Monday, 11 November 2013

How multi-level marketing cheats at all level

Is it possible that network marketing firms are flocking to India because they are just not wanted elsewhere? CNN-IBN found that the British Government has sued Amway for unethical practices. China banned all forms network marketing in 1998, Sri Lanka, Nepal, and Australia have also tightened the noose. But in India, MLMs have managed to skirt between the legal loopholes. While ads promise exaggerated incomes make claims in magazines and newspapers, not everybody’s dreams come true.
Case Study 1: Santoshamma 
Santoshamma is one of them. She ploughed her dead husband's monthly pension of Rs 2,000 into an MLM dream floated by Quantum International Pvt Ltd, even paying the enrollment fees for those she recruited. “I lined up 15 members, I persuaded them. I even paid on their behalf. But nothing came of it. I lost Rs 40,000 rupees, I got nothing. I am a Christian. I have these Sri Yantras. I bought four Sri Yantras. They cost Rs 8,000,” she says. She bought a 'Sphatika Mala' instead of soap as Quantum assigns these beads greater Commission Value (CV). Says Santoshamma, “They told me, I was one point short of travel to Malaysia. That’s why I should enroll two or three more persons, so I made another two persons join.” 
Editor, Pelli Patrika, Krishna Mohan says it’s looting the poor. “A lot of indigenous Amway likes are emerging on a day-to-day basis and are looting the poor, gullible, innocent people,” he says. 
CNN-IBN Investigation approached a police officer who bust an MLM outfit-the mattress selling Japan Life India. The officer explained how MLM operations in India are in fact, illegal. 
Says IPS, Vishwanath Sajjanar, “Way back in 1978, the Central Government has banned all money circulation schemes by whatever names they may be called, whether you call network marketing or multi-level marketing or direct marketing. The very running of money circulation scheme is illegal in India.” Multi-Level Marketing was banned in 1978. The Prize Chits and Money Circulation Schemes (Banning) Act bans “money circulation schemes” in all forms - Multi Level Marketing, Network Marketing and Direct Marketing A recent Andhra Pradesh High Court judgment in a case involving Amway has held that its business is illegal, calling it a Money Circulation Scheme that have been banned since 1978. In response, Amway continues to maintain that. "It is a legal and ethical company doing business in public interest,” says in a statement. (Source: July 2007) Says Sajjanar, “Even in the Supreme Court, an SLP has been dismissed of Amway company where it was clearly held that Amyway's business model is nothing but money circulation scheme, falling into the mischief of this act.” In 2003 and 2004, the Madras High Court also declared such networking schemes illegal. Says Sajjanar, “Copying them many Indian companies have started, saying this model is accepted. When there is no action against them they can also do.” 
On ground, consumer activists are trying to do their bit Says Secretary, Public Alert Sewa Society, Manda Bhiksham Raju, “High authorities from firms involved in this business are forcing me (my society) to withdraw complaints.” Raju's job is tough. MLM firms know the allure of quick money is hard to resist. 
Case Study 2: Yesamma 
Yesamma was told network marketing is as simple as making and selling idlis. An idli-dosa vendor making Rs 1500 a month, Yesamma spent Rs 15,000 buying up Quantum products. She believed a Certificate of Incorporation was a personal insurance cover the company gifted her. “My children warned me, but the insurance attracted me,” she says, adding, “They told me this is an insurance document.” Her commission statements of Rs 2 tell the story of the high failure rate in such enterprises. 
When CNN-IBN approached Quantum, the Company refused to comment. 
Most “victims” of network marketing we met in rural Andhra Pradesh were not even aware of their legal rights as consumers. We also found that the law too is reluctant to act. There is also ample confusion within the Government on the legal status of multi level marketing firms. In December 2002, the then Minister of Consumer Affairs, Srinivasa Prasad, told the Lok Sabha that multi-level marketing schemes are legal. But on the same day, the then Minister of State for Finance, Anandrao Adsul, told the Lok Sabha that such schemes were in fact illegal and should be investigated. The Reserve Bank of India too has done a flip-flop on this. In 2001, it declared the MLM schemes of Japan Life illegal. But in February 2003 it changed its mind. Like millions across the world, they too fell for the sales pitch, lost time money and effort chasing an illusion. 
Says software professional, AVS Satyanarayana, “Finally we know this is not worth the time and money we spend but because to support our people who are really mad for it.” 
Agrees another member, Dr Umamasheswara Rao, “It is not a gambling because gamble is designated as gambling, prostitution is designated as prostitution, this is shown as a business it is not a business.” Mathematics and common sense will tell you that losing money in network marketing is not because you failed. Chain recruitment tends to favor those at the top of the heap. But most - and that could include you - do end up at the bottom.

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sumantaworld said...

I want to start my comment on the fifth line of your post " not everybody’s dreams come true".....
There is no industry or career where everybody's dreams come true .

I appreciate your fighting against illegal fraud schemes.

