Supreme Court in India Rules Against Amway: Police Investigation Continues
Apex court clears deck for probe into Amway's direct sale scheme
New Delhi | August 14, 2007 10:05:06 PM IST
In what could undermine the flourishing business in India of one of the world's largest direct selling companies Amway Corp of USA, the Supreme Court Tuesday dismissed its plea to stop an ongoing probe by the Andhra Pradesh Police into the legality of its business scheme.
Dismissing the Amway India Enterprises' plea, a bench of Justices H.K. Sema and L.S. Panta asked the Andhra Pradesh Police to complete its probe to determine the legality of the company business model.
The Andhra Pradesh Police is probing whether the scheme of selling its products through an interlinked chain of over 450,000 individual agents is akin to luring individuals into betting or for making easy money in violation of Section 2(c) Prize Chits and Money Circulation Scheme (Banning) Act, 1978.
The police had taken up the probe after lodging a First Information Report (FIR) against the company in September 2006 on a complaint from one Sukumar Balaji of Hyderabad.
Following the FIR, the police had raided the premises of nine officials and the warehouses of Amway India.
Amway India, in turn, had moved the Andhra Pradesh High Court challenging the police raids and sought suspension of the probe into its business model.
But the high court dismissed its petition on July 7, saying that the company's scheme was merely to enrol members for earning quick money.
The company subsequently moved the apex court, but failed to get any reprieve from it.
Amway India Enterprises is a private company with "unlimited liability" registered under the Companies Act, 1956, and is a wholly-owned subsidiary of one of world's largest direct selling companies, Amway Corporation USA, operating in 80 countries through its subsidiaries with an annual sales turnover of $6.4 billion.
In India, it has replicated its global business model of direct selling through interlinked individual sales agents for the last 48 years.
In its petition, the firm had contended that its business model had been approved in June 1994 by the secretariat of industrial approvals of the union ministry of industry in consultation with several other ministries and departments, including the commerce ministry, finance ministry and the foreign investment promotion board.
Related Articles and News about Amway in India:
-- For a full and graphic picture of how Amway operates in India especially if you live in India read WITH SOAP IN THEIR HANDS & HOPE IN THEIR HEARTS by Ramjee Chandran from The Bangalore Monthly Magazine in July, 1998. Chandran characterizes Amway as a cause of "economic evil" and describes the pitiful scene of uninformed and low income Indians investing their life savings in the "non-retailing" sales scheme in which 99% are doomed to lose.
-- In 2004, two revealing articles on MLM fraud published by Pyramid Scheme Alert were reprinted by The Institute of Chartered Financial Analysts of India in its prestigious business journal, Marketing Mastermind. The articles address the deception employed by MLM recruiters and how the "non-retail" model functions as a disguised pyramid scheme. The Institute of Chartered Financial Analysts is based in the state of Andhra Pradesh where Amway's offices were recently raided and closed down.
-- In 2005, PSA's President spoke at a seminar in Sri Lanka of Central Bankers from five South Asian countries, including India. The representatives from India reported many complaints against Amway but also said various states differed in regulation and that, despite complaints and largescale losses among consumers, the courts were allowing Amway to operate.