The Indian Direct Selling Association (IDSA) has demanded regulatory framework to keep fraudulent companies at bay and protect interests of the industry.

This demand found expression in the ‘discussion forum on direct selling’ organised here on Thursday by the association.

FRAUD SCHEMES

PHD Chambers of Commerce and Industry and Associated Chambers of Commerce and Industry in India were co-organisers.

Among those who spoke included Chavi Hemanth, secretary-general and P. Devdas, Treasurer, IDSA; S.P. Sharma, chief economist, PHD Chambers; and D. S. Rajora, senior director, Assocham.

Chavi Hemanth stressed the need for proper legislation to differentiate fraudulent financial pyramid schemes from direct selling/multi-level marketing (MLM) business.

Fraudulent money circulation schemes operating under the garb of direct selling/multi-level marketing opportunities have been duping people.

“Companies offering remuneration based on recruitment are a sure indication of a money circulation and fraudulent scheme,” she said.

A. Sengupta, vice-chairman, IDSA, said there was an emergent need for operational clarity between direct selling/MLM business and fraudulent financial pyramid schemes.

The concept of MLM compensation structure brings direct sellers in a principal-to-principal contract with the direct selling entity.

STATE SUBJECT

The sales system differs from a prize chits scheme both in form and function, he said.

S.P. Sharma said the industry has registered 27 per cent growth to Rs 5,230 crore in 2010-11 turnover — 28 per cent in organised and 17 per cent in unorganised segments.

D. S. Rajora said direct selling fell under the purview of State legislation but was governed by a large number of ministries and departments at the Centre, State and local levels.

The multiplicity of regulatory bodies has resulted in multiple regulations governing this sector. These should be streamlined for the smooth performance of this sector.

vinson.kurian@thehindu.co.in

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