Avon Products Inc, Amway and Mary Kay have direct selling operations in China.

The regulations set out how foreign companies will be allowed to run multi-level marketing activities, methods of selling for consumer goods companies which do not have physical retail outlets.

The rules, published by the Ministry of Foreign Trade and Economic Cooperation (MOFTEC), will be effective from April 1.

The government announced last December that it was drafting new regulations covering a range of direct selling activities by foreign-funded companies, including door-to-door and catalogue selling as part of its WTO commitments.

The State Council revealed in December that it had launched a new crackdown on pyramid selling and had been in talks with US retailers with operations in China, such as Amway, whose direct-selling operations were temporarily halted in China in 1998 as they came under a blanket ban on pyramid selling.

Under the new regulations, companies must register with their local commercial administration bureaux and must set up retail outlets before they can employ sales people.

They will not be allowed to develop networks of sales agents and must formally employ individual agents.

In addition, companies will only be allowed to pay commission on product sales and not for introductions of new customers.

Customers must be allowed to buy products directly from the stores in addition to buying from sales agents.

Companies will be banned from forcing sales agents to buy products or pay other fees such as training fees or deposits.

Training must be paid for by the companies themselves and training sessions cannot be attended by more than 50 people. Training material must also be submitted to the local authorities, the MOFTEC said.

(Xinhua News Agency February 25, 2002)