Central Govt Statement on Net Work Marketing

Central Govt Stated that Direct Marketing/Net Work Marketing is not Illegal. You can see the copy of the letter here.

Government of Mizoram has started a Direct Marketing Company

Chief Minister of Mizoram Government, Shri Pu Lal Thanhawla known the power of MLM Industry, Connection with he is going to launch the Direct Marketing Limited company, which is going to solve unemployment.

More you can visit on above mentioned mizoram govt website.

MLM NEWS FROM PILOT

एम्एलएम् कंपनियों के लिए बनेंगे नए नियम : पायलट 

Sachin Pilot Asked Reserve Bank of India to act Fast on NBFCs

Sachin Pilot Asked Reserve Bank of India to act Fast on NBFCs

This news was published in HINDU NEWS PAPER on 17th March 2013

Amid growing cases of innocent people being cheated by multi-level marketing (MLM) firms through various Ponzi schemes, Corporate Affairs Minister Sachin Pilot has asked the Reserve Bank of India to immediately act against companies that are not registered as non-banking financial companies (NBFCs) but are floating financial schemes and committing frauds.

“At present there are 34,754 such companies, out of whom only 12,375 have been permitted by the RBI to function as NBFCs under the RBI Act. It is the remaining 22,000 or so companies which mainly account for instances of cheating and fraud. The Ministry of Corporate Affairs (MCA) has already shared with the RBI the details of all the 34,754 companies and it is imperative that the RBI steps up its enforcement efforts to identify and proceed against companies not permitted to function as NBFC so that a major source of cheating is effectively dealt with,” Mr. Pilot wrote to Union Finance Minister P. Chidambaram, seeking his intervention in the crucial matter.

Pointing out that the MCA has been receiving complaints of cheating by so-called investment companies often using the ‘multi-level marketing’ strategy, Mr. Pilot said most of the MLM companies involved had got themselves registered with objects similar to those of the NBFCs to evade the law and carry out financial frauds. He urged Mr. Chidambaram to issue “specific instructions” to the RBI to pay attention to this aspect in coordination with the police authorities, while taking action against the companies committing frauds and cheating.

“The RBI, as the regulator of NBFCs, should immediately penalise companies that are not registered with them as NBFCs…Unscrupulous companies pose as NBFCs to invest money in MLM schemes with promises of heavy but mathematically improbable returns on investments, particularly when persons originally enrolled in a scheme induce others to join the same scheme. Such schemes bring adverse publicity even for the companies that are engaged in bona fide businesses,” Mr. Pilot told The Hindu.

The Minister said 87 companies were being probed for duping the public through illegal MLM or Ponzi schemes. West Bengal, with 73 firms, topped the list, followed by Delhi (5), Tamil Nadu (5), Rajasthan (2), Karnataka (1) and Uttar Pradesh (1). Mr. Pilot noted that he had written to all Chief Ministers to issue directions to the police authorities to take action against the fraud companies.

“We have taken prompt action against errant companies as and when complaints are received against them.” Notably, Tamil Nadu Chief Minister Jayalalithaa had recently written to Mr. Pilot on the issue.

To stop such frauds, it was imperative that the law enforcement agencies at the Central and State levels, along with Serious Fraud Investigation Office (SFIO) under the MCA, worked closely with each other to ensure early investigation and further follow-up action against unscrupulous companies engaged in such practices.

The MCA had constituted a steering committee to develop a ‘fraud prediction model’ aimed at generating alerts for prevention of fraud and malfeasance. “We will also be revamping the existing Market Research & Analysis Unit in the SFIO to enable it to function as an intelligence unit,” he said.

IDSA DEMANDING SEPARATE LEGISLATION FOR MLM INDUSTRY

IDSA DEMANDING SEPARATE LEGISLATION FOR MLM INDUSTRY

By PTI | 3 Jun, 2013

KOCHI: Describing the arrest of Amway India Chairman and CEO William Pinckney as a "big blow", Indian Direct Selling Association (IDSA) today sought from the Centre immediate operational clarity and a separate legislation for the industry.

The arrest of Pinckney, an American national, and two directors of the network marketing company in Kozikode recently was a "big blow" and has not only "dazed" the industry, but also risked the future of lakhs of independent sale distributors in the direct selling industry in India, IDSA said.

It is a "big dampener" and "unfortunate" incident, IDSA Secretary General Chavi Hemanth told reporters here.

The Amway officials were booked under the Prize Chits and Money Circulation Schemes (Banning) Act based on complaints by distributors in 2011. The three have been granted bail.

In an attempt to clear the cloud over the operational ambiguities for Direct selling Industry in India, the IDSA has sought from the government a clear policy framework and exclusion from the PCMC (Prize chits and Money Circulation schemes) Act.

The industry pledges to stand together against the continued harassment because of the collapse happening often between the fraudulent financial pyramid schemes and Direct selling companies, Hemanth said.

Such arrests would send wrong signals to the global companies in India and will affect the investment floating into the country, she added.

Kerala High Court Decision on Nmart

With the Petition No. 25122/2011,The Honorable High Court of Kerala has given the Judgement to Nmart Retails. find clear details in the following documents

Differences Between Direct Selling and Pyramid Schemes

Direct Selling Vs Pyramid Schemes

Compare Each point from 14ponts with Direct Selling and Pyramid Schemes respectively.

Direct Selling:

1. Direct Selling means the marketing of the products/services to the consumers generally from home or workplace i.e. locations away from permanent retail locations. It is done through explanation and demonstration of the products by a direct seller.
2. They offer genuine business opportunities. It involves quality sales plan of goods and services.
3. The cost of entry is reasonable.
4. Plans are entirely performance based.
5. Returns are dependent on the time invested and motivation of the direct seller and come slowly.
6. Sales incentive is based on sale of goods/services.
7. Enrollment is not compulsory of doing business.
8. Business is by sale of products. Enrollment is optional.
9. Sales incentive to all distributors is through Direct Selling Companies only.
10. Direct seller joining the business can exit the business within reasonable time. Investment is refunded as per the company provisions in the Initial Contract. Exit policy in place for termination of contract.
11. Products have 100% buy-back guarantees to ensure protection of end-consumer as per company policy.
12. Products are supplied to meet genuine demand and direct sellers are encouraged to hold minimal inventory and replenish as and when need arises.
13. Rigorous product and product Sales training is done. Incentives based on sales or products and Sales performance are offered.
14. Every sales person had to abide by the Industry Model Code of Ethics.

FRAUDULENT FINANCIAL PYRAMID SCHEMES:

1. "Pyramid" means a multi layered network of subscribers to a Money Circulation Scheme formed by subscribers enrolling one or more subscribers in order to receive any quick or easy money benefit, directly or indirectly, as a result of enrolment.
2. Pyramid schemes involve products which are cheap to produce and have no established market value. New miracle products, exotic cures, mattresses, online surveys are some of these.
3. Cost of entry is extremely high.
4. No Plan or Pyramid Plan.
5. Returns are easy and quick.
6. Incentives are based on recruitment rather than on sales.
7. Enrollment is mandatory for doing business.
8. Commission based on recruitments.
9. Payment through members and negligible pay outs by promoters.
10. No refund or exist policy exists.
11. Products usually do not have a buy back policy.
12. "Front Loading" is encouraged. Therefore, products are thrust upon the direct sellers, irrespective of their ability to sell the product and the product and the actual market demand.
13. There is no emphasis on product or product sales training. Emphasis merely lies on collection of money from new enrollment.
14. There exists no code of Ethics.