Case closed: Nine years jail for boss of China supplement firm that breached MLM rules
Shu Yu Hui, who pleaded guilty to leading organised MLM activities, was also fined RMB$50m (US$7.2m).
Another 11 employees of Quanjian who were also charged for organising MLM activities were fined and sentenced to jail terms of three to six years.
The pyramid MLM model is prohibited in China. Instead, the one-to-one direct-selling model is allowed.
A check on China’s Ministry of Commerce website showed that the firm was one of the 90 firms approved for conducting direct-selling business in the country. It was granted approval in Aug 2013.
The company was also fined RMB$100m (US$14.4m) and the illegal gains were confiscated.
Tianjin Wuqing District People’s Court announced this piece of news on their official Weibo page on Jan 8.
Statement of facts
Investigations showed that Quanjian had begun MLM activities since 2007.
The firm set the selling price of its products at a rate that was ‘severely different’ from the capital cost.
The firm then sought to sell these pricey products by building up its pool of members using a pyramid incentive scheme.
As the mastermind, Shu was responsible for the company’s structure and decision-making of its MLM activities.
The Chinese public reacted positively to the judgement, with most comments online describing it as a fair outcome.
As of the time of writing, Quanjian’s official website is still in operation.
NutraIngredients-Asia last year reported that eighteen employers of the firm were under criminal detention for its MLM activities on Jan 1 last year.
The case was brought to light when a healthcare website Clove Doctor published the story of Zhou Yang, a four-year-old Chinese girl who died from cancer after her father chose Quanjian supplement over proper medication for her.
The girl’s father was apparently told that the supplements were ‘anti-cancer’ drugs suitable for his daughter.
He was even told that his daughter did not need any medication or chemotherapy.
The saga has sparked a series of crackdown from the Chinese government.
The most notable one was the ‘100-day operation’ implemented last January.
Direct-selling companies were a key focus of the mission as the authorities sought to stem MLM activities and selling tactics which exaggerated the products’ functions and benefits.