Govt guidelines soon to differentiate direct selling companies and ponzi schemes

NEW DELHI, JULY 15:Union govt will be soon bring the guidelines for Direct selling industry.To make a clear distinction between genuine direct-selling companies and fraudulent ponzi schemes, the government will soon put in place a set of ‘model guidelines’ to be followed by different states in such cases.

“These guidelines are close to being finalised by the Consumer Affairs Ministry and the Corporate Affairs Ministry has given its suggestions and other inputs in this regard,” Union Minister Sachin Pilot said.

Pilot’s comments come against the backdrop of the recent arrest of global direct selling major Amway’s India Chairman William S Pinckney and two company directors by the Kerala police over allegations of fraud.

While they were released later on bail, the incident has generated a debate on need for a clear set of rules for differentiating between registered companies doing genuine businesses and those duping the investors through fraudulent schemes structured like multi-level marketing operations.

“The standard guidelines would have the distinction between what is legal and what is illegal,” Pilot said.

“These would be model guidelines. We hope that state governments adopt them pretty much as they are except for minor changes.

“Right now, there is no clarity on the issue. In India it is illegal to charge commission for membership. You cannot make a member and take commission on that. Selling products or services is legal but sometimes people do both,” he said.

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