Amway India MLM has recently come under the judicial scrutiny in some High Courts across the

country. The dispute involving Amway was heard by the Andhra Pradesh High Court in 2007. The primary legal framework governing such situations is thePrize Chits and Money Circulation Schemes (Banning) Act, 1978, under which Money Circulation Scheme is defined [Section 2(c)]. The Court, in examining the ingredients of the Section laid down a two-step test firstly, it must be proved that first petitioner is promoting or conducting a scheme for the making of quick or easy money, and second, the chance or opportunity of making quick or easy money must be shown to depend upon an event or contingency relative or applicable to enrolment of members into that scheme. The scheme of the business operation of Amway, very simply, is that the money that the sponsor member at the top of the line gets depends upon members whom he enrolls or the members enrolled by him enroll. Therefore, although enrolment of new members is not the purported criteria for the scheme, the scheme is structured in a manner such that inherently, there is sufficient inducement for aggressive enrolment of new members. The returns of any sponsor is calculated not only on the basis of is own sales, but also on the performance of the members recruited by him. Furthermore, to be eligible for the commission, minimum business levels have to be maintained, which require aggressively recruiting new members. Therefore, if one follows a technical and restri cted approach, the requirements of Money Circulation Scheme are not met. However, on a closer scrutiny, it can be observed that in effect, it is identical. This was recognized by the High Court, and it was held that the operation of Amway was illegal.

This decision has been appealed, and is pending before the Supreme Court. It may be noted that the Supreme Court, in another verdict, has pronounced very strongly against pyramid structures (in Kuriachan Chacko, 2008).

While the jurisprudence on the matter is yet to be developed, it can be broadly observed that the Indian Courts have opted a more cautionary approach that that of the USA. However, the cautionary approach of the judiciary is inadequate, given the large economic stakes held by such business operations, and the span of the population affected by them. Adequate regulatory framework on the issue of direct selling and multi-level marketing is urgently needed.

Read more: Multi-Level Marketing and Indian Law Amway cases in India and USA | Marketing and Advertising Law http://madlaw.in/multi-level-marketing-and-indian-law-amway-cases-in-india-andusa/#ixzz2wxdgWPu3