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China Bans Direct Marketing

April 22, 1998

BEIJING (AP) _ Saying it was trying to prevent illegal pyramid schemes, China has issued an immediate ban on direct marketing that could shut off a multimillion-dollar market.

Direct marketing companies of all sizes, including Michigan-based Amway, have become hugely popular in China in the 1990s. The government has been deeply distrustful of the independent distributor networks, with their door-to-door sales and motivational meetings.

The companies tend to have closed organizations and covert business dealings, the state-run Xinhua News Agency said in a report Tuesday night announcing the ban.

Criminals have used direct marketing to spread heretical religion and start secret societies, swindle, seek exorbitant profits and sell smuggled and fake goods, the report said.

Amway’s director for China, Herbert Ho, said his company understood the concerns over illegal pyramid schemes and was working to modify its distribution system.

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