling, but also the actual commission of its employees directly violates the regulations of direct selling management. According to reports, the sales staff of Perfect Company often develop offline business from relatives and friends in China, which is very similar to pyramid schemes, and the return of employees to develop offline business is also very high. Judging from the actual situation, the perfect company is very likely to be suspected of pyramid schemes.
In 2005, the State Council promulgated the Regulations on Prohibition of MLM, which clearly stipulated that MLM refers to the behavior of organizers or operators to develop personnel, based on the number of personnel directly or indirectly developed by them or their sales performance, to pay remuneration to the developed personnel, to seek illegal benefits, or to require the developed personnel to obtain the qualification to join on the condition of paying a certain fee, which disrupts the economic order and affects social stability.
Its specific behavior can be summarized into three ways: first, it does not provide substantive business or services, and takes the number of development personnel as the main source of income; Second, using propaganda or promising high returns as bait, illegal fund-raising is carried out by illegal gathering, making excuses for products or charging unequal and objective fees in disguise; Third, under the guise of selling products or providing services, engage in illegal and criminal activities such as fund-raising fraud and other commercial fraud, and use fraudulent means or even forced transactions to collect money.