The subcommittee formed under the parliamentary Industry, Commerce, Labour and Consumer Welfare Committee, regarding the direct sales of goods for networking businesses, has submitted a report suggesting an immediate amendment to the Direct Sales of Goods (Management and Regulation) Act 2017 to regulate the businesses strictly.

Som Prasad Pandey, member of the parliamentary committee, said that the different clauses of Direct Sales of Goods (Management and Regulation) Act 2017 and Regulation 2019 can lead to the forming of a pyramid scheme and that it is important to amend the Act immediately by fulfilling the necessary process.

“We have already submitted the report to the committee and the meeting on Sunday (September 20) will make the decision regarding it,” Pandey told the Post.

The subcommittee was formed to conduct an investigation into seven companies that had received the business licenses on July 30 and the government has been mired in controversy since. Consumer activists have criticised the government’s decision, calling it an attempt to promote illegal networking businesses, also known as multi-level networking businesses.

The report suggests that while the minimum paid-up capital of direct sales companies should be Rs30 million, the licensed company should raise its paid-up capital by Rs30 million within six months. Panday said that the report has made this suggestion in order to avoid customers being cheated on and if they are, the suggestion will ensure consumers get compensated.

With the implementation of Direct Sales of Goods (Management and Regulation) Act, 2017 and Regulation 2019, a huge amount has been going outside the country through the illegal operation of networking and digital currency business, say consumer activists. Such types of business activities need to be stopped immediately.

The study, that was conducted for a month, suggests that as per the major objective of the Act, direct sales companies should commit to selling a minimum of 50 percent of domestic goods while licensed companies should compulsorily sell and distribute domestically produced goods within two years. If they fail to do so, there should be provision to cancel the license.

However, the Department of Commerce, Supplies and Consumer Protection currently does not have the physical infrastructure nor the human resources for the inspection, regulation and control of work-related direct sales of goods.

The licensed companies, however, have not been able to submit any specific work plan because they are currently in a dilemma, unsure of which method and procedure to operate their businesses, say business owners. They have requested for directives and work procedures related to direct sales of goods to be prepared.

The report also states the director committee, as provisioned by the Act for the inspection, needs to be active and supervise such companies by making sure that customers are getting the product only from the original seller and not a new seller to prevent such businesses from expanding their network into a pyramid model.

The report further states regular monitoring needs to be conducted by forming an inspection committee that includes experts appointed by the director committee. Similarly, if there is any provision of networking business operation on the administrative paper or in regulation, then such type of provision needs to be immediately amended as per Act and regulation. A separate inspection mechanism needs to be created in the department or in the Ministry.

If any licensed company is found to be cheating consumers, then the transaction of the said company needs to be stopped by seizing their bank guarantee, says the report. And if the bank guarantee is not enough to compensate for the cheated amount, then the personal assets of the operator of the said company will be on the hook to make up for the shortfall, it adds.

Companies like Unity, Herbo, Goal Quest and others have been found to cheat customers in the past by restarting their business by registering the company in new names.

The government has suspended the issuance of new licences and temporarily halted business transactions of the seven companies that have received permits to conduct direct sales of goods, following a directive of the parliamentary Industry, Commerce, Labour and Consumer Welfare Committee and opposition from consumer welfare activists.