Is Network Marketing Legal or Illegal in India
The, as the law does not specifically say about the provisions related to MLM, or declare it illegal; but the concept of MLM rises many issues in the Indian economic system and product market.
First of all, let us have a clear concept about MLM. We generally see that people are selling Avon, Oriflame, Amway products to the people they know; they are not salespersons whose profession is to convince people to buy products and give a day to day report of the sale.
These persons buy a stock of products from the manufacturer directly, not through any retailer, and reach the products to other persons. The one who is buying more products, gets more benefits like retail commission which you get for your personal sale made, and team or group commission.
For example, A bought a number of products and sold it to 10 persons in one month and to 20 person in second month, it won’t matter to the company how many persons bought it, it will only matter how much product A bought.
A shall buy those products for example worth INR 5000, and then again 10 other persons shall take it from her, paying her for the products they shall buy, and this way A shall get her money reimbursed which she has spent in buying from the manufacturer. It is like consumer turned retailer.
Multi-level Marketing (MLM) is known by several names, #network marketing, direct selling, referral marketing etc. It is an alternate form of distributing products and services. The traditional way of distributor-retailer-consumer passage is not followed here. It is really good to hear theoretically, but practically the execution is not that simple.
There are many risks related to the Multi-level marketing system:
- It is not always in money it is being traded, it can be traded in kind as well/ If someone is giving some product, can take a cricket match ticket in exchange. It creates a big loophole in the economic system
- There is no refund policy communicated by the company or by any registered agent or retailer of the company
- No one has any knowledge regarding the local office of the company. Only there can be head office address printed on the product package, which can be in other state, as well as in other country.
- You may not know whereabouts of the person who sold you the product, and as the person is not under any legal obligation with the company as well as with you, you may get a total refusal of taking any responsibility.
- There is an ambiguity regarding the tax policy of the products.