Is MLM business Banned in India?

Multi-level Marketing Firms offer their goods and services directly to customers, instead of pursuing the conventional sales channel of Producer – Dealer – Wholesaler – Supplier – Customer. They rely on their company on a non-salaried workforce, which sells goods to customers by partnership referrals and marketing by way of word of mouth. 

Two sources, respectively, sales commission from the Individual Salesperson directly to their retail customers and sales from the Salesforce under those of the salesperson who had recruited the other participants to the MLM business, are used to pay for these sales. This establishes a manufacturers' downline and a pyramidal compensation hierarchy.

What Is MLM Business?

Multi-level marketing in India is a broad marketing terminology that takes place across a dealer network in India, such as a pyramid scheme or a direct sales scheme. An MLM software provider can provide you better ideas regarding what exactly is an MLM business. Moreover, an MLM software provider or an MLM software company is crucial for the success of any MLM business.

It is used by businesses adopting direct sales tactics under the 2016 direct sales rules to enable their current distributors to appoint new distributors by getting a fee on the sales of the new distributors to the existing distributors. A network marketing technique is used by some of the popular network marketing firms, such as Tupperware.

The system of receiving commission-driven remuneration and incentives based on the network marketer's success was seen as a cost-effective way to earn from home and created opportunities in the MLM sector in India. This business runs on the concept of direct sale, where the customer buys a commodity directly from the company instead of involving a middleman. 

However, the MLM industry is full of unethical practices, due to the lax regulatory system in India, schemes promising fast bucks that add negativity to the whole business. An MLM software provider or an MLM software company can provide you some good examples of legal MLM entities.

Multi-Level Marketing is a marketing technique often used for the selling of goods and services by pyramid-structured firms, where staff act as both salespeople and customers, and the profits of an MLM business is therefore extracted from this non-salaried workforce. 

This is achieved to ensure a stable amount of profits for MLM firms in India or worldwide, although the responsibility of trying to sell and deliver the product/services is not imposed on the workers alone. 

Amway, Avon, MaryKay, Forever Living, etc. are some of the strongest MLM firms in India, floating the Indian market with an effort to improve direct sales and provide job opportunities for housewives, retired people, and unemployed people.

The legality of MLM Business in India

In India, network marketing is legal. Multi-level marketing strategies are the same, except for some firms that are known as illegitimate multi-level marketing, as they are used to lure innocent customers who participate in MLM schemes, and there is no real trade directly by buyers or promoters of products and services. Rather, there is only a guarantee that the investor will reap returns. Such promises, however never materialize and trigger investors tremendous losses. 

Because of this, to protect customers, the government of India has listed a few forms of network marketing fraud tactics as illegal in India. Under the Direct Sale Guidelines, 2016 and the Prize Chits & Money Circulating Schemes (Banning) Act 1978, such network marketing schemes are not legal in India. An MLM software company can help you stay updated on the latest trends in the MLM industry.

The Guidelines made clear that whether it was consisting of members enrolling other members to gain a profit, either directly or indirectly, when the gain was the product of the distribution of products or services to those subscribers, the direct sales concept would not be regarded as a pyramid scheme. An MLM software provider or an MLM software company can help you identify the legal concepts of an MLM business.

These Rules set out some criteria for direct sales firms. These organizations must be licensed and can no longer offer any benefits for the registration of new customers since this remuneration is solely related to products and services. to separate them from pyramid schemes. Any obligations were also applied concerning the members of those enterprises, which no longer allow them to charge any registration, membership, or other charges.

These members cannot compel them to purchase additional goods or services than would be required to buy or sell. They are required following Section 10 of the Indian contract law of 1872 to conclude contracts with such members, which defines the buy-back, repurchase policy, cooling downtime as well as warranties and return policies. 

Members shall be issued identification cards and shall be held up to date on transactions, acquisitions, earnings details, commissions, incentives, and other related material. For the potential participants, they shall hold mandatory orientation sessions with equal and detailed details about all facets of the direct sale process, including pay opportunities, their rights, and responsibilities, etc. 

Besides, those organizations shall retain correct records of company activities, including particulars of products, supplies, contracting conditions, rates, income schedule, members' details, including admission, termination, and active status and income. They shall also maintain track of the checked address evidence, identification proof, and PAN information of the participants. Every direct sale business also has an effective system of grievances to mitigate customer frustration.

How to deal With a Fraud MLM Company?

Many multi-level marketing firms have found themselves unlawful after the warning of authorities of illegality by individuals who are victims of MLM theft and MLM scams. All of them was Qnet, the notorious Indian Multilevel Marketing (MLM) corporation charged with fraud. An MLM software provider or an MLM software company can warn you against potentially illegal MLM entities so you can protect your money. You should still take the aid of the law if you have ever fallen victim to such multiple-tier marketing frauds in India:

First, if it has taken your money and is not returning it you should give a notice drawn up by a lawyer to the MLM firm. 

You should file an FIR against the MLM scam firm and let them be investigated by the police 

If the organization acts unlawfully in violation of corporate rules, a report may be lodged to the registrar of companies