Government defends licences issued to firms engaged in ‘networking business’Networking businesses in the past had swindled billions by illegally expanding their network in a pyramid style.
With the government mired in controversy after issuing licences to firms engaged in ‘networking business’, the Department of Commerce, Supplies and Consumer Protection Management has defended its action, saying the licences were issued under the ‘Direct Sales Commodity Act’.
But consumer rights activists said they don’t believe that and the licences issued to these companies meant that the same people who used to operate a pyramid structure networking business in the past, will be allowed to do so again.
It is illegal to operate such business in Nepal.
The department has granted licences to iboss Global International, Chabahil; Nature Herbs International, Kumaripati; New Bibek Enterprises, Ekantakuna; Healthy Living Nepal, Battisputali; Care Matters International, Chabahil; Uturn International, Tokha and Global Orients Nepal, Balaju.
Madhav Timilsina, president of Consumer Rights Investigation Forum said that the government has granted licences to the same people who were involved in operating networking businesses in the past and had swindled billions by illegally expanding their network in a pyramid style.
“It’s the same business under a new guise. The same people are doing the business in the name of direct sales of the commodity now,” he said, adding that they are taking advantage of the Covid-19 situation as many people have lost jobs, said Timilsina. “When we observed their websites, they seemed to be transacting goods and services based on a networking structure.”
Unity Life International, Herbo International, Gold Quest International, Crystal Vision International, Best World Business Link and Robious International duped billions of rupees of the people in the name of networking business a decade ago. Unity Life International duped around Rs4 billion alone.
The Supreme Court in May 2010 had issued a verdict declaring networking business illegal and ordered the government to scrap the Directives on Network Marketing of Commodities. However, the government moved the Supreme Court, seeking an annulment of its decision.
The apex court on March 28, 2012, however, upheld the government’s decision, declaring multi-level marketing business illegal.
“As there are no proper mechanisms to check this kind of business, these firms can cheat people as they did a decade ago,” said Timilsina.
The Direct Sale of Goods (Management and Regulation) Act, 2018 and Rules 2019 have been promulgated to protect the rights and interests of consumers by making any business related to the direct sale or distribution of goods reliable, transparent and competitive, according to the department.
The department said that it started issuing licences for direct sales and distribution of goods from the end of the previous fiscal year, based on the new regulation.
The department charges a fee of Rs200,000 for a licence.
“There is a legal requirement for companies intending to sell goods directly to obtain permission from the department to do business. Although it has been in use internationally since Germany in 1883, the subject of direct sales is a new trade practice in the context of Nepal,” the department said.
Netra Prasad Subedi, director general at the department said pyramid based networking business is illegal. “There is a provision of fines and imprisonment for operating business in a pyramid style, '' he said.
“We too are concerned that the people from the network business have come into operation and we will clear the speculation soon,” he said.
Subedi said that while conducting business, the provisions of the relevant laws should be fully followed and the department is fully aware of preventing any business activities against the protection of consumer interests which is against the law.