Negative / Special Product List – Eye Opener

Negative / Special Product List – Eye Opener

Direct selling industry is growing exponentially in India and across the world. The direct selling companies are engaged in a business model wherein they market and sell products manufactured by them or another company to the customers via direct sellers.

While most products and services may be sold by direct selling companies, there are a few items that they should not be “selling” or should sell while adhering to a few conditions specified.

Strategy India, a consultancy specializing in direct selling, has developed negative product list that contains items that should not be sold by direct selling companies and a select product list with things that direct selling companies can promote conditionally.

What Prompted the Development of Negative Product List?

Strategy India ardently studies the direct selling industry in India and evaluates 20 to 25 new MLM operations every week. Their analysis has shed light on a few interesting facts. Many companies engage in scams under the façade of direct selling.

These companies are either pyramid schemes whose business models fail sustainability checks or entities that have misleading information on their websites.

A comprehensive list of MLM scam alerts can be found on the official website of Strategy India.

The team of Strategy India developed the negative products list in 2013 after thorough analysis. The research conducted provides a few fascinating insights into the characteristics of the negative products.

  • Items on the negative products list are used by MLM operations to cheat the common man.
  • These products have no intrinsic value. They are of no use to the customers and are meant to confuse the common man, media, law enforcement agencies and the court by masquerading the pyramid scheme as a direct selling business.
  • The MLM entities promoting the negative products try to evade the law by disguising themselves as sustainable direct selling operations and deploying MLM compensation plans.

The special products list was added by Strategy India in early 2014, considering that many companies were promoting products/services which were worthless tokens for the majority of individuals purchasing them.

An example of this is a farmer’s wife who had no access to the internet, computer or mobile but purchased five packages of online training courses that taught excel and word. She was misled into the purchase by promises of a commission on every package she bought or promoted to others.

In another incident, a college student from Bengaluru broke down into tears while urging team members of Strategy India to come up with a solution that would stop pyramid scams masquerading as ethical direct selling companies. The student in concern was arrested by the police under the P.C.M.C. (B) Act 1978 / Prize Chits and Money Circulation (Banning) Act 1978 because he was promoting the online training programs to multiple individuals. His career was over before it even started.

A company from Chennai was selling holiday coupons at ₹5000 after purchasing them at just ₹120 from an agency. Moreover, the company imposed a preposterous condition that any couple wishing to utilize the coupons had to pay an additional administrative/service fee of ₹750 months in advance along with an application listing at least three likely destinations.

The company was considering the probability that 99% of people will not avail the coupons because of unfriendly terms and conditions. It would allow the company to make significant profits and increase their turnover as the payout was higher for holiday coupons and vouchers sold.

Strategy India devised the lists to make it easy for ordinary people and direct sellers to identify the pyramid schemes and ensure that they were not cheated or misled.

Why should the companies prohibited/restricted from selling a few products/services?

Companies should be prohibited or restricted from selling a few products or services because of multiple reasons.

  • Worthless Products/Services – Some companies sell products at exorbitant prices. Customers might not have bought the products at such high rates if they were not associated with the business opportunity. The overpriced products are used to masquerade the company as a marketing organization and prevent it from being classified as an investment scheme.
  • The Requirement of Specialized Licenses – A company may require specific licenses for selling a few products or services like insurance policies, etc.
  • Products/Services Prohibited by Law – There are a few products or services that companies are prohibited from selling by law. These include deposits or investments in farming (animal and horticulture), real estate, crowdfunding, etc.

What is the Negative Product List?

Strategy India defines – "Negative product list" is the list of products/services which are not to be promoted by the company deploying a Direct / Single level / Multilevel marketing compensation plan.

The following items are included in negative product list:

  • Deposits / Investments / Offered for free along with other products / services - in / for / in the form of or trading in - Stocks, Shares, Initial Public offering, Initial coin offering, Debentures, Regulated / Unregulated and regulated Currencies/Tokens including Virtual currencies including but not limited to Crypto tokens (wrongly referred to as “Cryptocurrencies”), Bullion markets, Preferential shares, Forex, Plantations, Farming, Infrastructure projects, Resorts, Trading in commodities, Birds (Poultry, Emu, Quail, etc.), Livestock (Rabbit, Goat, Sheep, Cow, Buffalo, etc.), Media, Car Lease and Real Estate.
  • Crowdfunding ventures
  • Discount coupons / Vouchers / Currency/Tokens
  • Betting / Gambling activities
  • Quiz portals
  • Recharge portals
  • Peer to Peer transactions in any names as Support, Gift, Help, Assistance, Donations, etc.
  • Bid coupons / Vouchers/Tokens
  • Websites / Web space / Bidding portals
  • Buy in to get paid - to click, to give surveys, to watch advertisements, to receive SMS and to receive emails and to invest in an advertising medium
  • Products used for intoxication
  • Any product, which exceeds its validity period / use by date / expiry date.
  • Any illegal products
  • Non fungible tokens
  • Fantasy games and tokens/in game currency
  • Estate (online/offline)
  • Any equipment generating or claiming to generate tokens
  • Any online/physical – live/recorded training/coaching/literature for generating tokens/currencies.
  • Any type of trading signals on any platforms and messaging applications.

What is the Special Product List?

As per Strategy India – "Special product list" is the list of products/services which may be promoted along with the conditions mentioned along with them.

Items belonging to the special product lists include:

  • Gift Vouchers/Coupons – Direct Selling companies should promote gift vouchers and coupons with the condition that the direct sellers should only be compensated when the coupons are used by the customer and not when sold.
  • Discount Vouchers/Coupons/Promissory notes – Direct sellers that have promoted discount vouchers or coupons should be paid the commission only after the buyer of the discount vouchers utilizes them.
  • Insurance – The direct selling company and the direct sellers should obtain special licenses from IRDAI if they are going to promote insurance or insurance related products or services.
  • Online Products – Direct selling companies should only promote products and services online if they have a money back guarantee of a minimum of 30 days from the date of activation of the products by the customer.
  • Holiday/Timeshares Coupons/Vouchers/Packages – Holiday packages and vouchers should be marketed and sold by a direct selling company if commissions are paid to direct sellers once the coupons have been fully redeemed by the buyer.

What if the companies deploying the MLM compensation plans sell prohibited products?

Any direct selling company or direct sellers that sell prohibited products or services will face action under the P.C.M.C. (B)Act,1978 or relevant laws in force with lawsuits. It may lead to imprisoning of the directors, stakeholders, management and the top promoters (beneficiaries) of the company. The direct sellers and individuals associated with the company may face legal actions under relevant laws.