Stars shouldn't exploit fame for illegal business

Many stars run their own businesses, but few have run it as successfully as actress Zhang Ting, who has managed to cash in on her star value. However, she might soon fall from the top of the pyramid because of an alleged pyramid scheme.

Pyramid schemes, which are illegal in China and many other countries, are businesses that recruit people whose job is to enroll others into the scheme rather than sell a specific product or service.

Following an investigation by China's market regulator, the authorities have frozen assets worth 600 million yuan ($94 million) belonging to Zhang Ting and her husband Lin Ruiyang's cosmetics and skin care products company TST Tin'Secret.

The market regulator in Shijiazhuang, capital of northern China's Hebei province, said it had received several complaints about a suspected pyramid scheme involving Shanghai Dowell Trading.

Founded in 1996, Shanghai Dowell Trading is the main operator of cosmetics and skin care products brand TST Tin'Secret, which Lin Ruiyang and Zhang Ting founded in 2013. TST Tin'Secret sells its products through the "Tin Secret app" or at offline stores. The company's business began surging from 2014 to 2018. It was soon crowned "No 1 in micro business" while Zhang Ting was called the "queen of micro business". Dowell Trading was the highest annual tax payer in Shanghai's Qingpu district in 2017 and 2018; it claims to have paid 2.1 billion yuan in taxes in 2018 alone.

Zhang Ting and her husband gained their fame from starring  some popular TV series. As their fortunes soared, They also invited other celebrities to endorse their products. Model-actress Lin Chi-ling was hired as a spokeswoman, Chinese actor Xu Zheng was a former shareholder, and several Chinese actors posted photographs on social networking sites of themselves applying the brand's moisturizing masks.

Though it has legitimate companies offering it cover and is even endorsed by celebrities, doubts remains whether Zhang Ting's business venture, Shanghai Dowell Trading, is instead a pyramid scheme, because of three typical features: the need to pay a joining fee, the number of people involved and the method of payment.

The correlation between agents' salaries and the size of their teams means the more members people bring in, the more commission they receive. In this kind of business model only a few people at the top of the pyramid make money, while the large numbers at the bottom will make little to zero return on their investment.

The business model apart, some consumers had complained in 2016 that some of Tin'Secret's facial products, such as moisturizing masks, contained excess heavy metals because of which it hurt their skin. The case is currently under investigation.

However, to run a business successfully requires a good knowledge of the market, deep understanding of the law, a dedicated management team and a proper sense of risk management.

Stars should bear in mind that their fame is to be cherished and not exploited to make quick money in inappropriate ways. And fame will not shield them from punishment if they break laws.

The author is a writer with China Daily.