Amway urges regulatory norms for direct selling industry

Industry expected to be worth Rs 10,844 cr by FY15 with average y-o-y growth of 20%

In order to differentiate between genuine direct selling companies and fraudulent companies pretending to be direct selling or multi-level marketing entities, Amway India, country's largest direct selling company, has stressed on the need to create a regulatory framework for direct selling industry, which is expected be become Rs 10,844 crore industry (organised and unorganised) by FY15 with average year-on-year growth of 20%.

"Fraudulent money circulation schemes operating under  the garb of direct selling/multi-level marketing opportunities have been duping people. Hence, we seek and demand a robust regulatory framework to keep such fraudulent companies at bay," said, Yoginder Singh, senior vice-president-legal and corporate affairs, Amway India.

Explaining the major difference between the two, Singh added that direct selling means the marketing of 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, while pyramid schemes, run by fly-by-night operators, are illegal scams in which people at the bottom pyramid pay money to a few people at the top.

Pyramid schemes involve products which are cheap to produce and have no established market value. New miracle products, exotic cures, mattresses and online surveys are some of these.

Maintaining that there is no clear and holistic definition of direct selling in India, as a result, the classification of direct selling is also unclear, he said that direct selling industry in India feels there is a need to provide a clear definition of direct selling, enacting a governing legislation for the sector and appointing a nodal ministry or a single point of contact.

Countries like USA, UK, Singapore and Malaysia have regulatory framework for direct selling companies but the same is not present in India. In the absence guidelines and regulatory framework, genuine direct selling companies are often mistaken for fraudulent pyramid or ponzi schemes. Certain states also confuse direct selling companies with fraudulent one.

Recently, Kerala government has come out with guidelines for direct selling industry. "We are also working with government of West Bengal and UP for similar initiatives," he added.

There are as many as 18 organised players in India's direct selling industry, which include also Amway, Tupperware, Oriflame, Avon and Herbalife among others. In addition to this, there are 100 plus operators from unorganised market.