Sunday, 7 October 2012

The MLM apologists conveniently ignore the latter letter by the Secretary of Consumers Affairs

Often multilevel marketing apologists quote the letter written by secretary, consumer affairs, Government of India which is blatantly misused.
They conveniently or out of ignorance never mention the follow up letter written by the same department on 23-09-2003. It is herewith being produced verbatim for the convenient of our free-thinking readers as well as ignorant or cunning members of MLM companies.

F.No. 21/(22)/IT/2001
Government of India
Ministry of Consumer Affairs, Food & Public Distribution
Dept of Consumer Affairs

Shastri Bhavan, New Delhi
Dated 23.09.2003
Ms. Sunitha Kalla,
 Dy Director General & Joint Secretary
Ministry of Finance, Dept of Revenue,
Central Economic Intelligence Bureau
6th Floor, B Wing Janpath Bhavan
Janpath, New Delhi

    Subject:  Applicability of the Provisions of the Prize Chits & Money Circulation Schemes (Banning) Act, 1978  to pyramid marketing structure/schemes - Regarding.
      I am directed to refer to your D.O. Letter No. 301/15/2001-CEIB (Pt-II) dated 22nd September 2003 addressed to Shri Wajahat Habibullah, Secretary (Consumer Affairs) on the subject mentioned above and to say that this department was considering the issue of direct selling/network/multi-level marketing as an alternative form of marketing of goods and the entire issue was looked from that angle. However, subsequent feed back/response have showed that companies using pyramid structured marketing techniques too sell their products putting forth their schemes based on the clarification issued vide D.O. letter of even no dated 31st March, 2003 claiming that their activities also do not fall within the provisions of the Prize Chits and Money Circulation Schemes (Banning) Act, 1978. It is clarified that this Department's clarification of even number dated 31st March, 2003 does not cover pyramid structured marketing schemes. That area also does not fall within the purview of this Department.

This is issued with the approval of Secretary (CA).

Yours faithfully
Alice Chacko
Under Secretary of Govt of India

Copy to : Chief Secretaries of all States and Union Territories.

The letter of Consumer Secretary was annulled by this letter on the reference of Central Economic Intelligence Bureau, Government of India. 
Still, Gopals, Mallappas and plethora of other apologists refer the same annulled letter.  It is nothing but cheating once again after stealing billions of rupees from millions of people


Unknown said...

Shyam! You were publishing late in the evening. Since a couple of days U R doing it early in the morning!

We appreciate your stand on the MLM issue & the follow ups.

It was the pen in the olden days which had the power. Now the pen is replaced with the blogs! Hats up IT!

Shyam, MLM has both the merits & the de-merits. You are always behind of the demerits only. Off course, the net workers may be looking at merits only. There is need for a strategic view combining both the views.

It is not expedient to ban the entire MLM industry. It is to be ensured that the concept is not misused. It is to be ensured that either the Government or the public are not cheated. Government & the public are to be benefitted. If it is ensured, why the MLM is to be banned as a whole?
(Continued on Page 2)

Unknown said...

(Continued from Page 1)
Conventional systems also have merits & demerits. There will not be any proof – but a known fact that all the conventional private traders maintain two type of account books. Government is thereby cheated and thereby negate the national interests. Goods are sold at MRP prices – those sell directly to the consumers at the second or third stage of the manufacturers gain much more margins. If you buy a product at a village corner you will get it at MRP wherein it involves more than 6 to 7 intermediary handlings. It is sold at MRP even at Hyderabad where there will be one or two intermediaries. Trade benefits are shared by a few service providers.

In my opinion the intraday trading of the share market is purely money circulation. One buys shares at the current time & may sell in the next second at higher or lower prices. One will gain & the other will lose. It is from ‘Paul’ to ‘peter’. Demand & supply may work in guise. Basically, Price of a share is to be dependent upon performance, assets & intrinsic value of the company. Practical aspects are entirely different. Money put in is transferred to the other without getting deployed in the business. Purely apparent legal money circulation.

