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TIENS defends its marketing scheme

Authority launches investigation to take legal action

The controversial Chinese multinational and supplier of health and wellness products, TIENS a.k.a. Tianshi said that the recent allegation of improper business practice that prompted the Ministry of Trade to place a ban on its business license in Ethiopia is a product of severe misunderstanding and that its network marketing system has nothing to do with the pyramid scheme it is accused of.

The Chinese conglomerate hopes that the dispute will be resolved in days while the Trade Competition and Consumer Protection Authority of Ethiopia announced that it has launched an investigation to look into the allegation of illegal trade practice by TIENS; specifically running a pyramid scheme.

Mekonnen Worku, deputy head of administration for TIENS Ethiopia, told The Reporter that though the company had received a letter from the Ministry of Trade (MoT) concerning its trade practice in Ethiopia, but found the letter to be unclear and had asked the ministry for further explanation.

He, however, stated that his company is confident that this misunderstanding with the authorities will be resolved soon and that TIENS will resume with its regular operations very shortly.

TIENS Group, a multinational conglomerate owned and operated by a Chinese businessman, opened its local branch, TIENS Ethiopia Business PLC, in 2007 to engage in the import and distribution of its health and wellness products mainly supplementary food capsules, homecare and beauty products.

Currently, the company has 15 agents and over 200,000 sales agents and customers which it calls families.

The authorities accuse TIENS of running a pyramid scheme in Ethiopia; especially with regards to its network marketing strategy. As far as the company is concerned, it is operating a legitimate marketing strategy which made it easy for the company to penetrate the Ethiopian market.

In fact, the company argues that it is engaged in the direct sales of its products through its agents that are establish as a franchised companies throughout the country.

Yitagesu, Lulessa, one of the owners of these franchise companies headquartered around Megenagn at Genete Commercial Center, told The Reporter that his company is not working in violation of the existing laws and regulations. He rather argues that network marketing is a business that is generally perceived negatively as some form of fraudulent scheme while being a legitimate business activity that can lift out many citizens from financial constraints.

He said, “Every member benefits both in terms of health and financial gains”.

A pyramid scheme is a business model that recruits members via a promise of payments or services for enrolling others into the program rather than supplying investments or sale of products or services. As recruiting multiplies, recruiting becomes quickly impossible, and most members are unable to profit; as such, pyramid schemes are unsustainable and often illegal.

As far as Yitagesu is concerned the local media takes the blame for exaggerating the claim of pyramid scheme and its adverse effects of the supposedly illegal practice by relying heavily on the testimony of unsuccessful customers in the network market system.

He also denied that the company’s engagement in pyramid business arguing that since each family member is benefiting from the MLM as per their level of engagement.

The government prohibits elaborate pyramid schemes in Ethiopia such as NM and/or MLM via the Trade Practice and Consumers’ Protection Proclamation, No. 685/2010. Article 30/6 of the proclamation states that, “applying or attempting to apply a pyramid scheme of sale by describing that a consumer will get a reward in cash or in kind by purchasing good or service or by making a financial contribution and which describes that the consumer will get additional reward in cash or in kind where other consumers through his salesmanship purchase the good or service or make financial contribution or enter into the sales scheme, based on the number of consumers is prohibited.”

“The system doesn’t add value. It only sucks money out from people’s pockets and transfer it to the very few,” says an official at the Trade Practice and Consumers Protection Authority, who wants to stay anonymous.

The authority became operational only about eight months ago, while the proclamation was enacted on July 2010. It works to accelerate economic development while also protecting consumers’ rights and benefits.
The official, who believes that the company is the only one who is seriously benefiting from this system, cites article 685/2010 of proclamation to explain illegal nature of the business.