Thursday, Sep 18, 2014

A grey area called direct selling

Amway India chairman William S. Pinckney being taken into custody in Kurnool.(Source: PTI) Amway India chairman William S. Pinckney being taken into custody in Kurnool. (Source: PTI)
Written by Anil Sasi | New Delhi | Posted: June 9, 2014 12:10 am

Amway India head’s arrest is under law against money circulation schemes. It makes no distinction for the multilevel marketing model used by direct sellers, who have been pressing for an amendment

For Amway India chairman and CEO William S Pinckney, there is little respite since his sudden arrest by the Andhra Pradesh police.

Pinckney, 65, who was picked up from Gurgaon and brought to Kurnool on a warrant by the Andhra police on May 27 in connection with a complaint filed against the US-based direct-selling firm in that state, almost exactly a year after he was arrested under similar circumstances in Kerala, finds himself under much more pressure this time round. Remanded to 14 days in judicial custody by a Kurnool court, Pinckney, along with two colleagues, is battling multiple FIRs and is being shepherded from one Andhra town to another in relation to each of these cases. Intriguingly, the complaints, despite being filed presumably by different Amway distributors in distant towns such as Kurnool, Khammam and Guntur, use almost identical language, according to Samir Behl, Amway’s regional president, Europe, Africa and India. Behl, who is based in Germany, is camping in India.

At the centre of the arrest is the Prize Chits and Money Circulation Schemes (Banning) Act (PCMC Act), 1978, under which Pinckney was booked in both cases. Apart from IPC section 420 that covers cheating, all these complaints also invoke sections 3, 4, 5, and 6 of the PCMC Act. Over the years, the legislation has been leveraged successfully by state governments in tackling ponzi schemes, including high-profile ones run by SpeakAsia, Pearls Agrotech Corporation Ltd, Japan Life, and recently the Saradha Group. The Act, which was strengthened last year as a potential deterrent to those who float pyramid schemes in the wake of the Saradha scam, allows the police to seize, seal and arrest merely on the basis of a complaint.

Amway, an $11.8 billion Michigan-based direct-selling firm that conducts business through a number of affiliated companies in more than 100 countries, is evidently different from the other entities charged. Amway — short for American Way — has tangible products that include home care products, personal care products, dietary supplements, water purifiers and cosmetics.

The law

Since the PCMC Act was implemented at a time India had no direct-selling companies, most of which would start operations in the mid-nineties, firms such as Amway have been lobbying hard for an amendment, citing the possibility of misuse.

Section 2C the Act defines “money circulation schemes” as “any scheme… for the making of quick or easy money, or for the receipt of any money or valuable thing as the consideration for a promise to pay money, on any event or contingency relative or applicable to the enrolment of members into the scheme…” The clause “on any event or contingency continued…

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