In some good news for Amway India and other direct selling companies, it’s been reported that –
“An inter-ministerial committee is expected to come out with regulatory guidelines for direct selling companies by the end of this month”
Amway India and other companies in the market have been suffering from a lack of clear guidelines and the actions of some misguided anti-mlm zealots, particularly in Andhra Pradesh. Amway has been working hard to get clear laws in place. Hopefully things improve!
Back in 2007/2008 Amway in North America (then known as Quixtar) was involved in a deal of controversy after terminating several Diamonds associated with the organisation TEAM, led primarily by Orrin Woodward and Chris Brady. Eventually TEAM and many associated Diamonds joined another MLM company, MonaVie. There were then various legal battles between all parties over this, involving disputes of anti-Amway bloggers, stealing of corporate secrets, contract violations etc etc etc.
At the time these Diamonds were moving many in their groups to MonaVie, there were a lot of comments on this blog and elsewhere by people claiming that Amway was abandoning their distributors, changing polices, and would be opening stores, allowing their products to be sold in other retail outlets, and generally competing unfairly with the field. All of this was rubbish. What Amway has been doing around the world (though, ironically enough, not in the US) is opening up business centers to support the distributors. Some of these also act as retail outlets, but ultimately the PV and profit goes back to IBOs as usual. In my opinion these have been great innovations.
One place where Amway has been aggressively doing this is in India, with the opening of a large number of pickup locations where distributors can place orders and pickup products. It fits in well with the nature of India and seem to be working well. This week though, Times of India reports on a number of Diamonds who have stated they are leaving Amway, claiming rewards aren’t good enough and the company is focusing on showrooms and products instead of (believe it or not!) just recruiting people. Comments left on that site, and also this site, have further claimed that Amway India was going to be selling products through retail outlets and were abandoning distributors.
It all sounds awfully familiar, and low and behold … some Amway Indian Diamonds , lead by Sajeev Nair, are now loudly promoting their move to MonaVie India, just like TEAM did in North America.
This isn’t all that is familiar however. Back before the TEAM affiliated IBOs all left Amway (and there were reportedly hundreds of thousands), Amway was the subject of many complaints on the internet, people complaining of deceptive practices, hype, excessive pressure to spend money on “tools” etc etc. Since 2008 the emergence of new Amway critics on the internet has pretty much dried up. There’s a handful of diehard blogs (many run by the same person), but not really anything “new”. On the other hand, commentary from former distributors and others criticising MonaVie and MonaVie leaderslike Woodward for deceptive tactics has proliferated, with even a once anti-Amway blog like Amthrax now pretty much dedicated to anti-MonaVie commentary. Given Amway grew in sales last year by almost as much as MonaVie did total ($800M vs $854M) this can’t be attributed to MonaVie being more successful and attracting more attention. It appears that many of the tactics that helped contribute to these people getting kicked out of Amway were simply transferred to MonaVie, and the criticism has followed.
So how does this all connect to Amway India? Well, several times over the past months, a few visitors from India have left comments on The Truth About Amway regarding an Amway group called “Team One”, operating heavily in the Indian state of Kerala. The comments have complained about deceptive practices, excessive pressure to spend money on “tools” etc etc. All the same types of complaints we used to read about Amway North America, and which have diminished considerably since the TEAM dispute. I looked into Team One, and funnily enough it’s run by Sajeev Nair, the very same Double Diamond who says he’s now moving to MonaVie.
So, just like 2008 in North America, we have a large group of distributors, apparently the source of a number complaints, deciding to leave Amway for MonaVie and spreading a number of falsehoods about Amway as they go.
Amway North America suffered for a year or two from the TEAM exodus, but is now going from strength to strength (double digit growth in the past year) and is generating virtually no complaints about bad practices. Sajeev Nair – it may hurt for a bit, but I suspect Amway India won’t miss you. All the best with MonaVie.
As per my previous post Amway India has been having challenges in that country with some poorly worded laws and a lack of regulation for the direct selling industry. Amway is implementing some changes from November 1, including removing all joining fees. The changes were a response to the Indian state of Kerala issuing some guidelines for direct selling firms. This is a great step forward for the industry in India! The guidelines are a prelude to proper legislation, which will hopefully be implemented nationwide.
Definitions
1. Direct selling
Direct selling means marketing of consumer products/services directly to the consumers generally in their homes or homes of others, at their work place and other places away from the permanent retail locations, usually through explanation or demonstration of the products by a direct seller or by mail order sales.
2. Direct selling Entity
Direct selling Entity means a business entity which sells or markets products with its trademark or services mark or nay other identifying mark through a direct selling individual or organisation .
3. Direct seller
Direct seller means a person who is a member of a distribution system of the direct selling entity engaged in direct selling. Continue reading Kerala (India) issues guidelines for direct selling firms such as Amway
I reported a couple of weeks ago about Amway India’s legal challenges, with two states (Andhra Pradesh and Kerala) and an Indian federal body, “The Enforcement Directorate” investigating them. As I noted I thought the claims against Amway were frankly bizarre, but nevertheless Amway can’t afford to do anything but take such cases seriously. Well, now they’ve made a move that they hope will put a stop to the investigations – they’ve removed all registration fees, it’s now free to join with Amway in India. A similar move was made in the United Kingdom during the BERR vs Amway UK case.
