Monday, 13 December 2010

Time is running out for Amway and their ilk

Let us look at the ingredients of the two similar cases decided by the Madras High Court. One is V-Can Network Limited and the other is Apple FMCG.
In the V-Can Network case, the allegation in the complaint is that one Senthil Murugan, who had become a member and who had bought a magnetic bed, falsely induced the complainant that if he purchases a magnetic bed for Rs.5,990/-, he would in turn become a member and if he in turn introduces two more members, he would make quick money to the tune of lakhs of rupees and thereby cheated the complainant. Doesn't it sound familiar. Same is the case with Amway India.
The other case is Apple FMCG. In this case there are only two stages, viz. stockist and distributor. The distributor can introduce another person as a distributor and he will also get commission. The distributor has to put in his effort in selling the products and then only he will get the commission. 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 enroll others in the scheme, he gets commission from the petitioner company. (This amount is cunningly called Compensation Plan by Amway India) 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 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.
The learned counsel for the petitioner further submitted that earlier 45% of the sale amount was distributed as commission but presently it is increased to 65% of the sale price. That means the goods which are worth only Rs.35/- are sold at rs.100/- and this rs.35/- covers not only the price of the goods, but also expenditure involves for the administration of the company. Of course, the Court can not interfere with the fixation of the price. Anybody is free to fix any price and it is for the customers to accept or not. But, it is not an ordinary sale of goods. The persons are lured to become a distributor only on the hope or expectation that he may get more money by way of commission if he sells the products similarly to others. Of course, many persons are earning lot of commission in this manner. This chain is likely to progress for some time. At one point of time the progress of the chain will stop. On that day persons who buy the product may not find any further distributor to purchase from them. By the time, the company would have earned enormous profit. But a very large number of persons would be left cheated.
And this it the comment by the Andhra Pradesh High Court about the scheme of Amway India.
"It is, thus, evident that the whole scheme is so ingeniously conceived that the inducement for aggressive enrollment of new members to earn more and more commission is inherent in the scheme. By holding out attractive commission on the business turned out by the downline members, the scheme provides for sufficient inducements for its members to chase for the new members in their hot pursuit to make quick/easy money."
When there are so many decided cases in India, no wonder Amway India is afraid of facing criminal cases. If one case is decided it is going to be the Waterloo for Amway India. That is why it is trying its level best to prolong the criminal case at Hyderabad court.
Because of these crooks so many indigenous crooks are sprouting all over India. It is high time the officials both the administration and the police acted swiftly and close down the operations of these crooks at an early time.

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