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‘Multi-level marketing companies con many to benefit few’

According to the MCA study MLM schemes are inherently money circulation schemes and sale of products is only a camouflage

New Delhi: Warning people against joining multi-level product marketing schemes, a government study said that such programmes are primarily meant to con individuals to the benefit of a few sitting at the top of pyramid, reports PTI.

The study conducted by the Ministry of Corporate Affairs concluded that "such schemes are inherently money circulation schemes and sale of products is only a camouflage...(and) voilative of the Prize Chits and Money Circulation Schemes (Banning Act) 1978."
Several multinational and Indian firms are operating multi-level marketing schemes in the country and require their members to bring in more members and also sell products.

According to the study, the products by multi-level marketing companies are "over-priced" to pay huge commissions to people sitting at the top of pyramid and earn exorbitant profits for the company.

"Such schemes enrich the company and the top of the pyramid participants at the cost of 90% of the participants who are at the bottom two levels," it said.

The study added that in the pyramid or multi-level marketing schemes 'product' "is only a way to disguise the real intention" and such schemes are primarily "a variant of the earlier money circulation schemes" without any products.

Such pyramid schemes of money circulation were common in 1960s to 80s but as the public, media and law makers became aware of the con game, the non-product pyramid schemes were abandoned by the conman. Pyramid schemes and chit funds are banned in India.

Most recently, multi-level marketing company Speak Asia Online and chit fund company Gold Quest International have come under the radar of investigation agencies.

The study further said that now the trend was to introduce sale of products to camouflage real intention and to give an air of legitimacy, deceive the regulatory law enforcement agencies, media and the public into accepting them as legitimate business.

"These pyramid schemes are so cleverly designed that unless a very meticulous investigation is done and the con game is properly understood, it would be difficult to establish the deceptive nature of the schemes," it said.

The main difference, it added, between direct sales ad pyramid sales is that in direct sales the person making the sales gets the maximum commission, while in pyramidal scheme the person at the top of the pyramid gets maximum commission.

"Such a compensation plan rewards enrolling more members down line rather than give incentives to sell directly to the consumers who are not interested in becoming members. The deceptive and fraudulent nature of such scheme is because very soon saturation is reached and more members cannot be enrolled," it said.

The scheme itself is a mathematical trick, the study pointed out, adding, the victims themselves are participants in the scheme.

"The scheme is inherently deceptive because mathematically it is not possible to create an endless chain in enrolment. Such schemes are extremely dangerous from society's point of view because to gullible public, the scheme looks very attractive. The opportunity of being self employed and earning money sitting at home by contacting family and friends appeal to most of the people," it said.

In April, Corporate Affairs Minister Veerappa Moily had said he has suggested to the Home Ministry to set up an SFIO-type special body to probe frauds by the multi-level marketing companies and chit funds in a time-bound manner.




5 years ago

Add Qnet...I lost a lot of money....

Chandan Das

5 years ago

The article is not showing up

Vikas Gupta

5 years ago

Please add INSTANT FOREX in the list too.


5 years ago

Amway has managed buy some press with the claim that they are not not like most MLM companies when in fact they are the biggest and the most fraudulent of all MLM outfits.

RBI measures fail to cheer up markets, rupee near 58 level

The much-awaited RBI measures to stem rupee's slide did not match market expectations amid rupee plunging close to 58 level


Mumbai/New Delhi: To arrest the rupee slide, the Reserve Bank of India (RBI) on Monday increased foreign institutional investors (FIIs) limit in government bonds by $5 billion to $20 billion, while allowing up to $10 billion from overseas borrowings by India Inc for refinancing rupee loan, reports PTI.

Long term investors like Sovereign Wealth Funds (SWFs), multilateral agencies, endowment funds, insurance funds, pension funds and foreign central banks would be allowed to invest in government debts up to $20 billion, RBI said in a notification.

The rupee, which breached the 57-level on 22nd June, opened in the positive zone against the dollar but soon after the RBI measures were announced it sharply fell to 57.92 levels. Similarly, the BSE benchmark Sensex, which had climbed to a seven- week high of 17,132 during the day, lost momentum and touched a low of 16,853 after RBI annoucement.

The decisions have been taken "in consultation with the government," RBI said, adding that they will widen foreign investor base for government securities (G-Secs).

"It has been decided to allow Indian companies in manufacturing and infrastructure sector and having foreign exchange earnings to avail of external commercial borrowing (ECB) for repayment of outstanding rupee loans towards capital expenditure and/or fresh rupee capital expenditure under approval route. The overall ceiling for such ECBs would be $10 billion," the central bank said.

Industry body, FICCI, however said the steps announced (by RBI) are minimal in nature. "The steps announced so far are probably minimal at this time but could lead to some inward capital flows if this is supported by stronger fundamentals. We were however hoping for a broad based set of strong actions as well as policy reforms that could have a positive bearing on the overall environment. Every delay in announcing such measures is only reducing their ultimate effectiveness and extending the weak phase of our economy," said RV Kanoria, president, FICCI.

The RBI further said the existing limit for investment by foreign institutional investors in G-Secs has been enhanced by $5 billion.

"This would take the overall limit for FII investment in G-Secs from $15 billion to $20 billion. The sub-limit of $10 billion (existing $5 billion with residual maturity of 5 years and additional limit of $5 billion) would have the residual maturity of three years," RBI said.

Also, the terms and conditions for the scheme for FII investment in infrastructure debt and the scheme for non- resident investment in Infrastructure Development Funds (IDFs) have been further rationalised in terms of lock-in period and residual maturity.

Further, the conditions for investment by individual foreign investors have been relaxed in Mutual Funds.

RBI said that qualified foreign investors (QFIs) can now invest in those mutual fund (MF) schemes that hold at least 25% of their assets in infrastructure sector under the current $3 billion sub-limit for investment in mutual funds related to infrastructure.

The liberalisation measures for capital account transactions, which have come into operations with immediate effect, besides increasing foreign fund inflows into the country are also likely to check slide of rupee against the US dollar.




5 years ago


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