The American Chamber of Commerce in India on Thursday expressed concern over the arrest of Amway India Chief Executive Officer William Pinckney from the company's headquarters in Gurgaon by Kurnool Police on Monday.
"This unfortunate incident highlights the need for the government to amend the Prize Chits and Money Circulation Schemes (Banning) Act 1978 and calls for a systematic solution to the direct selling Industry's operational challenges in India," Amcham said in a statement.
Pinckney, who was arrested by Kerala Police last year as well along with two directors under similar circumstances, was placed under arrest on May 27 by the Andhra Pradesh police in connection with a complaint against the direct-selling firm under the Prize Chits and Money Circulation Schemes (Banning) Act.
He was apprehended in Gurgoan and was brought to Kurnool on a warrant.
The arrest was based on a complaint alleging unethical circulation of money through Amway's operations.
The police were permitted to take Pinckney into five-day custody by Kurnool court.
Amchem said that Amway is a direct selling FMCG company that uses multilevel marketing to sell its daily use products through independent distributors, instead of from a shop or a mall.
"These distributors earn their income only from the sale of products or by the sale of products their group makes.
“No commissions are made for recruiting new distributors into the business.
“Hence, compensation under Amway sale and marketing plan is based solely on the sale of products," it said.
While Amcham recognises the government's desire to protect its citizens' best financial interest, the PCMCS Act was enacted more than 20
years before direct selling companies like Amway, Oriflame, Avon, and Tupperware entered India, it added.
"The Act in its present form is unable to distinguish genuine direct selling companies from pyramid or Ponzi schemes.
“Like other countries, India needs to amend this act and create a conducive legal environment for the Industry," Amcham India Executive Director Ajay Singha said.
Industry body Ficci too has condemned arrest of the Amway India CEO and has said it was inappropriate and unwarranted since there is no criminality involved and the case should have been handled as a consumer redressal.
Meanwhile, Amway India said in a statement that William Pinckney was re-arrested based on another ‘frivolous’ FIR lodged in Khammam some days back.
"We maintain that the allegations mentioned in the first information reports are frivolous and give a misleading impression about our business," it said.
The chain of events brings back the need and urgency for the Government of India to amend the Prize Chits and Money Circulation Schemes (Banning) Act 1978 -- under which the complaints have been filed against Amway and its CEO, it said.
This Act gives the power to the police to seize, seal and arrest on the basis of a complaint.
"It is a grim reminder that unless the Act is suitably amended and a new legislation is introduced to recognise legitimate direct selling companies, such repugnant incidents may repeat themselves," the statement said.
Therefore, frivolous or motivated complaints filed against a legitimate direct selling company like Amway have been misinterpreted and booked under the PCMCS Act, it added.
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The American Chamber of Commerce in India on Thursday expressed concern over the arrest of Amway India Chief Executive Officer William Pinckney from the company's headquarters in Gurgaon by Kurnool Police on Monday.