Manufacturing News

China is lifting ban on direct sales

China banned direct sales in 1998, saying it was hard for consumers to tell the difference between their sales networks and fraudulent pyramid schemes, which were common then.

BEIJING -- China is lifting its ban on the Avon Lady. Beijing plans to end a prohibition on direct sales on Dec. 1, the government said Friday, clearing the way for such companies as Avon Products Inc. to expand into its booming market for cosmetics and other consumer products.

China banned direct sales in 1998, saying it was hard for consumers to tell the difference between their sales networks and fraudulent pyramid schemes, which were common then.

The ban was a major setback for Avon, cleaning products maker Amway Corp. and other companies that depend on networks of independent salespeople.

Avon, Amway and eight other foreign direct-sales companies were allowed to stay in China, but they were required to sell their products through retail outlets.

The new rules include licensing guidelines and require foreign firms that want to get into direct sales to have three years of experience abroad, the official Xinhua News Agency said.

According to Xinhua, companies must have a minimum of 80 million yuan ($10 million) in registered capital, which is likely to keep out smaller competitors.

In April, Avon was allowed to sell directly to consumers on a trial basis in Beijing, the eastern city of Tianjin and the southern province of Guangdong.

Shares in Avon Products, which is headquartered in New York, have traded in a range of $30.73 to $46.25 on the New York Stock Exchange.

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