Explained | The pyramid scheme allegations against Amway
The Hindu
What are pyramid frauds that the ED has accused Amway of? What are the laws governing direct selling companies?
The story so far: The Enforcement Directorate (ED) on Monday, April 18, attached ₹757.77 crore worth of assets of direct-selling company Amway India Enterprises Private Limited, accusing it of running a multi-level marketing scam.
The attached properties include over ₹400 crore worth of immovable and movable properties such as a parcel of land and the factory building of Amway in Tamil Nadu’s Dindigul district, plant and machinery, and vehicles. The remaining attached assets include bank balances and fixed deposits in 36 bank accounts identified so far, having a cumulative balance of ₹345.94 crore, the ED said.
Amway is an American direct-selling FMCG (fast-moving consumer goods) company that started its Indian operations in 1995 in the form of the Indian Direct Selling Association. It then started a charity in 1996 called the Amway Opportunity Foundation, conducting seminars to enrol members, and eventually established a subsidiary in 1998. Its operations are based on the direct selling and multi-level marketing (MLM) models.
Amway India faced multiple police complaints and court cases between 2006 and 2014 in Hyderabad and Kerala pertaining to fraudulent activity and cheating, with its former CEO William Scott Pinckney being arrested twice, in 2013 and 2014.
The current action by the ED is based on a past complaint registered in Hyderabad. The ED said that its investigation into Amway revealed that the company had been running a “pyramid fraud” under the guise of a direct selling multi-level marketing network.
The central agency alleged that Amway had collected about ₹27,562 crore through its business operations from 2002-03 to 2021-22, of which it paid commissions of ₹7,588 crore to its distributors and members in India and the U.S. during the same period.
The ED further said: “Amway has brought ₹21.39 crore as share capital in India in 1996–97, and till 2020-21, the company has remitted a huge amount of ₹2,859.10 crore in the name of dividend, royalty and other payments to their investors and parent entities.”
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