In fact, this is not the first time Program Baby has been exposed to violations of direct marketing and suspected pyramid scheme. Previously, Program's Shanxi branch was fined a hefty 17 million yuan by local authorities for alleged pyramid selling and direct selling violations, and its Guangzhou branch had its funds frozen. In addition, the whereabouts of Liu Yuwen, the former chairman of Program Infant, is unknown, and it is suspected that he has been arrested. And what kind of company is this?
Cross-regional violations of direct selling
Data shows that in July 2010, Program Limited obtained a direct selling license in China. In August of the same year, Patlin Corporation (USNA) was acquired for $62.7 million by USNA, which is the U.S. parent company of Program Baby.
Plough is suspected of a number of direct selling violations in China, most notably engaging in direct selling in non-direct selling areas. According to information published on the Ministry of Commerce's direct selling industry management website, Program Infant has received approval permits for its branches in only four regions: Beijing, Tianjin, Jiangsu and Shaanxi. However, according to the data published on Program Baby's official website, Program Baby has 29 branches in several provinces*** across the country.
According to the "Notice of the Ministry of Commerce on the Management of Branches of Direct Selling Enterprises on Relevant Issues", direct selling enterprises in the provinces, autonomous regions and municipalities directly under the Central Government engaged in direct selling activities should set up branches responsible for direct selling business in the administrative region. Enterprises applying for the establishment of branches should be registered through the provinces, autonomous regions, municipalities, municipalities and Xinjiang Production and Construction Corps, the competent departments of commerce, to the Ministry of Commerce to set up branches of the application, the registration of provincial departments of commerce should be received from the date of the enterprise application materials within seven working days, the application materials will be sent to the Ministry of Commerce, the Ministry of Commerce in accordance with the "Regulations on the Administration of Direct Selling" in accordance with the law. As you can see, most of Program's branches in China are not registered with the Ministry of Commerce for the record, and are private cross-regional direct sales.
In order to further understand the program branch of the existence of the business. The reporter called program baby branch was informed that in program baby unregistered 25 branches, Shenzhen, Shanghai, Shandong and other branches of the phone is not answered or the number does not exist, the rest of the majority of the branch does exist in the business.
According to the photos provided by Hu Hua to the China Business News reporter, Program Infant in Guangzhou, Wuhan, Hefei, Chongqing and many other branches have direct sales promotion, dealer training and other behavior.
Pictures of Chongqing distributors conducting business and rewarding distributors provided by Hu Hua
In addition, there are also consumers who bought Program Baby brand calcium plus D chewable tablets at Program Baby's Guangxi branch, which is the direct selling product that Program Baby has formally filed with the Ministry of Commerce.
Program Guangxi branch of the product order form also shows that the Guangxi branch of the program as a non-recorded branch of the baby but sells program filed almost all of the direct selling products.
A side-by-side comparison of Program's sales shows that the sales of Program's branches in the four provinces in China where it has obtained approval permits are comparable to the sales of other direct-selling companies in more than 20 provinces, which makes the claim that Program is engaged in direct-selling business in only four provinces in China more dubious.
Information shows that in 2018, Herbalife's sales in 28 provinces in China amounted to 1 billion U.S. dollars, Nu Skin's sales from branches set up in 25 provinces in China amounted to 886 million U.S. dollars, and Infinity's sales from branches set up in eight provinces in China amounted to 206 million euros (230 million U.S. dollars), while Program Baby's 2018 sales from branches set up in four provinces in China sales were a whopping $586 million.
The company has other direct selling violations
In addition to conducting direct selling business in non-recorded direct selling zones, Program Baby's direct selling violations are also manifested in the fact that non-recorded direct sellers are engaged in direct selling business. According to USNA's 2018 annual report, as of the end of 2017, 106,000 people in China were selling products of Programmers, while the actual number of direct salespeople announced by Programmers was only 223 people. Comparing to other direct selling companies, Herbalife has more than 200,000 direct sellers on record with the Ministry of Commerce, Nu Skin is 39,399, and Unlimited has 54,652.
