After being accused of being a multi-level marketing scam by the Enforcement Directorate, Amway India, which markets a variety of products as well as business opportunities to customers, has now been accused of being a multi-level marketing scam whose main purpose is not to sell its exorbitantly priced products but to induce the public to sign up as members of its get rich schemes.
In its list of allegations against Amway, the enforcement directorate has stated that the company is engaged in a pyramid fraud under the guise of a direct-selling multi-level marketing network and that the company's primary focus is not on its product, but on propagating the pyramid fraud.
In its list of allegations against the company, the enforcement directorate has stated that the company is engaged in a pyramid fraud under the guise of a direct-selling multi-level marketing network, and that the company's primary The central agency has also suggested that harsh action and an investigation will be launched against Amway as a result of the allegations.
Let's get this over with to open the floor to discussion I'm joined on the broadcast by Sanjeev Segal, who is the additional advocate general of India's Supreme Court and the chairman of the standing council of the government of India.
Sanjeev, if you could shed some light on this company and its alleged wrongdoings, that would be great.
We've all grown up listening to Amway, and I personally know individuals within my friend circle and within my mother's friend's circle who distribute those Amway books you're Yes, you are quite accurate, Micky.
As you can see, there's a very thin line between the mlm marketing schemes and this pyramid scheme scheme, and that line has to be defined in a proper way because, previously, when we had these policies, the policies weren't very clear about mlm marketing schemes and all of that, and so normally, what happens is that, recently, uhrecently, I believe we have uhrecently, uhrecently, uhrecently Companies are required to make a declaration that they are not involved in a pyramid scheme or a money regulation scheme, and what has happened is that the company has been working to basically increase the wealth of their customers instead of focusing on the products that they are basically supposed to market through a multilevel marketing scheme or a marketing scheme that can be a direct scaling scheme, which is completely legal in the country, but when you overstep your line of controversies, you are liable.
As a result, there is something known as direct selling.
Direct selling is currently available.
As Uh Sanjeevji very correctly pointed out, there is a very thin line between direct selling and pyramid schemes, and that is why rogue traders are so dangerous.
As you are aware, I have been pleading with the government to enact legislation similar to that which is already in place in other countries.
I have also published a book demonstrating how direct selling is conducted in other countries, such as Bangladesh, for example.
We were attempting to convince the Indian government and policymakers to bring in legislation to manage this entity or this format of business, but instead they have done the exact opposite, as you know.
It is very clear that consumers and citizens alike need to know what direct selling is and how pyramids are formed in terms of marketing.
You mentioned that you know that interests and profits are shared with commission holders who are actually helping you build the pyramid and allow for your product to grow by word of mouth by communities.
How do we then witness these Amway advertisements? How does one determine whether a product is priced correctly, whether it is, for example, an amber product or an oriflame product, which is also a direct marketing mechanism? You know, the things that are available, whether it is a mac or whether it is a doctor, are significantly more expensive than what Ambe gives in its catalogues, so that's a big deal. You see, let me first tell you that there is no pricing regulation in our country.
See, under the drug control order, there is only a certain amount of oversight in terms of pricing in the telecom sector by the regulators.
There are certain norms in our country which are governed by the law, but in terms of putting mrp on products by the manufacturers, as of today, there is no law controlling the pricing of products sold in the marketplace.
My friend, advocate Sanjeevji, will be better to tell me to tell all of us, but the point which I'm making is that the manufacturer is free to put their mrp in the manner they want, but if there is a profiteeringelement coming in where there is an element of some kind of deceptive trade practise going on, then the competition commission can bring in an investigation into the sale of such products where there is unfair tradepractice adopted.
So we have good laws in our country to protect the consumers.
The only unfortunate thing is the knee jerk reaction sometimes, which happens from the policymakers or from the law enforcers in our country.
You see, what I am trying to say is that in 1996, many companies came into India, including Away, to conduct business in the country, and they have been conducting business in the manner they have been conducting it all over the world.
So what have they done wrong which needs to be shared by the citizens with the citizens until the investigation is complete and the information is not made public.
I don't think we should sit and uh, conclusion, absolutely.
Would you like to get into the conversation and understand the very ness of the situation then?
Individuals will get themselves involved on a commission basis to allow for their business models to flourish. So sure, uh, conclusion. Good evening While Professor Mishra and Mrs Segal discussed the boundary line, we must very clearly distinguish between what is the business differentiator and why Amway is currently on thin ice. Direct selling, when done correctly, can actually bring in products faster and directly to the consumer, as well as benefit from reducing the sales and distribution channels in between. is the price markup, which you mentioned was an unusually high price markup.
