Screws on direct selling companies like Amway: Government bans pyramid and money circulation scheme, will not be able to sell products through networking The central government on Tuesday banned the pyramid and money circulation scheme of direct selling companies like Amway, Oriflame and Tupperware. Direct selling means selling goods directly to the customers.
Whereas pyramid scheme means network marketing. The Consumer Protection (Direct Selling) Rules 2021 have been notified by the Ministry of Consumer Affairs on Tuesday. Companies will have to comply with the new rules within 90 days.
Pyramid scheme and direct selling sound similar, but the difference lies in the product. In direct selling, money is given to buy the product, and in the pyramid, scheme money is asked in the name of a joining fee. The notified rules state that the state governments will have to put in place a system to monitor the activities of direct selling companies.
Apart from direct selling companies, sellers selling goods directly to customers on e-commerce platforms will also come under the purview of the rules. A pyramid scheme is a type of multi-layered network. In this scheme, one person joins other persons.
On adding a new person, he gets some benefit directly or indirectly. In this scheme, money-circulation means money is rotated, in which the old people get the money of the newly joined people. People at the bottom of the pyramid often have to bear losses.
A pyramid scheme is banned in most countries including India. But, these companies do not circulate money directly but do money circulation through their products. Because of this, the government has decided to ban it.