Float guidelines to distinguish between direct selling ,MLM& ponzi schemes: ASSOCHAM plea

*The Associated Chambers of Commerce and Industry of India (ASSOCHAM)has thus sought an immediate action by the government to protect the genuine DSCs, MLMCs and their distributors.

*A large part of unemployment problem is being addressed by the direct selling industry which has over seven crore active networkers engaged currently with majority of them being women, said ASSOCHAM

Apex industry body ASSOCHAM has urged the centre to draft guidelines to help the state governments and police authorities distinguish between genuine direct selling companies (DSCs), multi-level marketing companies (MLMCs) with that of fraudulent direct selling pyramids, ponzi schemes, prize chits and money circulation companies.

“The Rs 20,000 crore worth direct selling (DS) and multi-level marketing (MLM) industry offering full and part-time income opportunity to over seven crore people across the country has lately been grappling with issues arising out of misinterpretation of certain provisions of the Prize Chits and Money Circulation Schemes (Banning) Act, 1978,” highlighted The Associated Chambers of Commerce and Industry of India (ASSOCHAM) in a communication addressed to the union finance minister (FM), Mr P. Chidambaram.

“There is a need for a clear legislative framework to safeguard the interests of genuine organizations and also help them tell apart from fraudulent ponzi and pyramid schemes that operate under the garb of DS and MLMCs,” appealed ASSOCHAM.

The Reserve Bank of India (RBI) while sensitizing the state governments that MLM schemes fall under the PCMCS (Banning) Act 1978 has ignored the fact that violation takes place only when a company collects deposits through MLM schemes and there is a gulf of difference between companies selling products and those collecting deposits, noted the ASSOCHAM letter to the FM. “This difference needs to be specified so that DSCs do not face undue harassments.”

“The main purpose of PCMCS (Banning) Act, 1978 was to ban the prize chits and money circulation scheme which are in no way related to direct selling or multi-level marketing business,” said ASSOCHAM. “But unfortunately there is no mechanism or methodology for differentiation and distinction between money circulation companies and direct selling companies.”

The aforesaid Act has been left at the mercy of vague interpretations of state machineries and continuous unjustifiable actions have been taken by state police authorities against genuine DSCs and MLMCs mostly in states of Andhra Pradesh, Chhattisgarh, Kerala, Maharashtra, Rajasthan and Tamil Nadu, it added.

ASSOCHAM has thus sought an immediate action by the government to protect the genuine DSCs, MLMCs and their distributors from police harassment and protect their livelihood, more so as direct selling and multi-level marketing are time tested business models and have been successfully operating globally complying with all laws of the land. “Thousands of crores of rupees are being paid by DSCs and MLMCs to the government exchequer as part of different taxes and revenue while complying with all laws, rules and regulations for the business.”

A large part of unemployment problem is being addressed by the direct selling industry which has over seven crore active networkers engaged currently with majority of them being women, said ASSOCHAM. “Direct selling industry provides the consumers with quality products at their doorsteps at an acceptable price with a guarantee of money back policies and as an additional channel it is also leading to disintermediation, reduction in transaction costs and bridging the gap between consumer prices and manufacturer prices.”

Both the business models of direct selling and multi-level marketing are about sales of goods and sometimes services and these issues are important to be coded in all current and future policies and legislations to accrue entire benefit from efficiency enhancing and its employment generating advantages.

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