Recently, the first financial, Phoenix network, China Economic Network and other media reports, Zhang Ting, Lin Ruiyang couple's "TST court secret" suspected pyramid scheme. According to the report, the market supervision Bureau of Hubei Baokang County found that: the bonus system developed by the company divides members into blue card members and red card members, of which blue card members are general consumers, and the bonus system for blue card members is in line with business practices; The bonus system implemented by the red card members requires the development personnel to develop other personnel to join, forming an upper and lower line relationship, and the calculation and payment of online remuneration based on the sales performance of the following line belongs to the circumstances referred to in the relevant provisions of the Regulations on Prohibiting Pyramid Marketing, which is a pyramid marketing behavior, constituting the organization and planning of pyramid marketing illegal acts, and the illegal income of 19.2799 million yuan is confiscated according to law. A fine of $1.7 million. Pyramid marketing is a form of commodity sales developed on the basis of multi-level distribution and direct selling, also known as "multi-level pyramid marketing". In the process of the development of China's market management, MLM has caused great confusion to the development of China's market economy, especially at the end of the 20th century, resulting in the fragmentation of many families, causing serious social problems, and has been one of the red lines of management.

It is generally believed that according to the different components and legal consequences, MLM can be divided into two types: operating MLM and fraudulent MLM. Operating pyramid marketing objectively carries out pyramid marketing behavior, but subjectively it aims at selling products for profit, which belongs to the category of administrative illegal; Fraudulent pyramid marketing objectively carries out pyramid marketing behavior, but subjectively aims at fraud, which belongs to the category of criminal crime. According to Article 2 of China's Regulations on the Prohibition of Pyramid selling, pyramid selling refers to the development personnel of organizers or operators who seek illegal benefits and disturb economic order by calculating and paying remuneration to the developed personnel based on the number or sales performance of the developed personnel directly or indirectly, or requiring the developed personnel to pay a certain fee as the condition of membership, etc. Behavior that affects social stability. To be specific, the typical pyramid selling behavior has the following ways: (1) charging entry fees, that is, the organizer or operator through the development personnel, requires the development personnel to pay fees or to subscribe goods and other forms of disguised payment of fees, to obtain qualifications to join or develop other personnel to join, seeking illegal interests. (2) Recruitment, that is, the organizer or operator, through the development personnel, requires the development personnel to develop other personnel to join, the development personnel based on the number of direct or indirect rolling development of the calculation and payment of remuneration (including material incentives and other economic benefits), seeking illegal interests. (3) Team remuneration method, that is, the organizer or operator through the development personnel, requires the development personnel to develop other personnel to join, form a relationship between the upper and lower line, and calculate and pay the line remuneration (including material incentives and other economic benefits) based on the sales performance of the lower line, and seek illegal interests. In business practice, the vast majority of MLM activities belong to the mixture of the above three kinds of MLM activities, that is, organizers or operators in the name of selling goods, providing services and other business activities, require participants to pay fees or purchase goods, services and other ways to obtain the qualification to join, entice participants to continue to develop others to participate, and form levels in a certain order. Through a specific bonus system based on the sales performance of the lower line of the calculation and payment of the upper line of remuneration, seek illegal interests. The above behaviors belong to the category of operating pyramid marketing, which is prohibited by China's "Regulations on Prohibiting pyramid Marketing". According to the provisions, where the operator organizes and plans the operation of a pyramid scheme, the administrative department for industry and commerce shall confiscate the illegal property, confiscate the illegal income, and impose a fine and other legal liabilities. According to the report, the bonus system implemented by the TST brand for red card members, which requires the development staff to develop other personnel to join, form an upper and lower line relationship, and calculate and pay online remuneration based on the sales performance of the following line, is identified as a team remuneration behavior prohibited by the Regulations on the Prohibition of pyramid marketing, and is a business pyramid marketing behavior.

