What is the problem with MLM in China?

The trouble with the MLM industry is that although the regulations seem pretty specific about where the red lines are, MLM in practice can involve lots of grey areas. So how do brands take advantage of MLM in China while staying out of trouble? What’s Multi-level Marketing in China like?

What is MLM and how does it work?

MLM, a type of direct selling system, is a marketing strategy where the company’s sales force is highly dependent on the salespersons they have hired in different tiers of selling. The sales force is compensated not only for sales they generate, but also for the sales of the other salespeople that they recruit in this marketing strategy.

How did MLM change in the 21st century?

They also meant that traditional MLM – or multi-level marketing – had to change, adapting to the new environment it found in 21st century China. The most significant restriction is that sales representatives working as part of the direct seller cannot earn commission from the sales of those they recruit into the organization.

Are MLM companies illegal?

MLM companies have been made illegal or otherwise strictly regulated in some jurisdictions as merely variations of the traditional pyramid scheme. Multi-level marketing is also known as "pyramid selling", "network marketing", and "referral marketing". A typical multi-level marketing binary tree structure.