Regulations on Direct Selling Administration (Revised in 2017)
Regulations on Direct Selling Administration (Revised in 2017)
Regulations on Direct Selling Administration (Revised in 2017)
Order of the State Council of the People's Republic of China No.676
March 1, 2017
(Promulgated by Order of the State Council of the People's Republic of China No.443 on August 23, 2005, and amended in accordance with the Decision of the State Council on Revising and Abolishing Certain Administrative Regulations on March 1, 2017)
Chapter I General Provisions
Article 1 With a view to regulating direct selling acts, strengthening supervision over direct selling activities, preventing fraud and protecting the legitimate rights and interests of consumers and public interests, the present Regulations are formulated.
Article 2 The present Regulations shall be subject to the direct selling activities undertaken within the territory of the People's Republic of China.
The scope of direct selling products shall be determined and promulgated by the competent department of commerce of the State Council jointly with the administrative department of industry and commerce of the State Council on the basis of the development of the direct selling industry and the demands of consumers.
Article 3 The term "direct selling" as mentioned in the present Regulations refers to a type of business mode, in which direct selling companies recruit door-to-door salesmen to sell products directly to ultimate consumers(hereinafter referred to as consumers)outside the companies' fixed places of business.
The term "direct selling companies" as mentioned in the present Regulations refers to the companies which, upon approval, sell products by way of direct selling according to the provisions of the present Regulations.
The term "door-to-door salesmen" as mentioned in the present Regulations refers to any personnel who sell products directly to consumers outside the fixed places of business.
Article 4 Any company that is established within the territory of the People's Republic of China (hereinafter referred to as the company) may, in accordance with the provisions of the present Regulations, apply for establishing a direct selling company that sells the products produced by itself or the products produced by its parent company or holding company by way of direct selling.
A direct selling company may obtain the trade right and distribution right according to law.
Article 5 When undertaking direct selling activities, no direct selling company or its door-to-door salesman may conduct any fraudulent or misleading acts and other drumbeating and sales promotion acts.
Article 6 The competent commerce department and the administrative department of industry and commerce of the State Council shall, in line with the division of their responsibilities and the provisions of the present Regulations, be responsible for conducting supervision and administration on direct selling companies and door-to-door salesmen as well as their direct selling activities.
Chapter II Establishment and Alteration of Direct Selling Companies and Their Branches
Article 7 Anyone applying for establishing a direct selling company shall satisfy the following requirements:
1. the investor shall have good commercial reputation, and have no records of serious illegal operation during the past five years before filing the application; in the case of a foreign investor, it shall, in addition, have undertaken direct selling business outside China for at least three years;
2. the paid-in registered capital shall be no less than CNY80 million;
3. the deposits shall have been fully paid in the designated bank in accordance with the provisions of the present Regulation; and
4. the system of information reporting and disclosure shall have been established as required.
Article 8 Anyone applying for establishing a direct selling company shall fill out the application form and provide the following application documents and materials:
1. the certification documents conforming to the conditions as provided for in Article 7 of the present Regulation;
2. articles of association of the company; in the case of establishment of a Sino-foreign joint venture or cooperative company, the contract of the joint venture or cooperative company shall be provided as well;
3. the report on market plan, including the scheme for service networks in the area where direct selling business is conducted as recognized by the people's governments at or above the county level, which is drawn up according to the provisions of Article 10 of the present Regulations;
4. descriptions of products up to the national standards;
5. model sales contract to be signed with the door-to-door salesman;
6. report on the verification of capital as issued by an accounting firm; and
7. agreement concluded between the company and the designated bank on using the deposit according to the present Regulations.
Article 9 An applicant shall, through the competent commerce department at the province, autonomous region, and municipality directly under the Central Government at its locality, file an application with the competent commerce department of the State Council. The competent commerce department at the province, autonomous region, and municipality directly under the Central Government shall, within 7 days as of the day of receipt of the application documents and materials, submit the application documents and materials to the competent commerce department of the State Council. The competent commerce department of the State Council shall, within 90 days as of the day of receipt of all the application documents and materials, and upon the opinions solicited from the administrative department of industry and commerce of the State Council, make a decision on whether or not to approve it. And if an approval is granted, it shall issue the direct selling license.
An applicant shall, upon the strength of the direct selling license issued by the competent commerce department of the State Council, apply for registration of alteration to the administrative department of industry and commerce according to law.
The competent commerce department of the State Council shall, when carrying out examination and issuing the direct selling license, take into account such factors as national security, public interests, and the development of the direct selling sector, etc.
Article 10 When undertaking direct selling business, a direct selling company shall, in the administrative regions of the provinces, autonomous regions, and municipalities directly under the Central Government where it plans to undertake direct selling business, establish branches(hereinafter referred to as branches), which shall be responsible for the direct selling business within their regions respectively .
A direct selling company shall, within the area where it undertakes direct selling business, establish service networks which may facilitate and satisfy consumers and door-to-door salesmen to know about the price of products and returning and changing of products and for the company to provide other services.
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