Direct selling is not easily understood in many countries, and a lack of regulation has led to much confusion and misunderstanding. Because of the nature of the direct selling business model, almost every single company in the industry has faced challenges in new and emerging markets.
Certain countries have prohibited the sales of products through the direct selling business. Most recently, the Kingdom of Oman in the Middle East announced that it would not allow network marketing, a form of Direct Selling, due to a rise in commercial frauds caused by pyramid schemes operating under the guise of network marketing. Similarly, in several emerging markets, the government is scrutinising the industry as it’s a new form of commerce in most of these places. Often, since QNET is a first mover in the industry in these countries, particularly in several African nations, the company comes under the scanner as authorities try to understand the business model. This, by no means, is a short process and is often accompanied by media coverage creating a bias against the industry and the company.
Back in 2009, Rwanda’s Ministry of Finance issued a notice banning QNET because it didn’t localize operations. In response, the global e-commerce based direct selling company opened a dialogue with Rwanda’s government to address its 2009 concerns. In 2012, the direct selling company rectified the situation and set up a local company in Rwanda. “Following that, the Ministry of Finance revoked the ban,” explains a company spokesperson. “This company now serves as our East African hub.”
The government of Saudi Arabia has also banned network marketing as a business model which is applicable to all the leading direct selling companies. They are allowed to sell their products through e-commerce but are not allowed to apply the direct selling business model to the sales strategy. The media often names QNET when covering the country’s all-inclusive ban on the industry because QNET was one of the fastest-growing direct selling networks in Saudi a few years ago.
Misleading headlines about QNET ban in India
Several news reports and blogs claim that QNET is banned in India. This is sadly a result of a misinformation campaign. QNET is not banned in India and on the contrary has been cleared of any wrong doing by several courts in India. Here is the most recent win QNET has achieved in the Indian justice system.
The High Court of Karnataka recognized the business legitimacy of Vihaan Direct Selling India (Pvt. Ltd), the franchisee of the QNET business in India in January 2022. The court’s ruling also protects Vihaan from any coercive action while instructing Vihaan to cooperate fully with the investigation authorities.
Vihaan elucidated that it’s a direct selling company and not a financial establishment, as per the government’s allegation. Legal representatives of Vihaan explained that the direct selling company is not in the business of accepting deposits, which is why the provisions of the KPIDFE Act could not be used against it.
Vihaan Direct Selling first faced allegations of being a scam and pyramid scheme in India and has cooperated with all authorities in proper investigations since 2013. The Indian government has taken steps in the right direction to recognize and regulate the direct selling industry. Those steps include incorporating the direct selling regulations into the amendments of the Consumer Protection Act and creating the Direct Selling Guidelines of 2016 by the Ministry of Consumer Affairs.
The Global E-Commerce Leader Abides By All Laws
When QNET was founded in 1998, it offered only one product: commemorative gold coins. Today, it features hundreds of products in various categories, including health, wellness, jewelry, and travel. It also operates in countries with the most sophisticated and stringent laws and regulations governing this industry, including Singapore, Hong Kong, and Germany. In addition, the direct selling company ensures its operations are entirely legal and compliant with local laws.
The direct selling firm “has always complied with local regulations in any country it has operated in, paid taxes, contributed to numerous philanthropic activities, and reinvested in the country,” says the spokesperson. “We also instill a strict code of professional conduct in our distributors and penalize those who violate our policies and procedures.”
Cybercrime Complaints Against QNET Dismissed by Indian Court in 2017
In February 2017, a cybercrime case was filed against the direct selling company under the penal provisions of the Indian Penal Code and the Information Technology Act. However, the Karnataka High Court dismissed the case, citing that the criminal legislation was “not even remotely applicable to the circumstances of the case.”
The judge dismissed the case: “Moreover, the dispute, if at all, is between a consumer and a direct seller and (is) out to be adjudicated under the provisions of the Consumer Protection Act. Consequently, the First Information Report and the charge sheet are unsustainable and deserve to be quashed.”
The court ruled that direct selling, specifically QNET, doesn’t fall into the category under the Prize Chits and Money Circulation Schemes (Banning) Act (PCMC Act), 1978.
According to the court ruling, “The activities of QNET and Vihaan, i.e., the multilevel marketing companies, do not constitute offenses under the Prize Chits and Money Circulation Schemes (Banning) Act, 1978. The company’s activities do not fall within the definition of ‘Money Circulation Scheme’ under Section 2(c) of the Act, nor does it fall within the definition of ‘Prize Chit’ under Section 2(e) of the Act. When the activities of these companies do not constitute either (the) Money Circulation Scheme or Prize Chits, the offenses under sections 4 and 5 of the Act do not even remotely apply to such activities and, consequently, charging the accused of such offenses is unsustainable.”
In January 2019, it received another favorable ruling from the Supreme Court of India. The court’s directive covered 60-plus FIRs, or first information reports, which included several cases filed in the states of Telangana and Karnataka. Despite that ruling, India’s Cyberabad police began investigating its independent representatives and filed charges of cheating against the company.
Because of that, the QNET Distributors Welfare Associate (QDWA) appealed and sought protective orders against the harassment in the High Court of Telangana. According to a statement, “The action taken by the police has no civil and criminal law conformance and is in direct contempt of the order granted by the Supreme Court of India that has directed all states, including the state of Telangana, not to take any coercive action against the company.”
It seems clear that while the direct selling company has come under fire and been investigated in multiple countries, it strives to follow the rules and obey the regulations of every region it operates in. “It’s a very transparent company,” confirms CEO Malou Caluza.
