China direct selling: All 91 firms summoned to regulator meeting amid ‘100-day’ clampdown

By Tingmin Koe contact

- Last updated on GMT

Chinese market regulator said that the number of unlawful practices had increased alongside the rapid development of the direct-selling industry, hence there was a need to step up enforcement.  ©Getty Images
Chinese market regulator said that the number of unlawful practices had increased alongside the rapid development of the direct-selling industry, hence there was a need to step up enforcement. ©Getty Images

Related tags: Direct selling, regulations, Inspection, China

China’s State Administration for Market Regulation (SAMR) and the Ministry of Commerce summoned all 91 direct-selling firms operating in China to a meeting as part of the “100-day operation” to clean up the health food market.

Industry experts previously told NutraIngredients-Asia​ that the direct-selling industry was especially hard-hit by the operation. One indicator was that the Chinese authorities have stopped issuing the Direct Sale License temporarily.

At the January 29 meeting, the direct-selling firms were told to self-examine its production process, information made available in the product labelling and dosage information, sales, internal management, and direct-selling agents.

They were also told to refrain from making false or exaggerated health claims about their products and ensure that their operation were lawful.

To protect consumers’ interest, the firms should also provide a feedback channel where product refund or product exchange could be conducted conveniently.

The regulator pointed out that “the number of unlawful practices had come along with the rapid development of the direct-selling industry, which could bring about dire social consequences and the public had reacted strongly against it.”

As such, it cautioned direct-selling firms to be “highly alert and to recognise the severity of problems existing in the direct-selling sector” ​so as to “protect social stability”.

They were also warned to be prepared for random inspections.

The enforcement units will follow up with firms that have failed to reform or have displayed limited improvements. Punishments would be meted out if found guilty of unlawful practices.

Challenges with direct sales ​   

There is a total of 91 direct-selling firms in China, according to the country’s Ministry of Commerce web page on direct-selling firms.

Some of the firms well-known in China include well established and credible international brands such as Amway and Herbalife.

However, concerns have been raised over the activities of some other players in the space.

Attention has been placed on direct-selling firms since Chinese website “Clove Doctor” had uncovered​ unscientific and unethical practices in direct-selling firm Quanjian.

A four year old Chinese girl was said to have passed away from cancer after her father solely relied on Quanjian products, which were marketed as “anti-cancer” drugs, to treat her daughter.

While the founder and 17 other employees of Quanjian were placed under criminal detention, a check on the Ministry of Commerce’s web page on Feb 1 showed that the firm, which had obtained its Direct Sales License in year 2013, is still recognised as a legal direct-selling firm.

Guangdong the champion

Guangdong is most popular with direct-selling of health products, with 14 direct-selling firms approved to operate in the province.

Shandong followed next, with 13 direct-selling firms approved to operate in the province.

Shanghai, Beijing, and Tianjin were the other popular destinations, with the number of approved direct-selling firms registered as 9, 8, and 8 respectively.

However, it was previously reported that  some direct-selling firms do not limit their operations within the approved provinces, and that many were operating in all parts of China.

Related topics: Markets

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