Draft Bill Strong Enough to Rein in MLM Firms

Kozikode:The crux of the bill is that it restricts the ‘distributor from appointing or entrusting any person with the task of doing the business on behalf of himself or a direct seller or an MLM entity’ and thereby preventing the formation of a money chain.

*** Simply put, a registered ‘MLM’ or ‘direct selling’ company can appoint ‘direct sellers’ and each ‘direct seller’ can have ‘distributors’ under him. However, the distributor cannot appoint any person to work under him.

*** It clearly points out that the income plan of a MLM entity shall not be based on the registration or enrolment of new direct sellers.

*** “The benefits received by any MLM entity, direct seller or distributor shall be only as a result of selling goods or providing services,” it says. The direct seller or distributor need not have to ‘purchase any goods or service or pay any membership fee for registration’.

*** “It shall not require the direct sellers to enrol a minimum number of distributors for receiving any type of commission, incentive or other benefits,” it adds.

The draft bill proposes the constitution of a Multilevel Marketing Regulatory Authority for the registration, monitoring and supervision of MLM business in the state. It also clearly distinguishes a direct seller from a distributor and states that the relationship among direct-level marketing entity, direct seller, distributor and consumer or customer will be that of ‘among the principal, agent, sub-agent and third parties, respectively.’

As per the bill, the Director of Industries and Commerce will be the controller of the authority with powers to give or refuse registration to MLM companies, direct sellers and distributors, issue identity cards to direct sellers and distributors, to monitor the payment of taxes and to receive complaints from direct sellers, distributors and customers against the MLM companies. As per the Act, no MLM entity can do business in the state without a valid registration under this Act.

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