India’s Chamber of Commerce Seeks MLM Legislation
Sensing the need to regularise direct selling, the Federation of Indian Chamber of Commerce and Industry (FICCI) has urged the government to provide clarity. Shilpa Gupta, Head – Retail, FMCG, Luxury Gems & Jewellery, Direct Selling, FICCI, shares her views about the potential of this multi-level marketing model and the steps to regularise it.
How do you assess Direct Selling in India?
Direct selling is not new to India. Around the year 1995, many companies started with it; Amway was one of them. But the misfortune is that we only understand direct selling on the basis of one or two companies. In fact, there are so many companies in India today that are following this business model. In India, Direct Selling is a very old model of sales. For example, a cycle rickshaw peddler in the early days, coming to our doorstep to sell things was direct selling. However, with the application of the Prize Chits and Money Circulation (Banning) Act 1978, Direct Selling as an industry has been severely affected. Hence, we need to have industry specific regulations for good governance and operations.
What are the challenges faced by Direct Sellers and how can they be addressed?
There are multiple layers of direct sellers in the country. Those who are new to the business tend to face challenges due to the negative perception of the industry. Then there is the problem of fly-by-night operators who claim to offer a direct selling opportunity but end up cheating the customer. These things add to the reputation challenges faced by the industry, leaving the consumer confused about which is a legitimate direct selling company and which is a scam.
How is FICCI contributing towards the process of regulating this segment?
FICCI has prepared guidelines for Indian states, which can actually act as a model guideline. States like Kerala and Rajasthan have already come up with their own guidelines. However, state governments should take feedback from industry organisations to collectively formulate a set of consistent guidelines that are compliant and abidable. The main purpose is to ensure that pyramiding and scam companies are curbed and genuine businesses do not get hurt.
Is there any method to channelise it?
Sometimes, people in direct selling end up over-selling and over promising on things that cannot be delivered, in order to close the sale. This is what leads to situations that give rise to the negative perception of ‘scam’. This type of over-enthusiasm needs to be kept in check by the companies. This is why it is important to regulate the industry because the guidelines will cover this.
Modicare, Amway, Tupperware, Oriflame and Avon are just a few of the players. More than 7,000 companies are registered under the direct selling model involving almost six million people in India. If that is the kind of population involved, the govt needs to give this industry some legitimacy.
What measures are you suggesting to curb fraudulent schemes?
There are a plethora of things we can recommend. To begin with, if we ask a company wanting to operate in the direct selling space to submit a capital amount to the Reserve Bank of India or the State government where they are based, this will ensure that the operator cannot just run away with the consumers’ money.
What is the role of FICCI in the Direct Selling industry in India?
We are a policy advocator. We can give companies the right framework within which they should operate and act as facilitators between them and the right people in the government for specific queries.