By Lal Singh People in India usually discuss about MLM a lot but they really don’t understand this business model properly. Many people say it’s a good way of doing business and some other people think it is a total hoax & risky. If you check online, you’ll find different solutions, which simply makes things more confusing.So, the obvious question is: whether MLM really legal in India?There isn’t a simple yes or no answer.
What MLM Should Be:
MLM is a means to sell things through individuals instead of stores. If someone joins a business, sells its goods and gets a commission % of the sales. If that individual brings in other people who also sell things, the first person may get a tiny commission of their sales as well.
This looks like standard direct selling on paper. Selling things through a network is not against the law. Things go wrong when selling things isn’t the main goal anymore.
What the Law in India Really Looks At:
There is no one law in India that explicitly indicates MLM is legal or prohibited. The government doesn’t care about how the corporation makes money. People regularly employ the Prize Chits and Money Circulation Schemes (Banning) Act, 1978, to stop illicit schemes. This regulation makes it illegal for businesses to make money mostly by getting new members instead of selling real goods.
The Consumer Protection (Direct Selling) Rules, 2021, were put in place later to keep an eye on and govern direct selling enterprises. These guidelines cover things like how to register correctly, how to handle complaints, and how to be honest in your interactions. These rules must be followed by any MLM organization that wants to do business legally.
Why MLM Has a Bad Reputation:
It’s easy to see why MLM has a poor name in India. A lot of businesses misuse the model. They push hiring hard and promise high paychecks. Products are often too expensive or not described well. There are a lot of success tales at meetings, but not a lot of real facts.
Over the period of time this type of business becomes a pyramid scheme. The Founder members of the pyramid schemes generate money from the fees that new members pay. In the end, the system fails, and most people lose money. Such plans are against the law in India.
How to Tell the Difference:
A lawful MLM makes money by selling things, not by charging people to join. You don’t have to acquire a lot of stock. Sales, not simply hiring, affect income. There are clear rules, but you can’t be sure you’ll make money.
An illegal scheme is more about getting others to join than selling. Usually, if a business sounds too good to be true, it is.
Conclusion
In India, MLM is not fully banned, but it is also not completely legal.The way the business operates in real life is what matters. MLM companies that are real and sell products can work legally in India. Money circulation plans that rely on a lot of recruitment can’t. People who want to join an MLM should be careful, ask questions, and not become too excited about what they are promised. In most of the cases understanding this difference early can help you avoid a lot of regret later.