Network marketing is described as a business model where every member is a seller, and each seller is bound to recruit members under him/her. If any seller sells a product of the company he/she works for, then a percentage of the profit gained would be awarded to the seller and the members under him/her
According to a May 2021 news report, around 1,500 crore rupees were cheated from 10 lakh people by a Bangalore-based firm in a multi-level marketing scam in Hyderabad.
Neither is this the first news about such fraud nor is it going to be the last-only the names of the cities and the amount of change looted.
However, have you ever imagined what this multi-level marketing is and how someone can do such a scam and fool individuals in hordes?
"All you have to do is to pay ten thousand rupees to join the business organisation, then make 4-5 individuals join under you. After one year, your monthly earnings would be 1.5-2 lakhs, "You must have also received such phone calls from friends or relatives."
And then you must have been "impressed" by the success stories they spoke about, in which they spoke about an individual who earned in lakhs within months after joining some multi-level marketing business.
These stories of lucrative perks and success are enough to draw innocent people to join such businesses. Most of us have joined such businesses not because of the perks, but because we could not refuse an offer from someone close to us.
And the COVID-19 pandemic offered a golden opportunity for such fraudsters to manipulate those who had been adversely affected by the sudden change in the course of life. Multi-level marketing, also called chain or marketing, offers the same in the name of multi-level marketing, also called multi-level marketing.
What is network marketing and how is the business operated?
Network marketing is described as a business model where every member is a seller, and each seller is bound to recruit members under him/her. If any seller sells a product of the company he/she works for, then a percentage of the profit gained would be awarded to the seller and the members under him/her.
While most of the MLM companies are frauds and are embroiled in controversies and scams, the few companies that are legitimate in India and have never been a part of any controversies are Amway, Oriflame, Herbalife, and RCM.
Whenever a multi-level marketing scam is reported by the media, it is usually the CEO of the company or a high-ranking officer who is arrested. However, the question here is, are these officers and CEOs the real mastermind fraudsters, or are they merely victims? Can someone working in the lower ranks carry out such fraud without the knowledge of the seniors? The answers to these questions vary from company to company. While on most occasions, it is the CEO who scripts the entire fraud schemes and oversees the operations, on a few occasions, it is the middle man or the seller and his team who are responsible for the fraud.
There are several advisories issued by the Indian government against such multi-level-marketing companies and schemes, and people have been advised to not fall into the traps of such lucrative schemes.
In 2015, the Reserve Bank of India cautioned the public against multi-level marketing (MLM) activities so that investors do not fall prey to unscrupulous entities. The Reserve Bank advised that members of the public should not be tempted by promises of high returns offered by entities running multi-level marketing, chain marketing, or pyramid structure schemes. The Reserve Bank has reiterated that falling prey to such offers can result in direct financial losses and that they, in their interest, should refrain from responding to such offers in any manner.
The Reserve Bank has also said that acceptance of money under money circulation/multi-level marketing/pyramid structures is a cognizable offence under the Prize Chit and Money Circulation (Banning) Act 1978. Members of the public coming across such offers should immediately complain to the state police.
It is time the public started keeping a strict vigil against such schemes so that no one falls prey to another multi-level marketing scam.