When a person purchases any product from the company, he has to make an application which contains the price list of Rs. 550 Plan and Rs. 1000 Plan and others. It contains six products namely Nutrimalt, coffee, tea soap, shampoo and pickles. The maximum retail price and the distributor's price are also given. The sum of maximum retail price of all these six products comes to Rs. 497. The total amount for which it is sold to the distributors is Rs. 372.
Admittedly, for these products, the so-called distributor pays a sum of Rs. 550 whereas the distributor's price is only Rs. 372. Therefore Rs. 178 is charged extra from the distributors. This amount, the distributor pays to the company because he is made to believe that when he sells these goods to others and enrol others in the scheme, he gets commission from the petitioner company. Such commission depends upon the total volume of business that he generates by enrolling new distributors, it progresses like a chain; the amount of commission depends on the subsequent 'distributors' who is made to join by the petitioner (Apple FMCG) or a purchaser through him. The promise of the possible commission is the reason for one's enrolment. The form requires to be filled up with three 'distributors' names through whom the new entrant get into the scheme and their placement.
One has to purchase one or more starter kits by paying the money as stated above; he must sell the product to two other persons and get their application form filled up and sent to the company; those two persons in turn have to purchase starter kits from the company and in turn they must sell and enroll two other persons each. Each new entrant shall purchase the starter kit from the company and in turn sell enrol two other persons. Like this, every new purchase from whom the new entrant purchases shall enter the three names of his predecessors in the chain. Like this the chain progresses. The three names filled up by each and every new distributor depending upon upon the rank of placement and volume of the business, everyone in the chain gets the commission. If a person gets started with five starter kits, he will sell it to ten persons and that ten will become twenty at the next stage and twenty will become forty and so on. When it goes up to ten stages in this manner, the person who sold first will get a commission.
This is the business model of Apple FMCG which the Madras High Court held illegal. A glance at reveals that it is no different from Amway India's business model. The Order of the Madras High Court would appear later.