EIJING -- The Amway way is outlawed in China no more. The Avon lady is legal. Mary Kay can spread her pink gospel door-to-door in the world's biggest consumer market.
The Chinese government today lifts a seven-year ban on direct-sales businesses -- but does so with a twist.
Since the late 1990s, Amway, Avon, Mary Kay and a small group of other companies operating in China have been forced to sell their products through retail outlets, rather than relying purely on armies of independent sales agents as they do in the USA. China's new regulations will allow them to recruit sales agents to sell cosmetics, stain remover and vitamins from home or work -- and to sell those items directly to their agents.
What the new rules won't do, though, is let the agents themselves recruit and collect royalties from other sellers, a type of business known as multilevel marketing.
The continuing ban on multilevel marketing is designed to prevent the re-emergence of pyramid schemes that sparked unrest in the late 1990s. Back then, as China revenue mushroomed for Amway, Avon and others, local imitators built huge networks of salespeople, promising them riches if they signed up to peddle waterbeds, health elixirs, foot massagers and other products. Riots broke out when several schemes collapsed and salespeople at the lowest rungs lost their savings after paying for products that were never delivered to them.
The government's antipathy toward direct-sales businesses also grew out of concern that, as giant mass organizations, they were alternatives to China's Communist Party and could undermine loyalty to the party. At the time, the Chinese government labeled multilevel marketers "evil cults, secret societies and superstitious and lawless activities. ...