A bill to enact a law that brings multilevel marketing (MLM)
companies under a legal framework and imposes a ban on pyramid selling
was placed in parliament yesterday.
The proposed law, Multilevel Marketing Activities (Control) Act 2013, is aimed at protecting people from being cheated by MLM firms, most of which were found to be engaged in fraudulent activities, especially with public money, in recent years.
According to the proposed legislation placed by Commerce Minister GM Quader, no-one can do MLM business without obtaining a licence, and to get it an applicant must form a company under the Company Act, 1994.
The draft suggests imprisonment of 10 years at most and a maximum of Tk 50 lakh fine for running MLM businesses without licences. If an existing MLM company fails to apply to the government for a licence within 90 days of gazette notification of the law, its operators will also be penalised.
If anyone transfers the licence to other without prior approval from the government, he or she will face a maximum of two-year imprisonment and Tk 5 lakh penalty.
Primarily, a licence will be valid for one year and it can be renewed every year.
The government can run an administrative investigation against the MLM operators and can also appoint administrators to run the troubled companies.
“Although specific laws are there in different countries of the world to control and monitor MLM activities, there is no law in Bangladesh. As a result, no actions can be taken against the MLM companies despite having allegations of raising funds with promises of hefty returns within a short time,” the bill says.
The law, if enacted, will bring the MLM companies under a legal framework. “It will also ensure transparency and accountability by MLM firms and protect peoples’ interests,” the bill added.
The law bans the pyramid schemes in MLM business.
A pyramid scheme is a business model that involves promising participants payment or services, primarily for enrolling other people into the scheme, rather than supplying any real investment or sale of products or services to the public.
Most MLM companies in Bangladesh were following the pyramid model of business, which benefited the members at the top of the pyramid.
In absence of a law, people were cheated by MLM companies such as Destiny 2000, Unipay2u and ITCL since the introduction of the business model in Bangladesh in 1998.
Under the proposed law, the MLM companies will be allowed to trade eight types of products—household, electric and electronics, home appliances, cosmetics and toiletries, herbal, telecom services, training-related products and services and agricultural products.
However, no product can be marketed without packaging, and the package will contain details about the product such as the name of the manufacturer, manufacturing and expiry dates, retail price and information on quality.
Failure to do so would lead to a maximum of two-year imprisonment and Tk 2 lakh fine.
No product or service can also be sold at higher price than the mentioned value in the packet. In case of violation, the law suggests three years’ imprisonment at most and up to Tk 5 lakh penalty.
If an MLM company is found selling nonexistent products, its operators will face an imprisonment of up to five years and a fine of up to Tk 20 lakh, according to the proposed law.
The legislation also suggests double punishment if an MLM firm or an operator violates a rule twice.
The proposed law, Multilevel Marketing Activities (Control) Act 2013, is aimed at protecting people from being cheated by MLM firms, most of which were found to be engaged in fraudulent activities, especially with public money, in recent years.
According to the proposed legislation placed by Commerce Minister GM Quader, no-one can do MLM business without obtaining a licence, and to get it an applicant must form a company under the Company Act, 1994.
The draft suggests imprisonment of 10 years at most and a maximum of Tk 50 lakh fine for running MLM businesses without licences. If an existing MLM company fails to apply to the government for a licence within 90 days of gazette notification of the law, its operators will also be penalised.
If anyone transfers the licence to other without prior approval from the government, he or she will face a maximum of two-year imprisonment and Tk 5 lakh penalty.
Primarily, a licence will be valid for one year and it can be renewed every year.
The government can run an administrative investigation against the MLM operators and can also appoint administrators to run the troubled companies.
“Although specific laws are there in different countries of the world to control and monitor MLM activities, there is no law in Bangladesh. As a result, no actions can be taken against the MLM companies despite having allegations of raising funds with promises of hefty returns within a short time,” the bill says.
The law, if enacted, will bring the MLM companies under a legal framework. “It will also ensure transparency and accountability by MLM firms and protect peoples’ interests,” the bill added.
The law bans the pyramid schemes in MLM business.
A pyramid scheme is a business model that involves promising participants payment or services, primarily for enrolling other people into the scheme, rather than supplying any real investment or sale of products or services to the public.
Most MLM companies in Bangladesh were following the pyramid model of business, which benefited the members at the top of the pyramid.
In absence of a law, people were cheated by MLM companies such as Destiny 2000, Unipay2u and ITCL since the introduction of the business model in Bangladesh in 1998.
Under the proposed law, the MLM companies will be allowed to trade eight types of products—household, electric and electronics, home appliances, cosmetics and toiletries, herbal, telecom services, training-related products and services and agricultural products.
However, no product can be marketed without packaging, and the package will contain details about the product such as the name of the manufacturer, manufacturing and expiry dates, retail price and information on quality.
Failure to do so would lead to a maximum of two-year imprisonment and Tk 2 lakh fine.
No product or service can also be sold at higher price than the mentioned value in the packet. In case of violation, the law suggests three years’ imprisonment at most and up to Tk 5 lakh penalty.
If an MLM company is found selling nonexistent products, its operators will face an imprisonment of up to five years and a fine of up to Tk 20 lakh, according to the proposed law.
The legislation also suggests double punishment if an MLM firm or an operator violates a rule twice.
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