With the growth of economic activities, the risk of economic fraud and scams is also increasing in India. Multi-level Marketing (MLM) is one such fraud that involves the downward selling of products. Accusing M/s Amway India Enterprises Private Limited of the same MLM scam, the Enforcement Directorate (ED) has taken action under the money-laundering investigation.
ED has provisionally attached assets worth Rs. 757.77 Crore belonging to M/s. Amway India Enterprises Private Limited, a company accused of running a multi-level marketing scam.
— ED (@dir_ed) April 18, 2022
The agency has provisionally attached immovable & movable properties worth Rs 411.82 Crore & bank balances of Rs 345.94 Crore from 36 different accounts belonging to Amway. Further, in its press release, it has stated that an amount of Rs 27562 Crore was collected by the company from 2002-03 to 2021-22 in its “pyramid fraud in the guise of direct selling multi-level marketing network”.
Amway’s manufactured price rise of its product
ED investigating the case of money laundering revealed that Amway was running an MLM networking fraud of manufactured price rise. The company is selling its product on an induced formula of networking. Moreover, they promise their network members a high commission on purchasing and selling which ultimately increases the prices of their products.
Any product in the market is for the consumer’s use but in this particular case, rather than to use, the consumer buys it to earn profit. Further, it has been seen that the same product in the market is cheaper than the product offered by Amway.
Certainly, people think that the costly product is bound to be better than the other similar product in the market and people easily fall into the psychological marketing trap of the company.
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The fraud game
The business strategy involved in this type of marketing is the sure-shot case manipulation, fraud, and scam. They lure the consumer with the induced idea of making them rich. In the process, every member joining the network is shown a dream of a big car, or a ticket to a holiday destination in case of completing the target of sales. Influenced by the idea, the newly joined member himself buys the product to complete the target without having the purpose to use it. In a way, the consumer himself becomes a seller or vice-versa.
The purpose of any manufactured goods or product fails here in the process. The ultimate aim of the consumer is to consume the product but they fall into the trap of such companies and buy the product at a very high cost.
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Pyramid Scheme prohibited under Indian business laws
The pyramid scheme or the MLM which works on the top-down model of business is prohibited by the Consumer Protection Rule 2021. The practice of the business model is not only illegal but also unsustainable for the growth of a business. Further, it destroys the healthy competition in the market to settle the prices of any product.
In recent times, to cope with this type of fraud, the government has made various amendments to the business laws of India. Section 3(c) of the Consumer Protection Rules 2021 expressly provides for a legally enforceable written contract for the direct selling of any goods or services.
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Further, there are various other companies involved in such networking marketing scams. People’s hard-earned money is being looted by fraud. Government should thoroughly investigate other such companies also. Moreover, to alert the public about the fraud, an information campaign should be launched.
