Over the past few decades, companies such as Modicare, Tupperware, Quantum, Oriflame and Amway have brought the opportunities of direct selling to India. The direct sales model currently generates 35.8 percent of non-store retail sales, 4.41 percent of organized retail sales and 0.07 percent of the country’s GDP. As direct sellers have increased their impact on India’s economy, the country’s financial regulators have engaged in sustained debate concerning proper jurisdiction over multi-level marketing firms. Both the direct selling industry and government officials have expressed the need for reform to weed out any pyramid or other schemes and to establish clear guidelines around legitimate direct selling opportunities.
Renowned economist Bibek Debroy addresses the issue in a study entitled, “Direct Selling in India: Appropriate Regulation Is the Key.” The study calls for an amendment of India’s present legislation banning money circulation schemes to include a clear definition of direct selling, explicitly qualify direct selling as separate from money circulation schemes, and specify what qualifies as an illegal pyramid scheme.
The Wall Street Journal’s Livemint blog reports that a committee composed of the capital market regulator and the ministry of corporate affairs (MCA) is set to draft India’s first set of regulations for MLMs. An Amway spokesperson confirmed that “the direct selling industry has been meeting officials from the ministry of consumer affairs, corporate affairs, ministry of commerce and finance ministry, to provide regulatory clarity.” The MCA’s efforts focus on bringing a greater degree of clarity to India’s current legislation, as Debroy and others have advocated.
Read more on India’s steps toward regulatory reform here.