But in some points I am disagree with you.
I know thousands of innocent people who lost their hard-earned money in stock market. I know 1000s of intelligent people lost crores of money in stock market. then is it illegal?
1000s of people appeared in job exam , only few succeed . is it fraud?
in multiplex people purchase movie ticket for 500rs where in cinema hall it is available at 50 rs. is not it inflated price?
I trade in stock market because I know the risk of that business. People come to MLM not to participate in a drama , they come here to do business. In a good mlm company success depends on their performance not the size of their dream. Better fight for the illegal scheme.
Show us any industry or career or sector where everyone's dream fulfilled.
If one MLM company gives the value products on the initial purchase it is enough. then the payout, tax matter and other legal matters should be take care.

Sumanta das

David Brear said...

Sumanta das

Your ignorance of these matters beggars belief. However, your scripted, sophistic, closed-logic false-argument has often been used by blame-the-victim 'MLM income opportunity' racketeers and their slimy apologists.

In reality, since the 1940s (beginning in the USA), countless millions of individuals have signed up with so-called 'MLM income opportunities' around the globe.

Apart from an insignificant minority of grinning shills, the quantifiable, churn/loss rate for all these would-be 'MLM' millionaires, has always been effectively 100%. The real money has come from peddling ill-informed people the pernicious fairy story that they can achieve their dreams goals (without risk) by participating in 'MLM income opportunities'.

The pernicious 'MLM' fairy story has been sold in countless millions of effectively-valueless publications, recordings and tickets to meetings.

This cruel blame-the-victim racket has generated many billions of dollars for the narcissistic criminals who have run it.

Few victims of the pernicious 'MLM income opportunity' fairy story have come forward to complain, mainly because they were recruited by a friend or relative, but also because they were tricked into believing that not everyone succeeds in life, only people who fix specific dreams and goals in life, and who have a 100% positive mental attitude, achieve success.

Thus, 'MLM' victims have been brainwashed into believing that failure to make money was entirely their own fault, and you, Sumantra das, have suddenly appeared reciting this very chapter of the 'MLM' fairy story, expecting the free-thinking readers of this Blog to swallow it.

This makes you, Sumanta das, either a crook or a fool.

David Brear (copyright 2013)

sumantaworld said...

Mr. David Brear...
Your speech does not prove that all MLM companies are fraud.

Your speech does not prove that I am a crook or a fool.

Anyway please give the answer of "often use " argumentative questions if possible. this is a blog .....and you people always try to sweep aside at first shot all the opinion in favor of good mlm companies as you are the only people know everything and all other people are fool. You people are not fit as a blogger.
there are a lot more option than being a fool or crook.

Anyway This is my last post on that blog.

David Brear said...

Sumanta das

I think you have just proved yourself to be a fool - whose understanding of 'MLM income opportunity' racketeering is obstructed by your overwhelming desire to protect your ego.

Why do you expect the authors of this Blog to show you respect, when clearly you do not merit it?

Another option for you, would be to grow up and put your ego to one side, whilst showing respect for the victims of 'MLM income opportunity' racketeering and for selfless patriots, like Shyam Sundar, who have been trying to halt the unchecked spread of the pernicious 'MLM income opportunity' virus in the Republic of India.

David Brear (copyright 2013)

Anonymous said...

Hi, I'm Kinjan Mano.
I have suffered all the things that David Brear is telling. What David Brear is telling is absolutely true. People in Mumbai & Bangalore are lured by the companies(indirectly by Friends) to start their business & creating false beliefs that their goals could come true. MLM works here like a pyramid scheme in disguise. If a person has invested 40k, he has to recruit 16 people under him to recover that money(thru commission). Further in order to make profit & get commission, he will wait for those 16 people to again recruit people(means each people recruited would have paid 40k to purchase a product). This goes on & on & recruiting people & recovering money is so difficult that it crashes at one point. Since there are no regulations set, the company may change rules anytime & you cannot go to court or get any refunds back saying that the company has cheated you. To tell my experience, I lost some money because I was brainwashed & made to purchase a product in MLM. But initial money lost is lost(its ok since I'm a normal techie), but I'll stop proceeding on this. Its a lesson for me in my life not to fall prey for such things. I'm not criticising any normal sales business. Sales business is legal & getting paid for providing products to consumers is good, but as I said, MLM is bad. MLM gets more money only for the top people. 90% of the people in the lower hierarchical levels dont get the money they expect. If Indian laws try to be more stricter on this, many people will lose money they have put in MLM. For a common man, initial year of investment will be good, but later on, I say the laws will set you on fire. Even after this, if you want to fight on my comments, then I think you are working for an MLM & apart from which you cant do anything else.

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Anil Prajapati said...

Housewife are common victims of such MLM schemes. 1 of my Friend seriously lost his mental stability due to mlm trap.

All who want to make easy money, should understand that if Money making was so easy then pooverty wouldn't exist.

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