Direct Selling, also referred to as Network Marketing or Referral Marketing or Multilevel Marketing, is a legal business model in India. However, there are some exceptions to it. Certain businesses that adopt malicious schemes to trap innocent individuals are categorized as illegal. This article lists those business model that is illegal in India. Moreover, it is about the self-regulatory body that is an interface between the Direct Selling Industry and the policy-making bodies.
Direct Selling is Not the Same as Retail
Often, Direct Selling is confused with broad retail but, the fact is that they are not the same. Direct selling is a retail channel wherein companies sell various goods and services directly to consumers. Most top brands and entrepreneurial companies use this channel to market. The popular products are cosmetics, jewelry, health & wellbeing, etc. The Direct Selling business implements a model wherein consultants work independently but affiliated to the Direct Selling company. The independent consultants are Independent Representatives or Sales Representatives.
List of Illegal Business Models in India
Direct Selling companies need to register to be in the list as a legal entities under the laws of India. Every Direct Selling entity needs to comply with the registration conditions. This is by submitting its verified address proof and identity proof along with PAN number details.
In India, some companies operate in the guise of an MLM business, promise big, and suddenly vanish in no time, duping several investors in the process. Taking a serious note of that, the Government of India has listed a few business models and strategies as illegal. With the sole intention to safeguard consumer interests. Under the Direct Selling Guidelines – 2016 and the Prize Chits & Money Circulation Schemes Act – 1978, such schemes have been identified as illegal. The illegal business models in India include Money Circulation Schemes, Pyramid Schemes, Chit Funds, and Ponzi Schemes.
IDSA – The Self-Regulatory Body for Direct Selling in India
IDSA stands for Indian Direct Selling Association. It is an autonomous body that self-regulates for the Direct Selling industry in India. IDSA acts as an interface between the Direct Selling Industry and the policy-making bodies of the Government. It facilitates the cause and grievances of the industry. It strives to create an environment conducive to the growth of the Direct Selling Industry, Partnering Industry, and Government via advisory and consultations. IDSA works closely with the government in formulating policies, bringing in credibility and clarity in Direct Selling.
IDSA aims to build strong support and understanding for the Direct Selling Industry across India. The key objectives of IDSA are pursuing high levels of ethical conduct in the marketplace – Indian and global. It partners with the government, consumer, and academic professionals to foster advocacy. IDSA provides support to member companies related to policies, and regulations & compliance. It promotes the integration and alignment of the Direct Selling companies. IDSA is affiliated with WFDSA – Washington DC, a leading non-governmental international organization representing the Direct Selling Industry worldwide.
Make an Informed Decision when Planning to Collaborate with a Direct Selling Company
The Network Marketing or MLM business is a lucrative one that can give you financial freedom. The flexibility to work in hours convenient to you. However, you need to choose the right MLM company. It would help if you made an informed decision when collaborating with a Direct Selling company. You need to know about the product it offers and the commission it pays. Also, see whether it has been in existence for more than five years to ensure that it is a genuine company. Further, it is also advisable for you to verify if the business model implemented by the company is legal. Once you have ensured all these points, you can confidently step into the world of Network Marketing without any worries.
