Industry chamber Assocham has asked the government to come out with guidelines to help distinguish genuine direct-selling companies and multi-level marketing firms from ponzi scheme operators.
"The Rs 20,000 crore worth direct selling and multi-level marketing industry offering full and part-time income opportunity to over seven crore people across the country has been grappling with issues arising out of misinterpretation of certain provisions of the Prize Chits and Money Circulation Schemes (Banning) Act, 1978," Assocham said in a letter to Finance Minister P Chidambaram.
"There is a need for a clear legislative framework to safeguard the interests of genuine organisations and also help them tell apart from fraudulent ponzi and pyramid schemes that operate under the garb of DS and MLMCs," it said.
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The Reserve Bank of India (RBI) while sensitising the state governments that multi-level marketing (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, Assocham claimed.
"This difference needs to be specified so that DSCs do not face undue harassment," it said.
Highlighting that the main purpose of PCMCS (Banning) Act was to ban prize chits and money circulation schemes which are in no way related to direct selling or multi-level marketing business, Assocham stated: "Unfortunately there is no mechanism for differentiation and distinction between money circulation companies and direct selling companies."
The PCMCS 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 direct selling companies (DSCs) and multi-level marketing companies mostly in states of Andhra Pradesh, Chhattisgarh, Kerala, Maharashtra, Rajasthan and Tamil Nadu, the industry chamber said.
