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Indian Direct Selling Association (IDSA), the 19-member industry body that represents direct-selling companies in the country, on Friday, sought a separate regulatory framework with clearer guidelines governing the direct-selling entities in India.
“We want definitional clarity and operational framework under which the direct selling industry can operate. There should be clear distinction between the direct selling industry and the fraudulent financial pyramid and ponzi schemes.
Prize Chits and Money Circulation Scheme (Banning) Act (PCMC) of 1978 is inapplicable for direct selling industry and we want a clear exclusion from it,” said IDSA chairman Amarnath Sengupta.
The issue came in light after Amway India CEO and managing director William S Pinckney and two other directors of the company were arrested by Kerala police early this week. The Amway India officials, who were granted bail the next day, were arrested under the PCMC Act because of complaints filed in 2011 by distributors, making allegations of fraud against them committed in 2003.
According to IDSA secretary general Chavi Hemanth, the estimated Rs 6,400-crore direct selling industry in India does not envisage promoting or conducting any scheme for making of money by enrolment of distributors as mentioned in the Section 2(C) of PCMC Act. Distributors make money by selling products and services only, she added.
“The focus of regulation should be to identify which practises are fraudulent and it should lay down certain specifications for the protection of consumers, distributors as well as the direct selling entity,” said Hemanth.
However, Amway is not the only company to face such cases. There are cases against six members of IDSA, including Daeshan Trading (India) Pvt Ltd, Modicare Ltd, Oriflame India Pvt Ltd only in Kerala, while the number would be slightly higher nationally, according to Hemanth.
The direct selling industry is growing rapidly and is estimated to cross the Rs 10,000 crore over the next one year. There are about 5 lakh distributors in the direct selling sector in India.
Meanwhile, IDSA has already held a meeting with Minister of State for Corporate Affairs Sachin Pilot on the matter.
Recently, industry body Federation of Indian Chambers of Commerce and Industry (Ficci) has noted in a paper, “Our plea is that the direct selling companies should be excluded from Prize Chits and Money Circulation Schemes (Banning) Act, 1978 (PCMCS). As per our understanding, there is no financial circulation undertaken by these direct selling companies often also referred as multi-level marketing companies.”
Hemanth said all member companies of IDSA offer mandatory buyback guarantee for unsold inventory within a specific timeframe and dissatisfied consumers also get their money back after deduction of a nominal fee.
