Saturday 28 January 2023
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EconomyBusinessPyramid selling fraud: ED attaches Amway India assets worth Rs 757 crore

Pyramid selling fraud: ED attaches Amway India assets worth Rs 757 crore

While pyramid selling or multi-level marketing is considered dubious worldwide, India legislated against it as late as December 2021

The Enforcement Directorate (ED) today attached assets worth Rs 757.77 crore of Amway India Enterprises in connection with a scam in the model referred to as pyramid selling. Also known as multi-level marketing or network marketing, it is a controversial strategy for the sale of products or services where the revenue of the company is derived from a non-salaried workforce selling the company’s products or services, while the earnings of the participants are derived from a pyramid-shaped or binary commission system. An MLM strategy may be an illegal pyramid scheme.

Curiously though, India took a long to realise that Amway India’s ‘pyramid’ is unethical. As late as December 2021, the union government banned chain marketing for direct selling companies under the Protection (Direct Selling) Rules 2021. According to the notified rules since then, direct selling companies are responsible and accountable for the products or services sold on their behalf.

The properties of Amway India that the ED attached today include their land and factory building in District Dindigul, Tamil Nadu, plant and machinery, vehicles, bank accounts and fixed deposits.

The ED had provisionally attached immovable and movable properties worth Rs 411.83 crore and bank balances of Rs 345.94 crore from 36 different accounts belonging to Amway.

“A money-laundering investigation by the ED revealed that Amway was running a pyramid in the guise of direct selling (in a) multi-level marketing network,” a statement by ED said.

The probe agency observed that the prices of most of the products offered by the company were exorbitant as compared to the alternative popular products of reputed manufacturers available in the open market.

“Without knowing the real facts, the common gullible public is induced to join as members of the company and purchase products at exorbitant prices and are thus, losing their hard-earned money,” the statement added.

It further highlighted that the new members are not buying the products to use them but to become rich by becoming members as showcased by the upline members.

The reality is that the commissions received by the upline members contribute enormously in the hike of prices of the products, it added.

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