Fraudulent pyramid selling is subjectively aimed at fraud, which is different from the business pyramid selling for the purpose of selling goods. Objective implementation of the "entry fee" and "pull the head" way of pyramid fraud sales. Fraudulent pyramid selling is suspected to constitute a crime. Article 224 (1) of the Criminal Law of China stipulates that in the name of business activities such as selling commodities and providing services, organizations and leaders require participants to pay fees or purchase goods and services to obtain membership qualifications, and form hierarchies in a certain order, directly or indirectly using the number of development personnel as the basis for remuneration or rebates. Whoever entices or coerce participants into continuing to develop others to participate in pyramid selling activities, defrauds money or property and disturbs economic and social order shall be sentenced to fixed-term imprisonment of not more than five years or criminal detention and shall also be fined; If the circumstances are serious, he shall be sentenced to fixed-term imprisonment of not less than five years and shall also be fined. Article 78 of the Provisions of the Supreme People's Procuratorate and the Ministry of Public Security on the Standards for Filing and prosecuting Criminal Cases under the jurisdiction of Public Security Organs (II) stipulates that organizations and leaders, in the name of business activities such as selling goods and providing services, require participants to pay fees or purchase goods and services to obtain membership qualifications, and form levels in a certain order. Directly or indirectly to the number of development personnel as the basis for compensation or rebates, lure, coerce participants to continue to develop others to participate in pyramid marketing activities, defraud property, disrupt the economic and social order, suspected of organizing, leading pyramid marketing activities of more than 30 people and at the level of three or more, the organizer, the leader, should be prosecuted. In particular, it should be pointed out that according to the regulations: "more than 30 people and more than three levels" is the calculation of the number of people and levels within the pyramid marketing organization, as well as the calculation of the number of people and levels of the organizers and leaders who directly or indirectly develop and participate in pyramid marketing activities, including the organizers and leaders themselves and their levels; Level 3 or above includes level 3.

Quanjian Natural Medical Technology Development Co., LTD. (hereinafter referred to as Quanjian) was established on February 17, 2004. In December 2018, Doctor Dingxiang published the article "Billions of health care Empire Quanjian and Chinese families under its Shadow" to push Tianjin Quanjian company into the wind. In January 2019, the Tianjin Public security organ filed an investigation against Quanjian on suspicion of organizing and leading pyramid selling activities and false advertising. In November 2019, Quanjian Company and Shu Yuhui, the actual controller of Quanjian Company, were suspected of organizing and leading pyramid selling activities and other crimes, and were prosecuted by the People's Procuratorate of Wuqing District of Tianjin to the People's Court of Wuqing District of Tianjin in accordance with law. It has been found that since 2007, with high rewards as the bait, Quanjian lured others to buy products whose cost significantly deviated from the price to become members of Quanjian, and then made a rebate based on the number of members, induced members to continue to develop others to participate in the formation of a pyramid hierarchical relationship, and obtained huge economic benefits. Shu Yuhui, as the actual controller of Quanjian Company, plays a decisive role in the organization and leadership of the company's pyramid marketing activities. Others participate in the organization and leadership of pyramid marketing activities according to Shu Yuhui's instruction, or develop members to participate in pyramid marketing activities as a dealer of Quanjian Company. On January 8, 2020, Tianjin Wuqing District People's Court issued a public judgment on the case of Quanjian Company and the actual controller of Quanjian Company Shu Yuhui and 12 other people organizing and leading pyramid marketing activities according to law, and found that the defendant Quanjian Company and the defendant Shu Yuhui and 12 other people constituted the crime of organizing and leading pyramid marketing activities, and sentenced the defendant Quanjian Company to a fine of RMB 100 million yuan. The defendant Shu Yuhui was sentenced to nine years in prison and fined 50 million yuan; The other 11 defendants were sentenced to prison terms ranging from three to six years and fined; The illegal gains shall be recovered and turned over to the state Treasury. Shu Yuhui, the actual controller of Quanjian, pleaded guilty in court. As far as the above crime of pyramid selling of Quanjian is concerned, the behavior of Quanjian company to lure others to buy products whose cost deviates from the price seriously to become members of Quanjian Company with high rewards is subjectively fraudulent; Objectively implemented to develop the number of members as the basis for rebates, to induce members to continue to develop others to participate in the formation of a pyramid hierarchical relationship for the "team remuneration" behavior, its behavior is not the scope of operating pyramid marketing, but constitutes the "fraud pyramid marketing crime" severely cracked down on by China's criminal law.

Business compliance is one, and the others are zero, especially for scale enterprises. Pyramid selling behavior has great complexity and social harm, operators should clearly recognize its boundaries and operating risks. On the one hand, operators should correctly recognize the boundaries of operational pyramid marketing behavior, and on the other hand, they should accurately recognize the boundaries of fraudulent pyramid marketing crimes. Although according to the Opinions of the Supreme People's Procuratorate and the Ministry of Public Security on Several Issues concerning the Application of Law to Criminal Cases Involving the Organization and Leadership of Pyramid Selling Activities (hereinafter referred to as the Opinions on Pyramid Selling Cases) of November 14, 2013, "a simple team remuneration-based pyramid selling activity for the purpose of selling commodities and based on sales performance shall not be treated as a crime", However, this behavior is still prohibited by the Regulations on the Prohibition of pyramid selling business pyramid selling activities. According to relevant reports, the key point of the TST incident is that its member bonus system violated the red line of team compensation and was identified as an operating pyramid scheme. Operators should pay great attention to the issue of team remuneration, so as not to cause legal risks of pyramid schemes.