Presently the NMart issue is in focus. No doubt NMart’s concept is very good provided it is implemented in the presently spelt out terms & conditions. Gpoal Shekhawat may make money. It is his business. He may perhaps pay the tax for his earnings. All those joined will be benefitted. Practically, the new joinings into the Nmart system will not end soon. There will be rejoining on completion of four years term. By that time new generation will also come up for joining. When the goods are sold to the consumers directly purchased from the manufacturers, huge margins, perhaps sufficient to cover the promised pay outs will be available. It is hardly difficult to keep two types of account books in the Nmart concept. Thus the Government also get the full taxes. Even when the new joinings are stopped, the end person will also do not suffer a loss. He will get gift purchase of Rs. 220- for four years. Subject to the condition of cash purchase of Rs. 72,000- in four years, he may get loyalty bonus of Rs. 11,000- It may somewhat affect the conventional systems. Trade margins were enjoyed by a few in the conventional system. It will be made admissible to all permanent customers in large. Conventional systems also suffer with the foreign entities penetrating into the Indian soil for direct selling. Indigenous company like Nmart is required to compete & to retain the trade margins in the Indian soil. Present provisions in law formulated in consideration of different aspects of the olden days may find some fault with the Nmart system. It is truly to be not. Therefore, there is need for a separate regulation befitting the present time & the conditions. Existing provisions are of pre-age of globalisation & liberisation. NMart concept is not against the need of the common men and not against the interests of the Nation. In fact nourishing both the aspects. Therefore, as a citizen of India, I feel Nmart like entities need not be banned for not befitting with the present provisions of law – but there is need to support it. Requirement is only to ensure NMart’s concepts are properly implemented & that there is no cheating – deviating from the spelt out terms & conditions.

Unknown said...

Dear sham sunder

That area also does not fall within the purview of this Department.

Prize Chits and Money Circulation Schemes (Banning) Act, 1978. It is clarified that this Department's clarification of even number dated 31st March, 2003 does not cover pyramid structured marketing schemes. That area also does not fall within the purview of this Department.

which deprtment under it comes sir

Shyam Sundar said...

Joining and making others join in such schemes is punishable under the Provisions of Prize Chits and Money Circulation Schemes (Banning) act, 1978. The enactment also prohibits easy and quick money for anybody. You said Gopal might have made money. That is exactly the crime. And joining members into the scheme you have also made some money. That is also a crime.
How could you hoodwink with your skewed arguments.
There is nothing merit in the MLM. It is outright cheating your own and friends by inducing them to join the imaginary infinite chain.

Shyam Sundar said...

Megha raj,
Pyramid schemes falls under the provisions of the Prize Chits and money circulation schemes (Banning) Act, 1978. That is what is written in the letter.

Unknown said...

Dear sham sunder

this letter is clearly saying that this departments jurdiction is not falls to this = That area also does not fall within the purview of this Department.

Prize Chits and Money Circulation Schemes (Banning) Act, 1978. It is clarified that this Department's clarification of even number dated 31st March, 2003 does not cover pyramid structured marketing schemes. That area also does not fall within the purview of this Department

Unknown said...

MLM is another form of marketing system. There is no proper legislation to guide the industry; many companies misuse the MLM concept. Existing Acts & the Provision can act against the companies on the plea of non compliance to the provisions – but lack with putting pre-track to run the industry - setting forth the proper guide lines. You are perhaps totally against the MLM industry & hence may not vote for setting up of such guide lines! But, Shyam, MLM has merits also. It opens equal opportunities for all and enables good earnings. For a meritorious company, earnings either by the company or by the associates need to be defined as the business opportunity & not always be murmured as money circulations – as far as the national & public interests are served.

Shyam Sundar said...

Vidyasharee, let us assume that MLM is another way marketing. How do the business associates earn money? By selling products. Is that right?
But actually here they earn money by way of enrolling more members into the scheme nay scam.
All MLM companies offer enormous incentives or profits if you enroll more members into the scheme.
For instance, if you join 102 members under your downline under 6-4-3 scheme of Amway, you are guaranteed an income of more than Rs 65,000 per month without any personal effort.
In NMart also if you enroll 100 or more members you are entitled apart from a commission of Rs. 200 per person, gifts like motorcycle, car and even foreign trips.
This is exactly where the law comes in. You are just putting a veil of corporate over a money circulation scheme in the name of selling products.
Show me one person who actually is making money by selling products in any of these MLM companies.
That is why it was banned under the PCMC Act, 1978.
Now you want a law or guidelines to make an illegal act of enrollment a legal one.

