Amway India: A grey area called direct selling

Jun 09 2014, 10:28 IST
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Amway India CEO William Pinckney was arrested by Andhra police on May 27, almost exactly a year after he was held under similar circumstances in Kerala. (PTI) Amway India CEO William Pinckney was arrested by Andhra police on May 27, almost exactly a year after he was held under similar circumstances in Kerala. (PTI)
SummaryFor Amway India chief William S Pinckney, there has been little respite since his sudden arrest.

easy money, or for the receipt of any money or valuable thing as the consideration for a promise to pay money, on any event or contingency relative or applicable to the enrolment of members into the scheme...” The clause “on any event or contingency relative or applicable to the enrolment of members etc” does not make a clear distinction on whether it can be applied to multilevel marketing schemes used by direct sellers.

Direct selling involves sellers at the top of the pyramid recruiting others below them, which makes it a multilevel marketing scheme. According to Ajay Khanna, chairman of Indian Direct Selling Association, a consensus on major provisions had almost been reached on the draft of a bill to amend the PCMC Act. However, a final push by the government to change the law did not come through.

Pinckney, who arrived in India in February 1998, is described by many in the direct-selling industry as one of its poster boys. FICCI has come out in support of Amway and said there was no criminality involved in the latest case which was in all likelihood the result of a dispute between Amway and a consumer.

On May 28, 2013, the Kerala police arrested Pinckney and two directors of the company in connection with a case filed in 2011 in Wayanad, for an alleged violation of the PCMC Act, though the three men had already been granted anticipatory bail on May 3 by the Kerala High Court over a different case filed in Kozhikode in 2012. The Kozhikode case was filed by one Visalakshi, who claimed she suffered losses after having bought Amway products worth Rs 3 lakh that she was unable to sell.

This time, Pinckney was arrested on the orders of the Kurnool district court in a case that goes back to 2006, when the Andhra Pradesh CID registered a criminal case against Amway. The company in turn approached the Andhra Pradesh High Court requesting a declaration that its scheme does not fall under provisions of the PCMC Act. A division bench of the high court held Amway’s scheme is an illegal money circulation scheme and fell within the “mischief of definition of money circulation scheme”. Amway tried to file a special leave petition in the Supreme Court, which was dismissed.

The dissonance in the Amway model and the Act as it stands today is evident. The company sells its products through members

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