The Indian arm of US-based direct selling firm, Amway, has asked the Department of Industrial Policy and Promotion (DIPP) to clearly define multi-level marketing and direct selling in the consolidated foreign direct investment (FDI) policy so that there is no confusion on the legality of foreign companies operating in India in the sector.

The Indian Direct Selling Association, that represents 18 direct selling companies including Amway, Oriflame and Tupperware, has also made a representation to the DIPP, on the issue.

The policy talks about various forms of selling, including wholesale, single-brand retail and multi-brand retail, but is silent on direct selling, which is often used synonymously with multi-level marketing.

The companies are seeking clarity, as they do not want to be held guilty for violation of Foreign Exchange Management Act rules and other fraudulent activities.

“Amway and some other direct selling companies want that direct selling should also be bracketed under retail, defined clearly and included in the FDI policy. They want their operations to be 100 per cent legalised,” a DIPP official told Business Line .

When Amway started its operations in India in the late nineties, the FDI policy was not well established and it was not really clear under what category they were operating, the official added.

Direct sellers are also seeking to distinguish direct selling from multi-level marketing.

Amway, when contacted, denied having made a representation to the Government but added that representations were made by IDSA.

“Whenever there is a financial scam of any sort, regulators are quick to include multi-level marketers into this list, as there is an assumption that direct sellers are MLMs. We are a direct selling FMCG. Multi-level marketing needs to be defined. Direct selling needs to be defined,” Rajat Banerji, Head, Corporate Affairs, Amway India, said.

Meanwhile, Chavi Hemanth, Secretary General, IDSA, said the body had approached DIPP about two years ago, as it was not clear whether direct selling polices came under the Foreign Investment Promotion Board or DIPP.

Hemanth said IDSA had also submitted draft legislation for the direct selling industry to the Ministries concerned, including Consumer Affairs, Corporate Affairs and Finance. The draft is based on the direct selling laws prevalent in countries including Singapore, Malaysia, Vietnam, Hong Kong, the US, the UK and Japan.

In multi-level marketing companies, a sales person gets paid not only for what he sells directly to consumers but also on sales made by the members he recruits as his down line. In some cases, a pyramid structure is created where a distributor gets paid for recruiting another member in the scheme without any sale of products.

The direct selling industry had reported a turnover of Rs 6,385 crore for 2011-12 registering a 22 per cent growth over last year.

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