Citizens' Issues
Kerala government’s guidelines in favour of MLMs says expert

While intention of the state government may be genuine, its new guidelines for direct selling companies will not curb the menace of MLMs but in fact would shield them

The guidelines being framed by the Kerala state government to distinguish a genuine direct selling company from fake one are grossly inadequate and misleading. According to an expert in reality, it (the guidelines) aims to protect the fake money multiplier companies and schemes. Kerala is trying to become the second state, after Manipur, to have separate guidelines for multi-level marketing (MLM) companies.
Robert FitzPatrcik, co-author of False Profits, the first book-length analysis of pyramid schemes and multi-level marketing, told Moneylife that, “The rules (being framed by Kerala government) noted are grossly inadequate and misleading and, I fear, will  result in the tragedy of  millions more people falling victim to pyramid frauds that are disguised to look like legitimate sales companies. By prohibiting requirements to recruit others or to buy products, and by requiring that all payment be based on a purchase, the rule has "validated" a pyramid scheme that is disguised as a sales company, but, beneath the disguise, is perpetrating a blatant fraud.”

Mr FitzPatrick is also founder and president of ‘Pyramid Scheme Alert’ and is based in the US.
The Kerala government had set up a high-level committee headed by the chief secretary following the complaints of few direct selling firms, calling themselves genuine, which were affected by the drive of the investigating agencies to weed out ‘get-rich-quick’ companies. The guidelines were approved by the state cabinet on 12th September 2011.

According these guidelines, any direct selling company would be considered ‘valid’ if it does not directly ask seller or a consumer to purchase any product or collect membership fees as a condition precedent for enrolment. The compensation should be based solely on the quantum of goods and services. These entities would also require giving full refund to consumers who have returned the unsatisfied goods within 30 days.
Mr FitzPatrick says that either handing over cash or purchasing products, these schemes still remain fraudulent. “The fraud lies in the false and misleading income proposition, not in the official requirements regarding products and purchases. It matter little if a person is defrauded by handing over cash or by purchasing products. If the fraud that induced the payment or the purchase are the same, and the net effect is the same -- huge losses -- then the policies protected no one. Indeed they achieved the opposite by giving protection to the scams.”

Apart from legally registering and filling necessary tax returns mandated under law, according to the guideline, these direct selling entities should also have a valid license or a registered trademark identifying its promoter, goods and services. They should also maintain websites with complete details of the company, and other such as price, terms and condition of its products/ services.

However Mr FitzPatrick says that the new policies of this state would legitimize a gross unfair and deceptive marketing practice. “Allowing the endless chain promise to drive purchases corrupts and pollutes the market place. It lures millions to join the schemes in the desperate need, not of the products, but of income. Yet, these schemes, by their design, cannot offer income to any but a few. To all others, the schemes, by design, cause financial losses.”

He adds, “For this income promise to be valid, the chain of salespeople would have to extend forever, which obviously it cannot. Those who join later will not be able to gain the income because they will not be able to enroll enough new members. So the harm of the pyramid scheme occurs, just as if the money were directly transferred rather than through product purchases.”

In India there are various direct selling firms such as Amway, Herbalife, Tupperware have huge market base and membership with turnover amounting to several crore.
The sales people, according to the directive, should carry their identity card issued by the government while selling the product. It should also furnish full details of the order date, amount, and bill to the consumer. Interestingly, the direct seller should take prior permission or appointment of the person to whom the goods or services are intended to be sold.

It is important to note that, apart from Kerala, other states like Manipur, Rajasthan, Maharashtra and Andhra Pradesh are keeping tight vigil on ponzi schemes.

Moneylife had reported that Kerala, said to be the country’s most literate state, is flooded with numerous ‘get-rich-quick’ or ‘earn-huge-return’ schemes offered by money swindlers. While the state director general of police has admitted noticing frauds amounting to over Rs1,000 crore, the worrying factor is that even a few policemen have been found to be involved in these MLM schemes.

Mr FitzPatrick says that actual fraud in MLM is the deceptive promise. “The fraud of pyramid scheme is not in whether money changes hands directly or throughout the vehicle of a purchase. The fraud is in the deceptive promise which cannot be fulfilled. The rule would not prohibit the use of this "endless chain" lie. It would, in fact, validate it by merely requiring that it assume a disguise and enact meaningless "policies" that have no effect in practice.”



shyam sundar

5 years ago

The glaring example is the transfer of all the IPS officers who had filed criminal cases against the fraudulent companies for indulging in money circulation schemes.
It is a shameful act on part of the Kerala Government for shifting all the honest officers.
It shows that the Government is actually supporting the criminals.



