The Regulation Of Multi-Level Marketing Companies: A Comparative Analysis Of Legislation In India An
- IJLLR Journal
- May 8, 2022
- 2 min read
The Regulation Of Multi-Level Marketing Companies: A Comparative Analysis Of Legislation In India And The United States
Gina Asha Lewis, BBA LLB (Hons), Christ (Deemed to be) University
ABSTRACT
Multi-level marketing companies, sometimes referred to as direct sales companies, network marketing companies, and affiliate marketing companies, are a type of company that eschews retail selling in favour of a network of independent salespeople who recruit other people to work under them. These salespeople are highly incentivized to recruit other people rather than focus on sales, and receive commissions for the same. These companies are understood as being distinct from pyramid schemes, by virtue of the existence of a product or service that is sold by the company.
However, the business model followed by these companies is not guaranteed to grant the salesforce a sustainable source of income, and have historically been largely unregulated in India despite the fact that the majority of salespeople in multi-level marketing companies do not earn an adequate income.
These companies need to be tightly regulated to protect their salesforce. Multi-level marketing companies were previously regulated by the Direct Selling Regulations, 2016, published by the Ministry of Consumer Affairs, Food & Public Distribution, and by the Prize Chits and Money Circulation Schemes (Banning) Act, 1978. However, these regulations were not sufficient to regulate multi-level marketing companies, and as such, they still largely operate outside the confines of the law. The Consumer Protection (Direct Selling) Rules, 2021, came into effect recently, and will supersede these laws as the primary regulatory framework for the multi-level marketing industry.
In this paper, the author will analyse the existing legislative framework for regulation of multi-level marketing companies in India and compare it with the legislation that exists in the United States, in order to determine if the existing legislation in India is adequate or not.
Keywords: Multi-level marketing companies, pyramid schemes, consumer protection.
