Legislation Key for Survival of Direct Selling/Multi-Level Marketing Industry in India

MUMBAI, January 6, 2014 /PRNewswire/ --

QNET Clarifies Allegations With Regards to Mumbai EOW Investigations in India

QNET today welcomed ASSOCHAM's move clearly indicating the urgent need for legislation/guideline that will help the state governments and the police authorities distinguish between genuine Direct Selling/Multi-Level Marketing companies from fraudulent Direct Selling Pyramids or PONZI Schemes. In a letter addressed to the Finance Minister, Consumer Affairs Minister, Minister for Corporate Affairs and Home Minister, ASSOCHAM highlighted the immediate need for the government to act for the interest of the citizen-consumer, distributors and genuine DS/MLM companies in India.

ASSOCHAM reasoned that the confusion is possibly due to RBI sensitizing the state governments that Multi-Level Marketing (MLM) schemes fall under the PCMCS (Banning) Act 1978 but not elucidating clearly that at the operating level violation takes place only when a company collects deposit through MLM schemes. The gulf of difference between companies selling products and those collecting deposits was not clarified. ASSOCHAM said that this difference needs to be specified so that Direct Selling companies do not face undue harassment.

Speaking on the occasion, Mr. Ajay Chanam, official spokesperson for QNET in India said, "The Direct Selling or Multi-level Marketing (DS/MLM) industry took the world by storm offering a radically innovative model of leveraging word-of-mouth marketing, cutting overhead costs of store maintenance and development, product and brand promotion, sales force etc., and instead, offering these typical overhead costs as commission to its distributors. The industry is immensely successful in providing entrepreneurship opportunities to millions of individuals with an estimated over 7 crore such entrepreneurs in India who, leveraging this opportunity, started their own businesses selling products manufactured or promoted by DSCs. On the other hand, product manufacturing companies which have smaller or zero marketing budgets find the DS/MLM industry a viable alternative platform to launch products - transitioning to traditional retails formats once these products achieve some level of critical mass in terms of demand. Most countries have formulated clear legislative frameworks and clear guidelines protecting both the DSCs and consumers in the process. Citizens have clearly benefited through the self-employment opportunity offered by this industry and China - one of the recent countries in Asia to have ushered a clear legislative framework for the industry having provided licenses to 38 DS/MLM companies is one of the largest markets today."

"QNET through its proprietary e-commerce platform offers this business opportunity to people residing in over 100 countries while adhering to the highest possible, globally accepted, best standards. Strict codes of conduct exist and policies and procedures are reinforced by training so that each one of our many thousand Independent Representatives [IRs] understand the rules governing product sales and abide by the ethical codes of business practice published and promoted by the company. Whenever informed of any regulations been violated we investigate these thoroughly. In appropriate cases, stern action is taken resulting in termination of the IR," Ajay Chanam added.

QNET currently faces investigations based on one complainant who never actually bought any product/service from the company, but due vulnerability posed to DS/MLM companies in this situation, managed to cripple the entire business.

Facts about the allegations around QNET in India

In April 2013, Parmeet Kaur, wife of Gurupreet Singh Anand, filed a complaint against 3 IRs which affected QNET and its local franchisee Vihaan Direct Selling (India) Pvt. Ltd. ['Vihaan'] at Oshiwara Police Station in Mumbai.  

The complaint alleged that three representatives of Vihaan sold Parmeet Kaur a bio-disc which would be able to 'help her son's brain damage'. The three representatives deny misrepresenting any product to Parmeet Kaur as this would be in breach of the agreement they signed with Vihaan. Company records indicate that Parmeet Kaur did not agree to purchase a bio-disc but signed up for an educational course. This was cancelled by her husband along with the cheque.

The three representatives who allegedly misrepresented matters were not amongst those subsequently arrested for fraud.

The original complaint made by Parmeet Kaur was withdrawn on 18^th May 2013. The fact that Parmeet Kaur's cheque to pay for the product was cancelled was cited in the police's closing report which clearly shows that Parmeet Kaur was not a victim and under the circumstances no crime was committed.

