Government to work on preventing a Amway repeat

NEW DELHI: In the backdrop of police action against global direct selling major Amway in Kerala, the government is looking to remove the legal ambiguities to differentiate between fraudulent ponzi schemes and genuine businesses run by "reputed and law-abiding" entities.

"We will work closely with concerned ministries and industries to remove the ambiguity in the law as soon as possible," corporate affairs minister Sachin Pilot said. "While steps should be taken to crack down on fraudulent companies running dubious investment schemes, companies that are reputed and law- abiding must be delineated," he said.

Amway India chairman William S Pinckney and two company directors were arrested by the Kerala police earlier this week over allegations of fraud. They were later released on bail.

Commenting on the Amway incident, Pilot said that "it is disappointing that such an eventuality came about. Such events might negatively affect the prospects of our country as an attractive investment destination".

"While we take strong actions against ponzi schemes, we need to be careful not to create a vitiating atmosphere for reputed and law-abiding companies," he added.

Amway's business model involves direct selling of various consumer products to their customers, who in turn get incentives for bringing more clients and further expanding the network. While ponzi schemes also follow a kind of network marketing model, these businesses lack any real products in many cases.