It is quite likely that soon there will be a strict regulation on Network Marketing in India. From past few years people have lost money to the tune of hundreds of crores in ponzi schemes. Now Consumer Affair Ministry has asked Central Bureau of Investigation (CBI) to look into the operations of MLM companies.
Many ponzi schemes have surfaced on the name of investment. sooner or the later they collapses due to flaw in the business model. The government is planning to bring Network Marketing under Strict regulations on the lines of similar rules in the US, EU and Singapore. The strict regulation will impact many known companies in India like Tupperware, Amway, and Oriflame.
A team of Income Tax department has been put on operation to contact all registered MLM companies to know the source of funding. I.T department is suspecting involvement of black money. Many have not even deposited regular TDS on the source income given to the distributors.
India Direct Selling Association secretary general Chavi Hemanth: “The sector needs regulation. Over the last few years, we are in discussions with the government to bring the industry under some sorts of (regulatory) framework. There is no official definition of direct selling in the country.” According to an ICRIER study, the Prize Chits and Money Circulation Scheme (Banning) Act, 1978, which is sometimes cited for regulating this sector, is not applicable to direct selling and is outdated.