India bans MLM pyramid schemes… again?
India has banned MLM pyramid schemes through new Consumer Protection Rules.
The rules were enacted in 2021, giving MLM companies 90 days to comply.
Under the new norms, all direct selling companies and sellers are prohibited from promoting a pyramid scheme or enrolling any person to such scheme or participating in such arrangement, in any manner whatsoever, in the garb of doing direct selling business or participating in money circulation scheme in the garb of doing direct selling business.
MLM companies will have to register themselves with the government, with states directed to “monitor and supervise” their activities.
It is also now mandatory to have a minimum of one physical location as its registered office within India and the companies to make a self-declaration that a direct selling entity has complied with the provisions of the direct selling rules.
The new rules also bring in some additional consumer protections, relating to refunds and marketing.
Interestingly, if you’re booted from an MLM company, said MLM company is required to publish your name on a list on its website.
As I understand it MLM pyramid schemes are already illegal in India as per the Prize Chits and Money Circulation Schemes (Banning) Act, which dates back to 1978.
Like many countries, India’s regulation of MLM schemes isn’t so much a legal issue – it’s the lack of enforcement that sees illegal schemes proliferate.
Whether the new laws will see Indian states pick up the slack and increase MLM pyramid scheme regulation remains to be seen.
I think even if the new laws make a difference, we’d be mostly looking at “traditional” MLM company busts. The laws don’t seem to do anything to address the burgeoning MLM crypto niche.