Dimpee said...

Sir,I always appreciate your steps and arguments.I am just a bit curious by Vidyashree's version,if companies stop paying on only recruitment and provide the amount on product consume
but continue the distribution through networking will it be illegal any more?Because I think there is the game the companies are playing in.
If the criteria is-
1st same amount product on registration fees,
2nd commissions will be on down lines product consumption(on amount of the consumed product)
3rd No extra benefit on recruitment anymore.
4th Incentives ,trips,awards,gifts will be on the basis of the amount of product consumed by self and the down line team only.
Under the above circumstances is it possible to get the permission to run the mlm company as legal by the law(as per pcmc 1978 or any correction may be taken).As a legal advisor or a advocate I want to know your valued suggestion which may be give us who dont want to braak any law but want to stick with mlm system.Please Give us your suggestion on the above criteria.

Shyam Sundar said...

No MLM company pays its distributors from its pockets. That is the money collected by way of subscription or by way of selling products and services at exorbitant price. Pocketing sizable amount from it, it gives peanuts to the downline members. This is proved beyond doubt in the Andhra Pradesh High Court in Amway India writ petition.
The High Court stated that the business model of Amway is illegal and it is earning easy and quick money in the name of selling products. And it is offering its upline distributors also some of the stolen money from the downline members.
All MLM companies adopt the same technique to loot the public.
You people are carried away by the smooth talk of these companies and refuse to see the reality.

Dimpee said...

Sir,You have not answered yet my question...there is a concept I am sharing with you, similar like said conditions as i have mentioned my early letter.

there are a start up amount of rupees 2000/- in which they are giving products of amount 2500/- + 20% discount.

you can promote the business to others,in which you will get amount of the 10% of the product in start up kit(2000X10%)-Direct commission.

Next month onward you can earn %(percentage slab-0.25% to 10% as per slab & product category) of the collected amount of the products your team have purchased.

there are no such offers of gift coupon, lump sum amount,golden handshake,tour or any way by mean of uncountable amount.

Under the circumstance still it would be counted as illegal?

Actually my intention is to find out a way by which we can use the networking but no cheating scope will be there.As You are also a lawful
person that is why I asked for your advice.

Shyam Sundar said...

Dimpee, Are you innocent or naive? Would anybody give Rs. 2500 worth products with 20 p.c. discount for Rs. 2000. And still offering more commission to the downline.
So far, several hundreds of models came out in networking. Not a single model is proved to be beneficial to all. They are beneficial only to the operator who would vanish after the chain breaks.
Network is called 'mathematical impossibility'. Place one coin in the first square and double it in the next square on a chess board, see whether you could complete it.
There nothing like infinite chain. For the last several years I have been assessing various network systems. They are all bogus with lots of promises. The operators have only made wads of money.
The members who joined their friends and relatives found themselves in an embarrassed situation and lost their relations. This is all the more dangerous to the society. Nobody trusts anyone as the mutual trust is gone.

Dimpee said...

Sir,Thanks a lot for your advice.Now I understood as because it is mathematically Impossible to continue as it it cross the human birth rate like anything so some how ,some where the base will not be able to promote anymore as it will cross the total population.Only possibilities is there if people have to be satisfied as a user but not as a promoter.Thus it will break the social equilibrium in terms of earning scope.In the last stage some person will earn millions on downline even if they not purchase any products,in another side the mejor portion those downlines would not be able to earn rather have to be satisfied as user of the products or the customers.

Under the circumstances it will break the pillars of socialism...where people only will think for his personal profit.Great sir.I salute you.Being an future business analyst I salute you.You just changed my skeptic view about the power of net working which a beautiful tool in social aspects but a scar in business distribution.Example of nuclear power which is a great thing if been use to generate energy but so devastating as a explosive which can take millions of lives.