On 16^th August 2013 (3 months after the original complaint was deemed not to be a crime) the complaint was re-filed by Parmeet Kaur's husband, Gurupreet Singh Anand. This is in spite of the fact that no money changed hands between Parmeet Kaur and Vihaan and there has been no other change in circumstances. Gurupreet Singh Anand confirmed in an interview that he cancelled the purchase before any product (as he claims) was received.  This matter was recorded as a 'No Crime' by the Police when first reported and there has been no further change in this position. Independent legal review from various top Senior Advocates in Mumbai confirms there is no evidence of any crime.

On 16^thAugust 2013, as a result of this complaint by Anand, Vihaan's office in Bangalore was visited by police officers from the EOW Mumbai.  Due absence of a legislative framework which makes the task of differentiating genuine Direct Selling Multi-Level Marketing  companies from fraudulent Ponzi schemes that operate in its garb impossible , the EOW seized several million dollars of assets and subsequently arrested nine IR's, including two couples, and held without charge for weeks.  As of 9^th December, 2013, all eight IRs were released immediately on bail as soon the judge was able to hear their plea for bail.

"Those who misled the police or conspired and promoted the arrests, the freezing of substantial funds and assets based on a transaction, which didn't actually take place, will be subject of both criminal and civil complaints and litigation, the nature of which is presently under review," said Ajay Chanam, Spokesperson for QNET in India.

Note to Editors:

• QNET is a leading direct selling company, offering meaningful products in diverse markets. QNET works with people in more than 100 countries.
• QNET has always complied with local regulations in any country it has operated in and contributes to numerous philanthropic activities.
• QNET's grass-roots business model enables ordinary people from all walks of life to start their own business with minimal overhead. With hard work and dedication, QNET distributors, known as Independent Representatives (IRs) have the opportunity to become economically self-sufficient, raising the standard of life for their families and communities.
• QNET currently operates in India through Vihaan Direct Selling India Pvt. Ltd.
• QNET operates under a strict code of conduct: http://www.QNETindia.in/en/footer/code_of_ethics/
• QNET has a clear Earnings and Income Disclaimer: http://www.QNETindia.in/en/footer/earnings_and_income_disclaimer/

About QNET:

As a prominent Asian direct selling company, QNET provides a wide range of life enhancing products that are offered through its proprietary e-commerce platform to customers and distributors in more than 100 countries. The company also has some 25 offices and agencies worldwide, and more than 50 stockists, apart from localized operations or franchisees in a number of countries. In India, QNET operates through a franchisee company - Vihaan Direct Selling India Pvt. Ltd., based out of Bangalore. 

Established in Hong Kong in 1998, QNET is a member of the Direct Selling Association of Malaysia, Singapore, and the Philippines. QNET is also a part of the Hong Kong Health Food Association and the Health Supplements Industry Association of Singapore among others.

QNET is active in sports sponsorships around the world, including Formula 1, football, badminton and more, due to the company's strong belief that the drive, passion and teamwork of sports mirrors that of QNET.

For more information, please visit the QNET website at http://www.qnetindia.in.

About Vihaan Direct Selling India Pvt. Ltd.:

Vihaan Direct Selling India Pvt. Ltd. is a company headquartered in Bangalore (India) incorporated September 2011 with the objective of marketing all kinds of consumable products and services throughout India, utilizing all forms of marketing including direct online, referral and multi-level selling. Since inception till March 2013, Vihaan Direct Selling was a sub-franchisee of QNET responsible for product delivery, commissions' payment, warehouse and physical product delivery management, customer care and L1 after-sales product support. From April 2013 onwards, Vihaan Direct Selling entered into a direct agreement with QNET for managing QNET's Indian direct selling business.

Vihaan is a member of ASSOCHAM (The Associated Chambers of Commerce and Industry of India).

Primary Media Contact: Vineet Madhukar, [email protected], 91-96-50972555

Secondary Media Contact: Rohit Varier, [email protected], 91-98-19403119