In order to get legal sanctity and recognition from both central and state government authorities, the Indian arm of global direct sellers like Tupperware, Amway, Oriflame and their lobby arm IDSA may soon approach the commerce ministry. The Rs 7,000-crore direct selling industry, with 18 national players, are pushing for a clear definition of “direct sellers” and distinction from multi-level marketing entities, including those dealing in money circulation schemes.
Sources said Amway representatives in the US are planning to meet commerce minister Anand Sharma, who is currently on an official visit to that country, to pursue the matter.
“We will prepare a strategy paper and approach the commerce ministry very soon. Our proposals of own set of strict guidelines for distinguishing genuine direct sellers from the rest are being studied by the finance ministry. We are hopeful that something positive may come out in a month’s time,” Chavi Hemanth, secretary-general of the Indian Direct Selling Association said.
However, government sources indicated that both the consumer affairs ministry and the department of financial services are against exclusion of direct selling entities such as Tupperware, Amway and others from the ambit of Prize, Chit Funds and Money Circulation (Banning) Act, 1978. Both are currently examining the link between illegal money-making schemes, including ponzi schemes, pyramid schemes and those promoted by the multi-level marketing firms.
Sources in the consumer affairs ministry are of the view that instead of a central regulator or a central law, these direct selling entities should be subjected to state-specific laws whereby each state comes out with its own regulations that would need to be followed by all, including the 18 members of the Indian Direct Selling Association (IDSA).
Even IDSA supports state-specific laws. So far, only Rajasthan and Kerala have brought out “guidelines” for direct sellers, but not a comprehensive law as sought by IDSA.
“They should not function like money chains or resort to tax evasion. Compulsory subscription or insurance would not be permitted at any stage,” said a senior official from Rajasthan. As per the guidelines in Rajasthan, consumers get an opportunity to examine samples before buying. The direct sellers would be required to provide full information on their products and distributors with salesmen having identity cards issued by a government agency.
IDSA has already proposed norms for their members such as minimum paid up capital/net worth of Rs 1 crore for the direct sellers, promoters having no prior conviction in any criminal offence, direct seller can quit business but will have to refund unsold salable inventory within 30 calendar days, no direct selling entity will require a direct seller to purchase any product or collect any membership fee as a condition precedent for enrolment among others.
As per the draft norm, no direct selling entity will require a direct seller to purchase any product or collect any membership fee as a condition precedent for enrolment, something which is widely reported in instances of money circulation schemes. Also, the direct selling entities will be required to maintain proper records of direct sellers, including but not limited to enrolment, termination, active status, earning etc.