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Updated: December 1, 2012 15:56 IST

Digest this, drink worth Rs. 50 sold for Rs. 2,250

    Anand Haridas
    K. A. Martin
Comment (10)   ·   print   ·   T  T  

Multi-level marketeers cheat people with overpriced goods, finds investigation

It is not just a Rs. 1,000-crore scam involving 1,000 cases and 14 major companies. Officers probing the multi-level marketing and money chain operations in the State over the last two years are surprised by the ‘creative’ ways in which people have been cheated.

The ‘creativity’ of fraudsters involves selling products of suspect quality and prices that are jacked up 200 to 250 times in many cases.

During a search, a team of police officers came across a 750 ml bottle of fruit juice, which was being sold for Rs. 2,250 whereas an equivalent drink in the open market would cost between Rs. 30 and 50.

A team of officers from the Crime Branch (Economic Offence Wing) Kozhikode seized a product that was priced by its manufacturer at Rs. 341 but was being sold for Rs. 2,400 by a direct marketing company.

The vendor of these products is a link in the long marketing chain and will claim before his or her customer that the fruit juice (or any other product) is much cheaper than is available in the open market because the middle man has been eliminated through the direct marketing scheme.

He or she will even claim that no money has been spent on advertising the product so that that benefit too accrues to the buyer.

The naïve buyer believes the seller because the labels and packaging of the products are not the type he or she deals with during routine shopping. For example, beauty products and health drinks dominated the spectrum of products sold by a leading direct marketing company in Kerala.

“One of the difficulties in fighting cheats operating direct sales schemes is that the State government has little control over the quality of the products, mostly health drinks and food supplements,” an officer said.

Money chain promoters thrived on gaps in regulatory mechanism and the naivety or sheer greed for money among them.

Though the schemes appear as simple operations, they are quite complex so much so that a former IPS officer, who is an advisor to the Union Ministry of Corporate Affairs, in one of his recent recommendations expressed the apprehension that even the government machinery investigating money circulation and multi-level marketing schemes are not aware of the nature and scale of the operations.

Money circulation activities have been banned by the Prize Chits and Money Circulation Schemes (Banning) Act 1978. The Ministry of Corporate Affairs has suggested that a provision in Act should be revised as: “No individual or company or firm or business association, in any form, shall run a scheme that induces enrolment of new members by offering benefits or commission, by whatever name called, to upline members in a pyramid out of the action or performance like sale or purported sale of goods by the downline members”.

MLM schemes, involving products, can be regulated by regulations governing MRP (Maximum Retail Price). It should be made mandatory to print Cost Price and the MRP if a product is to be sold in the MLM way. Another idea can be prescribing a minimum % of the products sold in MLM to be available in regular retail shops, so people can easily see if they are really benefittng by lower price or not.

from:  R Sathyamurthy
Posted on: Dec 2, 2012 at 16:23 IST

The proverb 'Survival of the fittest' -has become ,"Survival of the fittest cheater" in all walks of Indian Life

from:  Dr.Krithika
Posted on: Dec 2, 2012 at 12:57 IST

Well, I really feel sorry for those who believe in those channels who claim to be direct marketing and offer fake product to fool the customers. Products that will enhance your skin color or reduce your weight in some magical way are the biggest cheaters.

I don't understand how the Governement or Crime branch has given them such free hand to fool the poor customers.

from:  Amjad Khan
Posted on: Dec 2, 2012 at 12:39 IST

Multi Level Marketing (MLM) / Pyramid Marketing is not legal and not allowed in North America. India should ban such MLM's.

from:  N. K. DORAISWAMY
Posted on: Dec 2, 2012 at 06:16 IST

RE: @Kristo Francis above

Your comparison of a coffee/tea priced higher in a 5-star hotel vs. a road-side tea stall is not correct. You are paying higher for the same tea in a 5-star hotel, because you are also paying for the ambiance, nice comfortable environment, hygiene level etc. Say, if I have the option to buy a packet of cashew nuts from a high-end super market, I know that I will really be getting the money's worth. Whereas, a packet with same net wt. of cashews from a local kirana store will have atleast 25% rotten or spoiled nuts. Now, if I am willing to pay that higher price just to get a good quality packet is a decision which I should make. Here, there is no cheating, you get what you pay for. But, with a fraudulent MLM, you are paying more for a low-quality product and also you are cheating others, by participating in the whole scheme.

from:  Srini
Posted on: Dec 1, 2012 at 23:22 IST

Thanks for the article. What is that stopping you to mention the name of the Direct marketing Company. without that details this article is no good.
Papaer like should not write articles like this as some tamil Kisukisu.(Gossip).

from:  Raja
Posted on: Dec 1, 2012 at 22:11 IST

People are attracted to MLM schemes for one simple reason, the theoretical potential for commission or cut from the profit of sales by a downstream partner. In other words, a potential profit from a sale for which I have not worked for. The pipe dream of making money without effort.
The Problem with the theory is that the downstream members are also attracted for the exact same reason, making money without effort. If everybody is looking for somebody else to do the work, who is going to work? This is why this is unsustainable not be profitable almost all people, after all somebody has to work generate revenue right? The TOPPS make their money due to the initial enthusiasm of the new members and limited success downstream.
I have been approached a few times by the folks who do this and a couple of times I have listened to their “proposal”. They spend an hour or more to convince. I am too smart to understand that there is no such thing as lazy money. I pity thier foolishness!!!

from:  Sahul Hameed
Posted on: Dec 1, 2012 at 20:05 IST

There are so many pyramid schemes, multi-level marketing scams flourishing unchecked. Amway is an illustrious example. Government should intervene and stop these scammers fooling naive people in the name of quality/organic products or higher returns.

from:  Sathish
Posted on: Dec 1, 2012 at 16:18 IST

The whole MLM concept strives on the greed of the people.It has simple
mantra 'You get cheated first , now cheat others to recover your
losses'.

from:  Naveen Reddy P
Posted on: Dec 1, 2012 at 16:13 IST

The same thing happens in an open market, a samosa costs you Rs 5 to
the max in making, but it is sold for Rs 50 in a cricket stadium. The
Coffee we drink in 5 Star hotels cost us in 3 digit figure; same thing
is available for 5 Rs. There are many things like this. The costing of
a soft drink or soda will be 3 Rs, but it is sold for 10 Rs or more.
Why is this? Or the costing of petrol, cost price and selling price
make lot of difference.
MLM is like a freelance open market. It gives you all those a normal
12 hr job does not give you. In MLM topps or the first joiny will be
the manager or MD automatically, since he earns and he is a good
mentor and leader. As in a corporate sector or company. A MD Rules
and rest listen to him or just do the job. And they do not earn if
they do not perform. Or they are fired. If done in proper business
way it will yield everyone financial freedom. Not like in corporate
sector, pulling each other leg and making your success rate.

from:  Kristo Francis
Posted on: Dec 1, 2012 at 15:08 IST
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