Pyramid schemeDate: 25 April 2022 Tags: Miscellaneous
Direct selling company Amway India Enterprises Private Limited has been accused of running a fraudulent pyramid scheme.
The Enforcement Directorate has attached property of the company worth Rs 757.77 crore for illegal business practices.
Amway is a direct-selling FMCG American company that started in India in 1995 in form of Indian Direct Selling Association.
Its charity wing started seminars to bring in new members and finally a subsidiary was established. It made use of direct selling and multi-level marketing strategy.
Amway is facing multiple charges in Hyderabad and Kerala for fraud. The CEO of the company was arrested twice.
The ED has accused the company of running pyramid fraud under the guise of a multi-level and direct selling method.
They entice people with scheme that will make them rich and in turn they are asked to enroll more members into the scheme.
In this scheme, a company or enterprise promises payments and commissions for enrolling others into the scheme.
No products or service is supplied but money is generated through new enrollment. This creates a pyramid or hierarchy, which is ever increasing.
Collapse of scheme
The scheme starts becoming unsustainable after members start increasing and money gets circulated amongst the group.
Laws against pyramid scheme
Direct selling companies have been brought under the consumer protection act through Consumer Protection (Direct Selling) Rules, 2021.
Direct selling companies are prohibited from employing pyramid selling scheme to bring new members.