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C.R. Sukumar

Hyderabad , July 15

FOLLOWING the rise in number of prize chits and money circulation scheme operators across the country under the guise of multi-level marketing (MLM) in the recent past, the demand for clarity in the Indian legal framework for protecting the interests of `genuine' MLM players has been gaining momentum.

The issue assumed significance in view of the growing incidents of harassment of companies dealing with direct, network and multi-level marketing by the police authorities in various States and Union Territories. The MLM players allege that the police very often resort to applying the Prize Chits and Money Circulation Scheme (Banning) Act that was formulated nearly three decades back to prevent the prize chits and money circulation schemes.

Mr G.V. Vamshi Ravi Raj Goud, the CMD of Alekhya Marketing Yellow Pages, a Hyderabad-based Rs 25-crore yellow pages marketing company using the MLM model, said: "Owing to lack of clarity in the current legal framework, the police authorities keep invoking the provisions of the PCMCS Act against the MLM companies."

He said there was no end to the instances of police harassment despite the Ministry of Consumer Affairs and the Ministry of Law issuing circulars earlier instructing the officials concerned to distinguish between companies dealing with activities coming strictly under the purview of the PCMCS Act and those such as direct, network and multi-level marketing dealing in distribution of goods so as to avoid harassment and commercial losses to bona fide investors.

Mr Goud told Business Line that both the Ministries were of the view that the provisions of the PCMCS Act were not applicable to companies dealing with distribution of goods including multi- level and network marketing companies. In this context, they also cited various judgments by the Supreme Court and couple of State High Courts, which imply that the activities of direct, network, multi-level marketing do not fall within the provisions of the PCMCS Act.

"But unless the Government comes out with a clear law on the MLM operations in our country to help police curb the fraudulent money circulation activities, the genuine MLM players along with lakhs of unemployed youth in our country dependent on such business models will continue to suffer serious losses," Mr Vamshi Ravi Raj Goud said.

According to Mr Goud, aimed at helping both the consumers and police authorities to distinguish the illegal pyramid schemes from the legitimate direct selling companies, the Indian Direct Selling Association (IDSA) has issued a map.

More Stories on : Direct Marketing | Courts/Legal Issues

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