In Reply to shyam sundar 5 years ago


After all it is a Congress Government that is ruling Kerala now. What more can we expect?

David Brear

5 years ago

'MLM income opportunity' fraud, is a form of self-perpetuating ritual belief system, instigated for the clandestine purpose of human exploitation. In other words, the 'MLM' victims' belief is genuine, but what they believe in (i.e. a lawful means to achieve 'financial freedom' by converting others, etc. ad infinitum), is false. Any less-than intellectually-rigorous legislation which fails to take account of the quantifiable evidence (i.e. the effectively total lack of income-tax payments by so-called 'MLM direct sellers') is, therefore, fundamentally flawed and dangerous. Self-evidently, the de facto agents of 'MLM' racketeers (i.e. the officers of the so-called Indian Direct Selling Association) have been allowed to write their de facto bosses' own inaccurate, misleading and toothless 'guidelines' in Kerala. This ongoing attempt by foreign based 'MLM' racketeers to subvert the democratic process and rule of law in India in order to exploit millions of Indian citizens, is a far more serious crime than any mere fraud.


5 years ago

The intention of the Kerala government was not genuine. It is increasingly become clear that the guidelines was framed only to protect the MLM swindlers.

A company named 'penta world India' on Janaury 1, 2012 advertised in a local vernacular that they would abide by the guidelines and continue with their business !!!. Please note that many criminals cases are pending against the functionaries of this company and offices were closed down by the Police. The Police say they were doing money circulation business.

P M Ravindran

5 years ago

Nothing surprising here. A govt that survives by selling liquor and lottery tickets only (apart from polluting the environment in general and fresh water sources in particular!) cannot be expected to do anything better!

SC asks TRAI on mobile guidelines for last time

The apex court said it will pass some directions if the TRAI fails to come out with its suggestions

New Delhi: The Supreme Court on Monday gave last chance to Telecom Regulatory Authority of India (TRAI) to give its suggestions on the guidelines framed by the Union government for tightening the verification process for mobile phone connections, reports PTI.

The apex court also said it will pass some directions if the TRAI fails to come out with its suggestions.

"We now need TRAI's suggestions. We are giving them last opportunity and if they do not come out with the suggestions then we will pass some directions," a bench headed by Chief Justice SH Kapadia said.

At the outset, Additional Solicitor General Gaurab Banerji asked the bench to give some more time to place before it the suggestions of the TRAI.

The court was hearing a public interest litigation (PIL) seeking a direction for strictly following the verification of consumers before providing connections for mobile phones.

The Kolkata-based petitioner, Avishek Goenka, submitted that verification norms were necessary in view of the recent probe in terror attacks pointing towards the use of mobile phones in which the connections were provided on the basis of fake documents.

He referred to the reports stating that both in Mumbai and Delhi blasts, the probe had reached to the conclusion that the cellular phones used by the accused were operating on the bogus SIM cards.

However, the bench, also comprising justices AK Patnaik and Swatanter Kumar, was of the view that waiting for TRAI's suggestions would be appropriate as the courts cannot assume the role of regulator.

"Our difficulty is that we are not regulator," the bench said and added that "whether the TRAI comes out with suggestions or not next time, we will pass some directions".




5 years ago

Bogus Sim cards - the issuer should be shut down - simple straight forward solution, on grounds of being presumed accomplice to the terror / bombings.
Automatic controls shall come into place by these service providers.

Venus Remedies gets patent for anti-bacterial drug from Japan

The patent grant for Vancoplus is valid up to February 2026 and Venus said it aims to launch the drug in Japan in early 2015

New Delhi: Pharma company Venus Remedies on Monday said it has received patent approval from the Japanese health regulator for Vancoplus, which is used in treating bacterial resistance, reports PTI.

The company has received patent grant for Vancoplus from Japan Patent Office (JPO), Venus Remedies said in a statement.

The patent grant for Vancoplus is valid up to February 2026, the company said, adding that the approval is the company's first in the Japanese market.

The company said it aims to launch Vancoplus in Japan in early 2015. The product is at present available in emerging markets and is under registration in many countries.

"The market size of MRSA in the world accounts for $900 million. Presently, it is growing with CAGR of 4.8%, which is estimated to reach to $1.2 billion by 2017," Venus Remedies said.

The company also intends to out-license Vancoplus to major pharmaceutical players, it added.

Commenting on the development, Manu Chaudhary, Venus Remedies' Joint Managing Director and director for Research, said: "With this patent grant for Vancoplus from Japan, which has a growing elderly population and high health expenditure with second largest per capita spending in the Asia Pacific region, the company is hopeful of gaining a fair share of the MRSA market."

Venus Remedies has already received patent for Vancoplus from US, South Africa, New Zealand and Ukraine.


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