In conversation with Digpu, Adv P M Mishra talks about how the Network Marketing Industry is being ruined by Ponzi Scheme Operators in India.

Ponzi Scheme Operators are ruining ‘Direct Selling Industry’ and ‘Network Marketing Industry’ in India that has huge potential in developing countries like India as per the research carried out by various agencies in the past. Post COVID-19, Direct Selling Industry is ready to play a major role in Employment generation directly and indirectly. For the expansion of small-scale industries and small service providers, Direct Sales Methodology is of great help as much funding is not required.

“Direct Selling Industry has a huge potential to create employment for youth”, says Adv P M Mishra. But unfortunately, People avoid Direct Sales as Direct Selling/ Multi-Level Marketing/ Network Marketing is misunderstood as the Ponzi scheme by the public. This is because some operators are running fraudulent schemes in the name of Helping Plan, Donation Plan, Loan Plan, Crowd Funding, Forex Trading, CryptoCurrency MLM, CryptoCurrency Mining MLM, Stock Market Investment plan, Click plan etc.

After the issue of Direct Selling Guidelines by Ministry of Consumer Affairs in 2016, all these scammers have devised new innovating ideas to loot common man. They form a company, arrange a few products and copy business plan of some existing XYZ company. Then they register the company with “Department of Consumer Affairs” and by showing their company as listed on Government website, claiming themselves legit, are able to easily sell their products to the common man. However, a few things are a matter of great concern:

1.So many companies are listed in the Consumer Affairs ministry website. Is it only a registration or the Department does some scrutiny of credentials of promoters or products as such?

2.How secure are the commission plans of these direct selling companies? Is it anyhow scrutinized and regulated by Department of Consumer Affairs?

As per Adv P M Mishra, “Government of India should consider implementing a procedure wherein any application for such registration is thoroughly scrutinized before allowing these firms to take undue advantage of Government Guidelines and start functioning.”

Few of his suggestions are –

1. Scrutinize Criminal and Financial Background of Directors of companies and preferably meeting with directors.
2. Close Scrutiny of Business Plan by qualified CAs.
3. Quality Report of Products or Services.
4. Genuine costing of Products & Services for public.
5. Details of network of branches and their operations.
6. Periodical renewal of approval for each product or service.
7. Detailed reporting of operations periodically with approved software.

Transparency in registration will bring back trust of public in Direct Selling Industry. Presently, even the most reputed companies are scared to launch their products and services by direct selling methodology due to its bad reputation.

“With the pandemic bringing many industries and businesses to the ground, its high time that people understand direct selling as a valid business model and make the most of it. However, there are still some insiders who misuse this industry to achieve their nefarious designs and exploit the public by then selling fake dreams”, says Adv PM Mishra.