The second is a very high sales bonus, and the sales bonus is directly proportional to how high you are in the hierarchy. The third is actually recruiting more people under your umbrella under your tree and actually taking a registration fee. So when the entire focus and incentive and benefit starts coming from how you recruit more people under your umbrella, rather than focusing on how you recruit more people, and that is I believe the current issue, which is that this borderline in the case of Amway, appears to be on the precipice. And while we were talking about that in India, the consumer protection act only comes into effect in December 2021, and there are only four states that have actually implemented, so it's a guideline.
If you go back to the United States, which is the parent company of Amway parent headquarters, the Federal Trade Commission warned the company in 1975 that it should not position itself as a source of income but should not position itself as a source of undue return, and this is exactly what we are seeing today.
If you have celebrity endorsements, if you have more multimedia advertisements, all of it is really pulling in people thinking that Amway is a source of undue return.
How can we protect their interests as well as the interests of the tree that they go ahead and create while keeping in mind that they end up collecting commission on every single member that is added to the pyramid and then the tree that they go ahead and build? The second issue, which is about the authenticity of the goods as well as the quality of the product and how consumer protection legislation should work for the welfare and benefit of the people of the country, is adequately covered by Mikhna as well.
You know, when it comes to quality and distribution and networking, that is a different, you know, marketing plan, which is the approach by which you would like to promote your goods, as my friends have done.
Mr. Srivastav has stated very clearly that you are not going to promote for the purpose of profit. You know, it has to be a good quality product, then you have to market it in such a way to cut down the cost. You can always usedirect selling. That is very much correct. That is very much legal.
But what happens is that you see, India has been struggling with this particular mlm and ponzischemes, which violate thepr for We've stated that the scheme that has been floated as an MLM, which is completely legal, is on the verge of crossing the line into ponzi schemes, which are illegal. We've also stated that the consumer must be well aware of this before becoming a victim of one of these types of schemes. We must all find our own ways to protect ourselves from being victimised by these types of schemes.
Dr. Bajan Mishra explains that it is the way you promote your product and the way you model it that matters. Why would one product be priced exorbitantly compared to another that is very competitively pricedand yet there is a consumer who is willing to pay that extra amount of money to get that product? That's marketing, and it's complex ways of branding, complex ways of putting your product across to the public, and that's what maybe an amber does or any other pyramid scheme company does when it comes to consumer protection, i.e., consumers have the right to make their own decisions.
The law provides consumers with the ability to distinguish between a substandard product or a spurious product and a genuine product. Unfortunately, in our country, there are no regulators in place. Now that there is a regulator, the central consumer protection authority, which has been established under the new consumer protection act 2019, which we have been talking about since 1996, you see, the point that you and everyone else are making is that it is the consumer's choice.
Why aren't you purchasing it? The difficulty is that there needs to be a regulator and oversight to determine whether these formats are in violation of the terms of the law that has now gone into effect. Nevertheless, we are talking about an activity that took place in 2011 and is now being considered. Those investigations that have taken place are still being looked into.
We need to figure out where they went wrong because there are 400 or so direct selling companies in our country right now, and if all of them are violators, why am I the only one? You should pursue the ponzi companies that are actually practising pyramid schemes on a daily basis, because if it were only Amway, you would know that this entire business would not have existed in India.
You should also pursue the companies that are masking the regulators, and you should investigate why those consumers are not being protected by the regulators. People who are becoming victims of these ponzicompanies are being pursued by those companies that are actually conducting themselves in a format that is allowed, but if it is violated, I am constantly saying if anyone is a culprit, they must be punished, but if you are not a perpetrator, please do not harass them for it, for the love of God.
People should not be discouraged from doing business in India because of the prevalence of ponzi schemes and chit fund businesses (there are numerous examples).
We put it out there month after month that there is some sort of ponzi scheme going on. The owners of those firms, those creators, have fled, leaving the people who had put their hard-earned money into them high and dry. There has been some embezzlement and fraud, and the people who have put their hard-earned money into it have been left high and dry.
There was one particularly large example that had come to light yet again.
There was a Sahara scheme that was implemented, and that is an excellent example of how awareness must be raised among consumers. How should this be accomplished while keeping in mind that there are several of them that will get layered and fall for the bait because of the larger profits or the dreams of a larger profit that are showcased by these companies that come out with concern? I believe that one of the most immediate things that can be done is to educate the public.
Second, I believe that wherever companies are doing a mix of direct selling and multilevel marketing (MLM), which is where the grey area exists, they should have very clear-cut guidelines, similar to how the American Society of Advertising Professionals (ASCP) and other bodies specify for advertising guidelines what is a realistic framework which members can earn, because the moment people think of unrealistic returns, that is where a combination of greed and fear comes in, and that is where people ultimately lose their mo Make yourself conscious of the situation.
Learn everything you can from all of the documents and literature that are accessible to you in order to keep yourself up to date, and then make an informed decision about what you will do next, all right? To finish, I would like to thank my panellists for joining me on the broadcast and encourage them to participate in more similar films in the future.
