Practice Areas
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Direct Sale
As a general rule, multi-level marketing (“MLM”), or direct selling operations has been prohibited in China—much to the chagrin of MLM companies who are anxious to enter the Chinese market. MLM companies have been trying to find ways around China’s prohibitions, or have been developing other methods to take their products to China through retail operations. It was not until August 23, 2005 that the State Council promulgated rules that dealt specifically with direct sale operation- Administration of Direct Sales (entered into effect on 1 December 2005) and the Regulations for the Prohibition of Pyramid Sales (entered into effect on 1 November 2005). It now appears that the Chinese objections to direct selling operations are beginning to fade, and the door to China is beginning to open, ever so slightly. The prohibitions are not yet gone, and when direct selling is allowed, it will only be permitted under the most stringent requirements, in order to ensure the operations are not pyramid schemes or fly-by-night operations.
The Direct Sales Regulations limit direct selling to cosmetics, health food, sanitary products, body-building equipment and kitchen utensils. And the Regulations require Chinese or foreign companies (“FIEs”) who intend to engage into direct sale business in mainland China to apply for and obtain direct selling license from the Ministry of Commerce (“MOFCOM”). Until now, there are 24 companies, including domestic and foreign companies, have obtained the direct selling license (please refer to the following chart for reference.).
| Name | Direct Sale Area | Product | Date (month/date/year)
(obtained the license) | 1 | Avon
雅芳
(U.S.) | Avon China has 32 branch offices in China, including Beijing, Tianjin, Shanghai, Chongqing, Shenzhen, Guangdong, Shandong, Qingdao, Jiangxi, Sichuan, Heilongjiang, Henan, Anhui, Shanxi, Guizhou, Jiangsu, Hubei, Hunan, Liaoning, Zhejiang, Gansu, Hebei, Jilin, Yunnan, Hainan, Shanxi, Fuzhou, Guangxi, Ningxia, Neimenggu, Xinjiang and Qinghai. | Cosmetics, skincare and fragrance products, nutrition products and equipments. | 07/24/2006 | 2 | Nu Skin
如新
(U.S.) | Shanghai, Beijing, Guangdong and Shenzhen | Make-up, cosmetics and skincare products | 12/31/2006 | 3 | YOFOTO
宁波三生 | Ningbo | Nutrition food | 02/06/2007 | 4 | Pro-Healthy
宝健 | Beijing, Shandong, Zhejiang, Hebei, Henan, Heilongjiang, Tianjin and Hainan | Cosmetics and nutrition food | 03/15/2007 | 5 | New Era Healthy Industry Group, Co., Ltd.
新时代 | Beijing, Hebei, Zhejiang, Fujian, Shandong and Guangdong | Cosmetics, nutrition food and cleaning products | 03/15/2007 | 6 | For You
富迪
(U.S.) | Shanghai, Chengdu and Mianyang | Cosmetics and nutrition equipments | 04/11/2007 | 7 | Kasly
金士力佳友 | Tianjin and Beijing | Cosmetics and cleaning products and nutrition food | 04/20/2007 | 8 | JoyMain
南京中脉 | Jiangsu, including 13 cities, such as Nanjing, Suzhou and Wuxi, etc. | Cosmetics, nutrition food, and nutrition equipments | 04/23/2007 | 9 | Amway
安利
(U.S.) | Beijing, Tianjin, Shanghai, Hubei, Chongqing, Heilongjiang, Henan, Jilin, Jiangxi, Hunan, Anhui, Liaoning, Shanxi, Hainan, Hebei, Guangxi, Yunnan, Guangdong, Jiangsu, Zhejiang Fujian, Shandong, Shanxi, Sichuan, Dalian, Qingdao, Ningbo, Xiamen and Shenzhen. | Cosmetics; nutrition food; cleaning products and kitchenware. | 05/28/2007 | 10 | Oriflame
欧瑞莲
(Sweden) | Jiangsu, Guangdong and Sichuan | Cosmetics | 06/27/2007 | 11 | Kang Li Pharmaceuticals
康力医药 | Shenzhen | Nutrition food | 06/29/2007 | 12 | Herbalife
康宝莱 | Jiangsu, Zhejiang, Shandong, Guangdong, Guizhou, Beijing, Fujian, Sichuan, Hubei and Shanxi | Nutrition food and cosmetics | 07/02/2007 | 13 | Perfect
完美
(Malaysia) | Guangdong, including 21 cities, such as Guangzhou, Shenzhen and Dongguan, etc. | Cosmetics, skincare and nutrition food | 08/17/2007 | 14 | INFINITUS
无限极 | Guangdong, Sichuan and Beijing | Nutrition food, cosmetics and cleaning products | 08/24/2007 | 15 | Marykay
玫琳凯
(U.S.) | Beijing, Shanghai, Tianjin, Chongqing, Zhejiang, Shandong, Guangdong, Shanxi, Jiangsu, Hubei, Henan, Shanxi, Jiangxi, Hunan, Fujian, Liaoning, Yunnan, Guizhou, Anhui and Guangxi | Cosmetics | 09/03/2007 | 16 | ROLMEX Pharmaceuticals
罗麦药业 | Jinan and Liaocheng | Nutrition food and cosmetics | 10/26/2007 | 17 | Taiyang Shen (Apollo)
太阳神 | Dongguan | Nutrition products | 11/05/2007 | 18 | Sunhope
尚赫 | Tianjin | Nutrition food, cosmetics and cleaning products | 12/25/2007 | 19 | Shaklee
嘉康利
(U.S.) | Beijing | Nutrition food, cosmetics and cleaning products | 03/12/2008 | 20 | Alphay
安惠 | Jiangsu, including 16 cities, such as Nanjing, Nantong and Suzhou, etc. | Nutrition food | 11/13/2008 | 21 | Hayao (Harbin Pharmaceuticals)
哈药 | Heilongjiang, including 12 cities, such as Harbin and Daqing, etc. | Nutrition food and cosmetics | 11/25/2008 | 22 | Kelti
克缇
(Taiwan) | Shanghai | Nutrition food, cosmetics and cleaning products | 02/06/2009 | 23 | Long Li Qi
隆力奇 | Jiangsu, including 13 cities, such as Nanjing, Nantong and Suzhou, etc. | Nutrition food, cosmetics | 07/22/2009 |
Lehman, Lee & Xu, who is recognized in China as a leader in the area of direct sale regulations, has years of extensive experience in dealing with domestic or foreign clients’ diverse corporate and commercial needs in China. Our direct sale lawyers provide legal and business advice covering all aspect of direct sale regulations, from advising on a new start up direct sale company to an established company that wants to expand its direct sale system and as well as direct sale operation model compliance. We have been engaged by, both past and present, numerous worldwide leading direct sale companies, such as Avon, Amway, Weightwatchers and Melaleuca as their local counsel to meet their legal needs in China.
For more information on how Lehman, Lee & Xu can assist with your legal needs in direct sale, please contact us at: mail@lehmanlaw.com.
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