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Direct Selling News - Post Amway, direct sellers seek separate policy : IDSA

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CHENNAI, MARCH 30Trade bodies and consumers’ associations have urged the Central Government to bring in a policy framework for direct selling business.
The recent arrest of William Pinckney, CEO of Amway India, by the Andhra Pradesh police is unfortunate and highlights the need to define the business in the provisions of the Prize Chits and Money Circulation Scheme Banning Act 1978, says Bejon Misra, former Chairman of the Consumer Coordination Council and international consumer policy expert. This, he says, will ensure that direct selling companies are not penalised, as they do not sell financial products.

Misra says the Government must immediately pass an ordinance to protect the genuine direct selling companies and subsequently enact an exclusive law to protect the interests of consumers who use the products of such companies.
Ajay Khanna, Chairman of India Direct Selling Association and Country Manager, Herbalife (another direct-selling FMCG company), argues that there is a clash between pyramid / Ponzi schemes and the direct selling industry. Direct selling differs both in form and function from such fraudulent schemes. The Prize Chits and Money Circulation law was formed for financial establishments. Direct selling should not be covered under its purview as it is a trade and commerce activity.
No definition
Mohan R. Lavi, Member, Ficci Sub-Committee on Direct Selling, said direct selling has not been defined in any Act.
Because of this, other Acts (such as the Prize Chit and Money Circulation Act) are being misinterpreted and applied to such cases. This, he said, is unfortunate as the PCMC Act is primarily concerned with distribution of monies while in the case of Amway there are underlying products involved. I do not see money being circulated amongst Amway members without the sale of an underlying product, he said.       

NEW DELHI: The Indian Direct Sellers Association (IDSA), an autonomous self-regulatory body for direct-selling companies in India, has called for an amendment to the Prize Chits & Money Circulation (Banning) (PCMC) Act, 1978, under which the chief executive of Amway India, William Pinckney, has recently been arrested.
The IDSA wants the government to exclude the direct-selling segment from the PCMC Banning Act and differentiate it from pyramid and ponzi schemes, Chavi Hemanth, Secretary General, said at a news conference here.

"Direct selling differs both in form and function from these fraudulent (pyramid and ponzi) schemes. The PCMC Banning Act, 1978 was formed for financial establishments and direct selling should not be covered under its purview as it is a trade and commerce activity," she said, while blaming a lack of definitional and operational clarity in rules for the recent issues involving Amway.
Pinckney was recently arrested by Hyderabad Police under the PCMC Banning Act following a consumer complaint. He had earlier been arrested by Kerala Police as well over a similar issue. Amway has denied any wrongdoing, saying that it "has always followed law of the land, fully cooperated in all ongoing investigations and has been responsive to queries and documentation".
"Prima facie what can be made out, it is quite an unfair action," a member of the IDSA present at the press briefing said on Pinckney's arrest. "Some kind of nexus down the line seems to be there. Because the way the matter has transformed itself over the last few days where 10 FIRs have been filed one after the other, there seems to be some kind of vindictiveness involved in an attempt to pursue this case."
According to him, such activities are concentrated only in a few South Indian states, and police in any other states have found any irregularities in the company's operations.
South India is the biggest market for direct selling in India, according to IDSA statistics. But the share of the region in the total market has fallen to 30% in 2012-13 from 38% in 2011-12. At the same time, direct selling in North India has recorded 33% growth.
If authorities bring in appropriate policies, the IDSA expects the India market to grow at 20% a year, Hemanth said.
According to her, direct selling has the potential to become a Rs 30,000-crore market by 2019-20. The current market is estimated to be worth Rs 7,200 crore, with Amway accounting for Rs 2,100 crore of that, according to the Federation of Indian Chambers of Commerce and Industry.
Currently there are about 60 lakh direct sellers in the country. Direct selling companies registered with the IDSA, including Amway, paid Rs 986 crore in taxes in 2012-13, compared with Rs 821 crore in the previous fiscal year.
According to IDSA Chairman Ajay Khanna, a consensus on major provisions had almost been reached on a draft of a bill to amend the PCMC Banning Act.  Source -

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