MLM refers to the behavior that organizers and developers illegally acquire wealth through developers or require the developed personnel to obtain the qualification to join on the condition of paying a certain fee. The essence of pyramid selling is Ponzi scheme, which is to distribute the money of latecomers to the income of pioneers.

To identify pyramid schemes, we need to look at three characteristics:

1, entry fee. Whether it is necessary to subscribe for goods or pay fees to obtain franchise qualifications or develop others' franchise qualifications to seek illegal interests;

2, pull the head. Whether it is necessary to develop others to become their own downline, and pay remuneration to the developed personnel based on the number of directly or indirectly rolling development personnel to seek illegal interests;

3. Method of payment. Whether to directly or indirectly develop personnel to calculate remuneration and seek illegal interests.

If it meets the above characteristics, it may be suspected of pyramid schemes.

Article 2 of the Regulations on Prohibition of MLM The term "MLM" as mentioned in these regulations refers to the behavior that organizers or operators calculate and pay remuneration to the developed personnel on the basis of the number of directly or indirectly developed personnel or sales performance, or require the developed personnel to obtain the qualification to join on the condition of paying a certain fee, seek illegal interests, disrupt economic order and affect social stability. Article 7 The following acts belong to pyramid selling:

(1) The organizer or operator, through the development of personnel, requires the developed personnel to develop other personnel to join, and calculates and pays remuneration (including material rewards and other economic benefits, the same below) to the developed personnel based on the number of personnel directly or indirectly developed, so as to seek illegal benefits;

(2) The organizer or business operator, through the development personnel, requires the developed personnel to pay the fees or pay the fees in disguised form by subscribing for commodities, etc. , so as to obtain the qualification to join or develop other personnel to join and seek illegal interests;

(3) The organizer or business operator requires the developed personnel to develop other personnel to join, thus forming an online relationship, and calculating and paying online rewards according to the sales performance of offline personnel to seek illegal benefits.