Overcome difficulties to uproot pyramid schemes

Tianjin police launched a 20-day massive crackdown on pyramid schemes on Aug 6 after Li Wenxing and Zhang Chao, two young men tricked into such schemes while seeking jobs, were found dead in the city's Jinghai district last month.

Pyramid schemes first appeared when Western direct selling companies started operating in China in the 1980s. Direct selling is the marketing and selling of products directly to consumers; it reduces prices of products by cutting the costs of transportation and retailing. Since Chinese people have tight family bonds, the target customers of direct selling in the initial stages were members of the sellers' families. Many people succeeded in convincing some of their family members to become "direct sellers" or "lower-level distributors" of products to earn some money. Gradually, however, some direct selling projects transformed into pyramid schemes, with "investments" replacing the products.

The Chinese government banned all direct selling companies in 1998, although foreign companies such as Amway and Sunrider had obtained licenses to sell their products from retail stores before the ban was imposed. The ban continued until the State Council, China's Cabinet, introduced the Regulation on Direct Selling Administration and Prohibition of Pyramid Schemes Ordinance in 2005 as part of its commitment to the World Trade Organization. Distinguishing direct selling from pyramid schemes, the regulation strictly prohibits such schemes. And the Criminal Law states that pyramid scheme sellers face imprisonment and heavy fines in accordance with the severity of their crimes.