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  1. What is multi-level marketing?


  1. As stated in Article 3 of the Multi-level Marketing Supervision Act, “The term ‘multi-level marketing’ as used in this Act means the marketing practices to establish a multi-level organization by having participants introduce new participants to the multi-level marketing enterprise, and promote and sell goods or services.”

In Article 4, it is stipulated, “The term ‘multi-level marketing enterprise’ as used in this Act refers to companies, businesses, sole proprietorships or partnerships, groups or individuals that conduct overall planning or the carrying out of multi-level marketing activities as referred to in Article 3. A participant of a foreign multi-level marketing enterprise or a third party that introduces or carries out the multi-level marketing plans or organization of such enterprise shall be deemed a ‘multi-level marketing enterprise’ as referred to in the preceding paragraph.”

Again according to Article 5, “The term ‘participants’ as used in this Act refers to individuals who may earn commissions, bonuses and other economic benefits by taking part in the plans of a multi-level marketing enterprise and promoting or selling goods or services, and who may earn commissions, bonuses and other economic benefits by introducing other persons to participate, to promote, sell goods or services or introduce more persons. The persons who enter into contracts with multi-sale enterprises that after meeting specific conditions may become qualified to promote, sell goods or services, or to introduce other persons to participate shall be deemed as participants from the time such contracts are entered into.”

Simply put, multi-level marketing consists of sales of goods by a business through an established set of operating schemes or regulations and the use of a multi-level marketing organization developed through “interpersonal relations.” The main purpose of members of such an operating scheme (participants), besides purchasing goods for themselves, is to obtain the qualification to promote goods, sell them to regular consumers and make profits on price differences. They can also introduce other individuals to join the scheme and become participants and thus establish their own sales networks. All the networks established by individual members form the sales network of the entire multi-level marketing operation.

  1. The term “goods” used here refers to “tangible goods.” As for “services,” “intangible goods” like Internet access services can also be promoted through multi-level marketing. Following the implementation of related multi-level marketing regulations, multi-level marketing has thrived and become an important “marketing channel” in the country.
  2. The essence of multi-level marketing is the replication of function to expand downward and set up “sales networks” level after level. Each participant plays the roles of “consumer,” “retailer” and “manager” simultaneously. The sources of income include “retail profits,” “personal performance bonuses” and “counseling bonuses for each level.”

Relevant article(s) of law: Multi-level Marketing Supervision Act, Article 3 , 4 and 5

Updated at:2016-02-22 16:32:07