In the Program direct sales area in Nanjing, Jiangsu Province, a distributor called Qian Yuanyuan promoted a variety of Program products to the reporter through WeChat, and the reporter found that there is no Qian Yuanyuan's name in the list of direct sales personnel published by Program. In addition, engaged in direct sales business, claiming that Program Baby Xi'an distributor Yan Rui is similarly not in the Ministry of Commerce approved direct sales personnel list.
In addition to these violations, Program Baby is also suspected of selling non-registered direct selling products in China. According to the information published on the website of the Ministry of Commerce, Program General **** has 36 products approved for reporting, but Program's official website announced numerous products. The reporter checked and found that Program General **** has 10 products not reported in the Ministry of Commerce, including Program Concentrated Phospholipids Linolenic Acid Soft Capsules, Program Concentrated Multivitamin and Mineral Tablets, Program Probiotics Powder, and so on.
According to the "Regulations on the Administration of Direct Selling" and Announcement No. 72 of 2005 by the Ministry of Commerce and the State Administration for Industry and Commerce, direct-selling enterprises can sell products produced by their own enterprises and products produced by their parent and holding companies through direct selling, and direct-selling products of direct-selling enterprises can be inquired through the information system, and those products that have not been audited and announced shall not be sold through direct selling.
Former president of China is suspected to be arrested
More seriously, Program China has been popular "Program cell-based bonus system" suspected pyramid scheme. According to the reporter's understanding, "Program Baby cell-based bonus system" is to require the development of two downline salesman, that is, two business centers, the two business centers are not equal, the system will use the lower side of the group's sales to calculate the commission, but this way of remuneration does not comply with the direct selling enterprises directly paid to the direct sellers of the commission regulations.
The Regulations on the Administration of Direct Selling stipulate that the compensation paid by a direct selling company to a direct seller can only be calculated on the basis of the direct seller's income from direct sales to consumers, and that the total amount of compensation (including commissions, bonuses, rewards of all kinds, and other economic benefits, etc.) shall not be more than 30% of the direct seller's income from direct sales to consumers.
And the Regulations on the Prohibition of Distributive Selling stipulate that distributive selling refers to the behavior of the organizer or operator who develops people, makes illegal profits, disturbs the economic order and affects the stability of the society by calculating and paying the compensation to the developed people on the basis of the number of people developed directly or indirectly by the organizer or on the basis of the sales performance, or requires the developed people to obtain the qualification of joining the company on the condition that they pay a certain amount of money.
In addition to this, the frequent changes in Program China's top management are also thought-provoking. Data show that in 2014, Program founder Matthew J. Estes (Chinese name: Yi Rongji) stepped down as president of China, then Program vice president of Yang Liji to replace his position. In 2016, Liu Yuwen succeeded Yang Liji as president of China, and in October 2017, Shi Binhai took over Liu Yuwen's position. on May 28, 2018, the former president of Program Baby China, Shi Binhai, officially left the company for personal reasons. In four years, Program China has changed four presidents.
Hu Hua told China Business News that Liu Yuwen, once president of Program China, has been arrested by the police. Hu Hua provided the reporter with a case police case material, the material shows Program Baby in the online marketing cosmetics, health care products, the provisions of the company's members to pay 2,400 yuan or 6,000 yuan membership fee, and the development of people can be 20% commission from it, Liu Yuwen, as the head of the Program Baby company from which to obtain huge profits and was arrested, the date of filing in January 2017, the case.
In fact, Program Infant has previously been repeatedly exposed violations of direct marketing and suspected pyramid schemes. Public information shows that at the beginning of 2017, Program Baby was detained 13 people, dozens of people wanted on the Internet, frozen account funds of 360 million yuan. In March of the same year, the police took away one person and a dozen high-level distributors of Program Baby from Guangzhou. Hu Hua told China Business News reporter that the above mentioned Program personnel arrested by the police is the former Program China President Liu Yuwen.
In addition, the information shows, program baby Shanxi branch is also suspected of pyramid selling and violation of direct selling, was the local authorities imposed a high fine of 17 million yuan; Chengdu industrial and commercial departments have also been in direct selling enterprises symposium named program baby, pointing out that in Sichuan there are cross-regional violation of the direct selling problem.
Program in China for direct marketing violations, suspected pyramid schemes and the former president's whereabouts are unknown, China Business News reporter called Program China, the person in charge, the other side said no comment
.