The India head of global direct selling company Amway Corp was arrested this week, the second time he has faced trouble with law enforcers under a controversial law that fails to distinguish between multi-level marketing (MLM) and dubious money circulation schemes.
William S Pinckney, CEO of Amway India, was arrested on Monday by Andhra Pradesh police an allegations of improper circulation of money. He was produced before a magistrate in Kurnool district on Tuesday and set to 14 days in judicial custody. Amway is expected to move for bail on Wednesday.
Amway, which uses networks of member-partners, has been caught in a grey area governing chit funds and money schemes because its product sales also involve cash flows.
A year ago, in May, Pinckney and two of his directors, Anshu Budhraja and Sanjay Malhotra, was arrested in Kerala on same charges, but were granted bail.
“The CEO has been booked under the Prize Chits and Money Circulation Schemes (Banning) Act (PCMCS),” said Raghurami Reddy, Kurnool superintendent of police.
Amway India sells products like detergents, shampoos and soaps. Its products include dietary supplement Nutrilite, laundry detergent SA8, skincare brands G&H and
Artistry and haircare brand Satinique.
The company has denied charges. “The allegations were frivolous and the arrests were made due to the lack of a legal framework for the direct selling industry in India,” Amway said.
The Indian Direct Selling Association (IDSA) has also condemned the arrest. “International companies are reluctant to come to India because of the policy ambiguity in Indian direct selling industry,” said Chavi Hemanth, secretary-general, IDSA.
The association also demanded an immediate operational and ‘definitional’ clarity to provide a framework to genuine direct selling companies for effective and unhindered operations.
Industry chambers, too, termed the action as “uncalled”. “FICCI has been persistently asking for a clear and independent regulatory framework for the direct selling industry in India. This uncalled action might also have an adverse impact on India-US business relationships,” said A Didar Singh, secretary general, Ficci.
MLM is a controversial field because the pyramid marketing structure is vulnerable to abuse in some cases. The direct selling industry has repeatedly sought an amendment to the PCMCS Act, since there is no direct transfer of money. It is based on points system, earned when a product is sold.
“This incident highlights the urgent need for the government to amend the PCMCS Act. Unless amended, the Act will be unable to distinguish genuine direct selling companies from pyramid schemes and regular consumer complaints will continue to attract provisions of the PCMCS Act,” IDSA said.