Multi-level marketing, legal or not?
October 2, 2013 12 Comments
By Fong Tsz Kuen, Justin
DCHL is a multi-level marketing company and a former distributor of Lampe Berger Paris. Recently Lampe Berger claimed publicly that they wanted to sue DCHL for the infringement of intellectual property and expressing their dissatisfaction about the multi-level marketing scheme of that company being legal. Later news reported DCHL was trying to reform its controversial marketing tactics, amid allegations it exploited a loophole in Hong Kong’s laws regulating multi-level sales. Being legal according to the companies ordinance while not being agreed by the public. How should the government decide if this kind of act is legal or not?
Info of multi-level marketing:
Multi-level marketing is a marketing strategy by which the sales force is compensated not only for sales they generate, but also for the sales of sales they recruit. Nowadays multi- level marketing is being prohibited in many countries like mainland, Australia but not Hong Kong. The only thing being banned in Hong Kong is the pyramid selling scheme meaning a participant will be granted a license to introduce another participant into the scheme who is also granted such license. Secondly, the participant will receive reward on or after the other sale is being introduced.
Multi-level marketing is being prohibited in many countries meaning this kind of act is harmful to the society and citizens. The government did in order to protect us from these schemes, set up regulations to prevent pyramid selling scheme (one of the ways of multi-level marketing). However, starting from 2007 to 2010, 10 complaints in total have been received while 27 people have been arrested and finally no prosecution has been made. This statistics provide us a clear picture that the regulations and laws towards pyramid selling is not enough.
Multi-level marketing is a kind of directing mind strategy which the board of directors of a company should be holding the final decision to undergo this scheme and thus should be subjected to criminal liability to the company and public most. According to an article, Ponzi’s directing mind scheme has made him sentenced eight years to jail, emphasizing directing others’ mind should be illegal. Moreover, law states directors should be subject to criminal liability if they failed to prevent the crime by neglecting to control the misconduct of those subject to their control. Although the government wants to retain Hong Kong’s free market, multi-level marketing should be prohibited especially when those directors do harm to the society.
Tsang,E (2013, September 30). DCHL ‘looking to clean up its image’.
Retrieved 30th September, 2013, from
Tsang,E (2013, September 30). Perfume boss says Hong Kong laws ‘too lax’ for it to sue ex-distributor in brand row. Retrieved 30th September, 2013 from
Yau,KC (2010, October 7). Public consultation on proposed legislative amendments to eradicate pyramid scheme. Retrieved 30th September, 2013 from http://www.legco.gov.hk/yr10-11/english/panels/edev/papers/edev1025cb1-707-1-e.pdf
Cheung,J (1993). Multi-level marketing in Hong Kong: an unique direct, marketing strategy. Retrieved 30th September, 2013 from http://hub.hku.hk/bitstream/10722/37931/1/FullText.pdf?accept=1
Slate,D (2011, February 12). $37.5-million Ponzi scheme’s ‘directing mind’ sentenced to eight years. Retrieved 1st October, 2013 from http://news.nationalpost.com/2011/12/02/37-5-million-ponzi-schemes-directing-mind-sentenced-to-eight-years/