IDA seeks regulatory framework for direct selling industry

Concerned over frauds worth Rs 1,000 crore committed by some multi-level marketing and money chain companies in Kerala, the Indian Direct Selling Association (IDSA) today urged the Union government to formulate a regulatory framework governing the direct selling industry.

The Association was concerned about the mushroom growth of dubious and fraudulent money circulation schemes operating under the garb of direct selling and multi-level marketing opportunities, Yoginder Singh Chairman and Chavi Hemanath, Secretary General of IDSA told reporters here.

"Whenever there are scams, it does affect business and hits the long-term potential and growth of the sector and creates a scare," Singh said.

There are three areas that need government intervention -- the provision of a clear definition of direct selling, the enactment of a governing legislation/notification for the sector and the establishment of a nodal ministry or single point of contact, he said.

The IDSA is conducting 'Knowledge FORUMS' for the first time in Kerala to create awareness and educate people on the difference between legitimate direct selling company and financial pyramid schemes.

Pointing that there was no clear or holistic definition of direct selling in India due to which its classification was also unclear, they said there were several barriers which restrict the growth of the sector.

The direct selling companies can address some of them, while the others needed an immediate governmental intervention.

The industry, supporting about 30 lakh independent sales consultants of which 70% were women, was targeting a sales turnover of Rs 7,100 crore in 2012-13 fiscal against Rs 4120 crore in 2009-10, Hemant said.

South India contributes 32% of the total revenue for the 18 IDSA member companies, he said. 

Kerala police had recently registered various cases against fraudulent companies operating in the state. Several instances of frauds have been unearthed mainly from north Kerala.