Is Multi-Level Marketing Legal In India?


Posted On : January 9, 2023
Is Multi-Level Marketing Legal In India?
Is multilevel marketing legal in India? If you have this question in your mind, you must have heard of the multi level marketing frauds in India. Social media memes on ‘25 din mein paisa double’ play a great role in awareness in this regard, to use your eyes and brain when such a promising offer comes your way. It is your duty not to get swayed in the name of the pyramid scheme in India. What may seem like a levelling of the network might make you a stepping stone which is just adding to the benefits of the top notch officials, while it brings you closer to being prosecuted when those officials flee away. Know about the buzz around banned direct selling companies in India hereunder.
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“25 DIN MEIN PAISA DOUBLE - Join us with a minimum investment, make a chain to involve more people and spread the word for our products to get the financial benefits.” Have you come across such apparently promising, cheezy and dazzling Ponzi schemes? You can not deny if you are a common man belonging to the middle class. The question is, did you fall for this trap or did you find your escape? With companies like Amway, Tupperware which are among the top organisations indulging in the direct selling business, the question arises - ‘Is multi-level marketing legal in India?’.

 

With the buzz around banned direct selling companies in India as news broadcasts blew in the recent years, people keep searching for the list of illegal MLM companies in India. The target consumers and distributors of such products are people much less aware of the technicalities of prevailing laws. For such target audiences, is multilevel marketing legal in India? The same has been explored below in the easiest way possible. 

 


Are Multi-Level Marketing Companies Legal in India?

Companies which are selling certain products or services through network marketing by indulging people at multiple levels,are legal in India. Although the concept of ponzi schemes is declared illegal, some companies bring in their products to disguise the consumers into investing which ultimately serves the goals of such a scheme. On this note, is network marketing legal? The answer is yes until such a network is being built so as to make a chain of consumers with genuine products. Money circulation schemes which seek money from people to become a part of it are against the law. Thus, if a company is making more money from adding more distributors or recruiters under the garb of networking than from its products or services, it is more likely to fall under the category of banned direct selling companies in India. The question of legality of pyramid schemes in India arose after several multi level marketing frauds in India. 

 


Is Multilevel Marketing Legal in India?

As per the latest rules and applicable laws, the answer to ‘Is multi level marketing legal?’ or ‘Is network marketing legal?’ is yes unless it falls under the definition of Ponzi scheme or illegal pyramid scheme companies in India. If you are becoming a part of the pyramid scheme by forming a network, it is legal till you are not required to pay for becoming such a part. If the same is otherwise and loses legality of employment or business, given below are the provisions to apply: 

 

Cheating under Section 420 of IPC - The provision applies when someone else induces the person to do or not do something which he may refrain from otherwise. Illegal pyramid scheme in India often induces people through unrealistic benefits.

 

Consumer Protection (Direct Selling) Rules - It lays the provisions under the rules regulating multilevel marketing in India and banned direct selling companies in India. Non-compliance with the rules may prove a toll against such companies for the protection of consumers.

 

Competition Act, 2002 - Sometimes, multilevel marketing under the garb of pyramid scheme companies in India tags their products at such overwhelming prices that the real value rises exponentially without any justification. In such cases, the authorities come into picture which also regulate the pricing of such products so that the quality of product compliments the price as confirmed by the Competition Act to restrain monopoly or illegal practices in the market.


How to Check Multi Level Marketing Frauds in India?

Searching for the list of illegal MLM companies in India is not the solution to stay safe. If you are someone approached by apparently banned direct selling companies in india, you can check the legality through following pointers:

  • Assess if proposed benefits are genuine
  • Do not fall for unrealistic financial luring schemes
  • Check whether there is a physical office of the company
  • Know about the company’s people, culture and their philosophy
  • Is there any training methodology followed
  • The product/ services are genuine and trustworthy
  • Know if you are being paid for sale of products or for enhancing network
  • There should be a concrete profit plan/ layout
  • Profit payout should be recurring and not one time
  • There should be more focus upon product than networking
  • Target audiences are not only the vulnerable and unemployed people like housewives
  • Promises of becoming overnight billionaires arei a trap

It is better to be safe than sorry in this matter, especially after multi level marketing frauds in India have been unveiled. If you think yours is among the banned direct selling companies in India, consult with corporations lawyer.

 

Conclusion

With this, it is understandable that multilevel marketing is legal in India. The rules regulating the pyramid scheme companies in India are the wall that secures the rights of laymen, the ordinary citizens. The network marketing, or multilevel marketing,or the pyramid scheme, is legal until it is focussed upon reaching out to more and more people for selling the genuine product or services. The day it prioritises networking and requires investment or payment for becoming a part of such a network, it crosses the line and may become a part of the list of blacklisted MLM companies. If you are in Kolkata stuck with an illegal pyramid scheme, contact corporate lawyers in Kolkata.  

 

Suggestion

It is well accepted that multilevel marketing is legal in India until it is done without what we can assume as a membership fee. But since the target audience is the vulnerable sector of the society which is lured into becoming ‘financially independent’, they actually are the soft targets. Under the veil of a legal multi level marketing company, little money can be looted in the name of investment which people find part of the business. Hence, it is pertinent to make those targets aware of what may be a fish trap for them. If you read this today and the next day someone brings in such a network marketing proposal in front of you, it is your duty as an aware citizen to go through the checks and spread awareness on this topic.

Written By:
Abhimanyu  Shandilya

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