Corporate Affairs Minister Sachin Pilot announced yesterday that his ministry would work with the Ministry of Consumer Affairs to clarify guidelines for multi-level marketing companies in India. This statement emerged amidst conflicting departmental recommendations regarding the industry's future.
The Department of Financial Services previously called for banning multi-level marketing entirely. It recommended amending the 1978 Prize Chits and Money Circulation Act to achieve this goal.
Meanwhile, the Department of Consumer Affairs (DoCA) formed a committee last July. Its mandate was to establish guidelines distinguishing legitimate MLM companies from scams. This committee missed an early 2013 deadline, then a subsequent April 30th deadline, without public comment.
Pilot's recent remarks to the Press Trust of India highlighted the diverging views within the government. He stated strong action must target companies misusing laws and duping investors. However, Pilot also insisted that reputable companies operating legally should continue without fear and receive confidence.
The Minister acknowledged the ongoing effort. "My Ministry (Corporate Affairs) and Ministry of Consumer Affairs are now working on clarifying these guidelines (for multi-level companies)," he said. But the path remains unclear. One department seeks an outright ban, while the other aims to define legitimate operations.
This regulatory uncertainty leaves the entire Indian MLM industry in limbo. A compromise likely looms, where MoCA's guidelines might become law. Indian regulators would then need increased policing powers to address companies, legitimate or otherwise, failing to comply.
Pilot also criticized Indian newspapers, assigning them a "larger role to play as watchdogs." He urged them not to accept paid advertisements from illegal companies. "Sometimes newspapers publish advertisements placed by companies running illegal schemes to dupe the investors," Pilot noted.
He added that newspapers "must refuse such paid advertisements in the best interest of readers. Companies must deliver what they promise." This expectation raises questions. Regulating authorities themselves lack clear guidelines. Without a defined regulatory framework, the burden placed on media outlets to self-police the industry appears premature.