The allegations against Amway in India revolved around a law called The Prize Chits & Money Circulation Schemes Banning Act (1978). Like many laws the text is unfortunately almost indecipherable, even for experts, but the claims against Amway revolve around allegations it is a “Money Circulation Scheme”, which is defined in the act in this way –
(c) “money circulation scheme” means any scheme, by whatever name called, for the making of quick or easy money, or for the receipt of any money or valuable thing as the consideration for a promise to pay money, on any event or contingency relative or applicable to the enrolment of members into the scheme, whether or not such money or thing is derived from the entrance money of the members of such scheme or periodical subscriptions;
The act then goes on to ban such schemes –
3. Banning of prize chit and money circulation schemes or enrolment as members or participation therein.
No person shall promote or conduct any prize chit or money circulation scheme, or enrol as a member to any such chit or scheme, or participate in it otherwise, or receive or remit any money in pursuance of such chit or scheme.
Breaking down the definition, a money circulation scheme is thus either of the following –
By this definition virtually any income in India that is not straight trading of “rupees for hours” is illegal. Income from a business, Bollywood royalties, share market dividends, heck even inheritance! All illegal “money circulation schemes”! Ridiculous, I’m sure you’d agree. Do people actually bother to read these laws they write before they enact them? Sometimes I think it’s all just a plot … or should I say scheme … by lawyers to ensure they have a lot of profitable work! Hopefully not quickly or easily.
It’s possible that somewhere along the line there is some case law that has been created by Indian courts that refine this ridiculous “definition”. If there is, let me know!
The second part of the definition, as I’ve interpreted it above, is a bit more akin to normal illegal pyramid scheme definitions around the world. It’s illegal to receive money (or something of value) for promising to pay people for enrolling them in a “scheme” where you (and they) will earn money by enrolling others. A classic pyramid scam in other words.
But wait …. in India it’s not that simple. That’s not all the definition says. It says it’s illegal to collect money for promising to pay money not only for enrolling others, but also “on any event or contingency relative or applicable to the enrolment of members into the scheme”. What exactly does that mean? Well, “contingency” can be interpreted as any related future event, or it can be a future event dependent on the current event. Think about standard multi-level marketing – using the first defintion, a downline purchasing products might be considered a “contingency relative or applicable to the enrolment”, and (assuming you qualify) you might get paid for it. That could therefore be illegal. In the same Andhra Pradesh case I mentioned earlier, the Supreme Court suggested this may be their view. I’d argue that the second definition of “contingency” is what is meant, that an event dependent on enrolling is what is necessary to satisfy the definition. You don’t need to enroll anyone to earn money selling Amway products, and you don’t need to enroll to buy Amway products, so earning an income from sales of products is not contingent on enrolling people. It can happen with or without it.
Still, it’s pretty much at the whim of whatever judge(s) you may have, so it’s prudent of Amway to completely clear this second definition of “money circulation scheme” off the table. With the removal of registration fees, no money (or item of value) is received for promising to pay people for enrolling others – or anything related. That issue is now gone.
I can’t imagine that anyone (apart from the diehard anti-Amway zealots) would pursue the ridiculously broad “quick and easy money” definition, so Amway India should now be free to continue with, as the US State Department recently described it –
“building up the business acumen and human capital of independent distributors; fostering entrepreneurship; recruiting locally, investing in building its workforce abilities, promoting its management staff from within; and fostering an environment of volunteerism.”
For some years now I’ve been trying to write a post about the trials and tribulations of Amway India, and I never quite manage to get one done. It’s a struggle just to sort through the bizarre allegations, unreadable and confusing legalize, and the truly bizarre misinformation of Amway’s critics.
Anyway, I’m trying again. As many readers might know, back in 2006 police in the Indian state of Andhra Pradesh raided and closed several Amway offices citing the “The Prize Chits & Money Circulation Schemes” law. Amway appealed to the courts, successfully, to remain open but their attempt to get the courts to once and for all declare the Amway business model legal and tell the police to stop harassing them failed. The court refused, instead stating that if the police allegations were correct, then the law would apply, so they ordered the police to complete their investigations within six months so their original allegations could be heard. Five years later that still hasn’t happened, and Amway critics in the country have spent the intervening time claiming the courts decision means Amway is illegal in India and lobbying for action. Of course, they conveniently ignore the part about the allegations needing to be correct! Unfortunately, similar events, and allegations, have now been made in the state of Kerala, and today it’s been reported that “The Enforcement Directorate” is investigating money laundering charges against Amway.
So what exactly are these allegations? It’s frankly a nightmare trying to sort through all the very oddly worded legal documents, but as best I can find from the original court hearing, here are some of them –
Following last week’s news reports that Amway Vietnam is scheduled to open in 2008, a report in Indian news media quotes Amway India Managing Director William S Pinckney as saying –
“the company will start exporting to Sri Lanka, Nepal, Bangladesh and Pakistan from India within the next couple of years.”
Given the current political turmoil in Pakistan, and to a lesser extent Nepal and Sri Lanka, this is somewhat surprising news. IBOs should note that market openings have often slid years passed their originally planned dates – so don’t start booking any tickets just yet! Still, it might make for smart business to start talking to ex-pats from those countries sooner rather than later. In the past it has often been folk who have learned to properly build the business in their adopted countries who then return to their home countries and build the most successful Amway businesses there.
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Despite the distractions of being temporarily shutdown in the state of Andhra Pradesh because of a marital dispute, Amway India has reported spectactular sales growth for 2006. Amway India sales for 2006 are reported at Rs 738 crore (US$168 million) compared to revenues of Rs 633 crore in 2005 – growth of 16.6%. This is a spectacular turnaround on the relatively flat growth of the previous few years.
Double digit growth is expected to continue for the forseeable future, with The Economic Times quoting Amway India Corporate Communications Manager Rajat Banerjee as stating –
“We will open 3-4 more distribution centres in Tier-II and Tier-III cities this year, including Faizabad, Panipat, Kota, Bikaner, Dharamsala, Srinagar, Mysore and Vellore”
Overall Alticor and Quixtar sales data for 2006 has not yet been released after Alticor made a change in their financial reporting methods.
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