The mention of the word ‘MLM Business’ brings to the mind names such as Amway, QNet India, Oriflame, Avon, Herbalife, Forever Living Products, Tupperware, etc. People in India tend to associate these names with concepts such as a source of employment, additional income, and quality products. Thanks to these household names, the non-retail business model has created a considerable number of jobs, revenue, and entrepreneurship. Speaking at the ASSOCHAM Regional Conference, Zaheer Merchant – Director of Corporate Affairs, QI Group shared some insights on the guidelines and regulations currently in place in various countries and regions; and how these regulations are impacting the scope of business and revenue generation.

In India, 5.1 million people are involved in the direct selling business and the revenue generated by this sector in the year 2017 was $1.53 billion. However, India still has a long way to go in order to catch up with its neighbor China. The dragon nation has 5.3 million distributors who are involved in the direct selling business and their sales revenue for 2017 was $34.29 billion. This reflects a huge disparity between the two countries who share similar demographics.

Industry experts are of the view that the cause for this disparity is the lack of regulations and the presence of too many uncertainties attached to the direct selling industry. While India has a great potential on this front, the need of the hour is to inculcate an understanding and knowledge of the benefits of direct selling. Experts have expressed hope that since the Indian guidelines for direct selling business are excellent, these can also serve as a model for developing countries as well. There is a developing potential in countries such as Africa and the Middle East where there are no regulations.

Moving to the global front, direct selling business is at different pedestals in the top markets depending upon the severity of the regulations, monitoring the business. According to the World Federation of Direct Selling Association, the Direct Selling Association generated $189.6 billion in sales revenue in 2017.

Europe and the United States are the most mature markets for direct selling business; and in the Asia Pacific region, Japan, Australia and Korea have a specific regulatory mechanism firmly in place. Countries like Malaysia and Vietnam have also enacted specific direct selling legislation to discourage any bad practices from happening in the direct selling industry. Singapore has the Multilevel Marketing and Permit Selling Act in place while Hong Kong has its focus centered on customer privacy, data protection, and consumer protection. In fact, direct selling in Hong Kong has become multi-channel and electronic to a great extent. China put in place the Regulation on Direct Selling Administration in the year 2005. It has also set up free trade zones to regulate the types of products that can be sold within the direct selling space.

The above-mentioned regulations serve the multiple purposes of maintenance and audit of records; preventing fraudulent activities; refund and buyback guarantee; no entry fee, a specific license for direct sellers and giving them an identity of a professional.

Talking about the European market, the compliances in the direct selling industry over there are extremely strict. The top markets in this continent are Germany, France, UK, Italy, Poland, and Russia. The European Union implemented a directive on unfair commercial practices in the year 2005. In 2011, it merged the existing rules concerning direct selling into a single rulebook, calling it the Consumer Rights Directive.  According to Merchant, companies in Europe need to provide complete and fair disclosure of any consumer contract and information. Europe also has rules regarding Alternative Dispute Resolution, which helps in reducing the complexity of the grievance’s mechanism.

The US, being the benchmark for regulations is very sorted on the direct selling front as well. The business is regulated by Section 5 of the FTC Act and six states in the US have enacted the anti-permit laws, which are similar to the ones in the European Union. These laws mandate aspects such as buyback of inventory and additional consumer protection.

Going by a study conducted by the Federation of Indian Chambers of Commerce & Industry (FICCI) and KPMG in 2016, direct selling can reach 64,500 crores with 7 percent (YoY) growth. However, achieving this exponential growth would require removing the uncertainties associated with the industry and regulating the direct selling business.
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