Legal Aspects of Multilevel Marketing in India: Negotiating Through Murky Waters

DECISION - Official Journal of Indian Institute of Management Calcutta (Springer), December 2015, Volume 42, Issue 4, pp. 359-378. DOI: 10.1007/s40622-015-0105-1

Posted: 17 Feb 2016

See all articles by Rajesh Babu

Rajesh Babu

Indian Institute of Management (IIM), Calcutta

Pushkar Anand

Faculty of Law, University of Delhi

Date Written: October 26, 2015

Abstract

The direct selling industry is one of the fastest growing industries in India. Despite the prevalence of this business model since 1990s, India has neither provided for an exclusive regulatory framework nor attempted to define and differentiate the multilevel marketing schemes from comparable but illegal pyramid/Ponzi schemes. The ambiguity in the Indian regulatory environment has been a subject of intense discussion in the recent times specifically in relation to the operation of Amway India Enterprises. The incident with Amway exposed simultaneously, the vulnerability of doing business in an uncertain legal environment that lacks regulatory clarity and the potential for misuse by enforcement authorities and also the vulnerability of consumers who are party to such business transactions, with the law not providing definite recourse. In the backdrop of this incident, this paper attempts to understand the facets of multilevel marketing, a concept recognized and accepted, but regulated worldwide. The paper shall examine the legality of multilevel marketing in the context of the Indian PCMCS Act 1978 with a view to understand and differentiate genuine multilevel marketing companies from pyramid schemes run by fly-by-night operators, an activity considered illegal universally. The paper shall also examine the legality of the multilevel marketing schemes in India in the backdrop of the Amway fiasco, the judicial interpretations and the existing legal framework from a comparative perspective.

Keywords: Direct selling, Multilevel marketing, Pyramid schemes, Legality, Amway India

Suggested Citation

Ravindran, Rajesh Babu and Anand, Pushkar, Legal Aspects of Multilevel Marketing in India: Negotiating Through Murky Waters (October 26, 2015). DECISION - Official Journal of Indian Institute of Management Calcutta (Springer), December 2015, Volume 42, Issue 4, pp. 359-378. DOI: 10.1007/s40622-015-0105-1 , Available at SSRN: https://ssrn.com/abstract=2733458

Rajesh Babu Ravindran

Indian Institute of Management (IIM), Calcutta ( email )

Joka, Diamond Harbour Road
Calcutta 700104, West Bengal 700104
India

Pushkar Anand (Contact Author)

Faculty of Law, University of Delhi ( email )

Faculty of Law
University of Delhi
New Delhi, Delhi 110007
India
+91-8130043022 (Phone)

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