A case study based on the recent allegations on IndusViva

Direct Selling refers to marketing, distribution and sale of goods or providing services through a network of people. The roots of Direct Selling can be trailed back to the United States of America, which is known as the ‘Motherland of Direct Selling’. Unfortunately, the growth and success of this industry led to the development of fraud money circulation schemes in the name of Direct Selling. Since its inception, the industry has started facing several issues. It is often mistaken as a money chain or money circulation because there is a thin line between the two, similar to water and acid. You can’t distinguish if you don’t taste it. The absence of specific laws and norms to regulate direct selling companies was the reason behind this misconception. The ordinary people failed to notice the significant difference between Direct Selling and money circulation; the former compensate the direct sellers based on the sales volume generated, whereas the latter pays merely based on the recruitment.
In 1979, one of the pioneering companies in the Direct Selling industry, Amway, was identified as a legitimate business organization by the US Federal Trade Commission. Still, it took few decades for this giant to get this clean chit.
During the mid-1990s, the new model of economic reforms known as LPG, Liberalization, Privatization and Globalization model posed a boon for increasing revenue. In this period, Direct Selling made its way into the country with global companies like Oriflame, Amway, Avon, etc., followed by Indian companies, which became industry giants later. However, it continued to face challenges at every step. Time and again, it became mistaken as fraudulent Pyramid or Ponzi schemes. With the progress in the Direct Selling industry, money chain and money circulation schemes started taking birth just like unwanted weeds in paddy fields. People were lured in the name of quick and easy money, similar to mirages on a summer afternoon. FICCI, in association with KPMG, studied and highlighted the following causes due to this ignorance:
• Amendment in the PCMCS Act
• Need to streamline FDI policy
• Need for a clear definition
• Need for a governing legislation
• Need for a nodal ministry
The industry witnessed a revolution by issuing Direct Selling Guidelines 2016 and this new fiscal restructuring by the then Government of India through the Ministry of Consumer Affairs, under the ministry of Late Ram Vilas Paswan. It changed the horoscope of the industry altogether. Consisting of the guiding principles for State Governments to consider Direct Selling as regular businesses and appointing a monitoring mechanism to prevent any fraud in the best interests of the people involved in the business or customers was the main highlight. Following the guidelines, many states involved in this business has appointed a nodal authority for strict supervision.