To be honest I’m not really sure what’s going on in India at the moment regarding MLM regulation.
Last we checked in the Department of Financial Services had recommended amending the 1978 Prize Chits and Money Circulation Act to “ban multi-level marketing companies“.
At the time this seemed like a bit of a knee-jerk reaction, as last July the Department of Consumer Affairs (DoCA) established a committee ‘to establish guidelines to separate legitimate MLM companies from the scams‘.
After missing a self-imposed deadline in early 2013 that came and went, a new deadline was set for April 30th that then also passed without comment from DoCA.
Finally breaking the department’s silence, Corporate Affairs Minister Sachin Pilot made an announcement yesterday on the matter.
The problem? By all accounts the DoCA and the Department of Financial Services appear to be well at odds with each other.
Speaking to the Press Trust of India, Pilot stated
While we must take strong action against the companies that are misusing the laws and duping investors, reputed companies that are doing good work and did not violate any Indian laws should be allowed to operate without any fear. They must be given confidence.My Ministry (Corporate Affairs) and Ministry of Consumer Affairs are now working on clarifying these guidelines (for multi-level companies).
Glad to hear it although one can’t help but wonder why it’s taken so long (we’re going on a year since DoCA established their committee).
How DoCA’s guidelines are going to fit in with the Department of Financial Services’ recommendations is unclear. One department is calling for the wholesale banning of MLM while the other seeks to establish guidelines for legitimate MLM companies to follow.
In the meantime, you’ve got the whole Indian MLM industry caught in the crossfire. Ultimately I suspect some sort of compromise is going to be reached, with MoCA’s guidelines being passed into law and any MLM company (legitimate and scams alike) failing to abide being taken down by Indian regulators (who are hopefully given increased policing powers in related matters).
One particular comment I thought was strange though from Pilot was his criticism of Indian newspapers:
The Minister said the newspapers also have a larger role to play as watchdogs and should not entertain paid advertisements from illegal companies.“Sometimes newspapers publish advertisements placed by companies running illegal schemes to dupe the investors.The newspapers have a larger role to play in being watchdogs of investors and refuse such paid advertisements in the best interest of readers. Companies must deliver what they promise.”
Newspapers are now to determine whether or not MLM companies are legit? How’s that going to work when the regulating authorities don’t even have any guidelines to currently follow?
Ultimately if clear-cut guidelines are in place and Indian regulators have the policing powers required to take down scams targeting the Indian market, the problem of advertisements in newspapers should fix itself.
Asking newspapers to determine which companies are legit (purely on an advertising level) just seems silly. Any more so than the media having to investigate the legitimacy of any company they carry advertising for.
The problem lies with the companies themselves, not how and where they are marketed.