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.

who are called Amway Business Owners. The allegation is that when the business owners are not able to sell their products, they buy these themselves to achieve a level of sales for higher incentives. This is called “inventory loading”.

Behl refuted the allegation and said Amway has safeguards to prevent this. “Anyone down the chain automatically gets disqualified if he indulges in inventory loading,” he told The Indian Express.

The WORRIES

Direct-selling firms have started to cut their Indian exposure. Last year, US-headquartered brand Mary Kay quit India citing “regulatory concerns” and “poor sales”. Earlier this month, HUL chairman Harish Manwani, in the company’s annual report, noted that 2013-14 had been “extremely challenging” due to “ambiguity on acceptable norms for direct selling in India” and said the company is “reviewing” the strategy for this business.

Behl has maintained a brave face. “We are committed to this (Indian) market. We are hopeful about working with the new government to find a long-term solution to this issue,” he said. India is one of the top 10 markets by sales for Amway, with a range that includes Glister toothpaste and Nutrilite nutrition supplement. The current direct-selling market in India is estimated to be worth Rs 7,200 crore, with Amway alone accounting for sales of Rs 2,169 crore.

“If there is a consumer complaint, there are consumer redress systems in place. But arresting the CEO without any trial or conviction is baffling,” Behl said Amway is lobbying at various levels, including seeking a meeting with Finance Minister Arun Jaitley. But with judicial relief elusive, on Friday, Amway president Doug DeVos, in a video message for the Indian market, made a dramatic appeal to Prime Minster Narendra Modi, seeking his government’s help in the release of the company’s India head.

But till the law stands the way it is, any reprieve for embattled Amway and other direct-selling firms could at best be short-term relief.

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