MLM News

Tag: 1978

  • IDSA & Members Seeking Cilarity on MLM Regulations

    IDSA & Members Seeking Cilarity on MLM Regulations

    In order to get legal sanctity and recognition from both central and state government authorities, the Indian direct sellers like Tupperware, Amway, Oriflame and their association body IDSA might quickly approach the commerce ministry in coming days.

    Right now direct selling sector is of Rs 7,000-crore in India with 18  companies who are promoting through direct sales are seeking the clear meaning of “direct sellers” and distinction from multi-level marketing entities, including those dealing in money circulation schemes.

    On the other hand, Amway representatives in the United States are preparing to satisfy commerce minister Anand Sharma, who is presently on an official visit to United States.

    “We will prepare a strategy paper and approach the commerce ministry soon. Our proposals of own set of strict guidelines for identifying real direct sellers from the rest are being studied by the finance ministry. We are hopeful that something favorable could come out in a month’s time,” Chavi Hemanth, secretary-general of the Indian Direct Selling Association stated.

    Nevertheless, government sources showed that both the consumer affairs ministry and the department of financial services are against  exclusion of direct selling entities such as Tupperware, Amway and others from the ambit of Reward, Chit Funds and Money Circulation (Banning) Act, 1978. Both are presently examining the link in between illegal profitable schemes, including ponzi schemes, pyramid schemes and those promoted by the multi-level marketing companies.

    Sources in the customer affairs ministry are of the view that instead of a main regulator or a main law, these direct selling entities ought to be subjected.

  • Finance Ministry for Changes in Prize Chits & Money Circulation Act

    Finance Ministry for Changes in Prize Chits & Money Circulation Act

    The department of financial services has proposed modifying the Prize Chits and Money Circulation Schemes (Banning) Act, 1978 to make inducement to individuals for signing up with MLM pyramid, Ponzi or cumulative investment schemes an offence to plug loopholes in money churning tasks of business.

    The division under the finance ministry has proposed to place a brand-new section 3A in the Act with a change Bill for this function.

    The existing provisions of the Act ban various deceitful schemes and anyone breaching the provision is liable to be put on trial and penalized. However, it is possible that marketers of an illegal fund can take up a stand that the scheme is of a business entity which they are simple teams, who are exempt for the acts of the entity.

    To plug this loophole, the new section will ensure that individuals who are marketers in such schemes are individually prosecuted and punished if they fraudulently or dishonestly cause persons to register for or participate in such schemes.

    Besides Chits Act and Sebi Act, these schemes are presently covered under the RBI Act, 1934, the Companies Act, 1956, and state laws for protection of interest of depositors in the financial facility.

    The Chits Act covers prize chits and money circulation schemes, but there is no particular reference to multi-level marketing(mlm) schemes for items and services in the Act.

    There are particular company entities, which introduce schemes for appointing selling representatives for their items and collect registration charges from them with a more requirement that such agents have to designate even more representatives gathering registration charges from them. The reimbursement paid to the offering agents includes a share in the registration costs gathered from the new selling agents joining the scheme. Such schemes are referred to as pyramid, Ponzi or multi-level advertising and marketing schemes.