Amway CEO arrest on 12/2013

SSANANDAKUMAR (KOCHI)

Local court in Kerala has granted bailtothreesenior executives of the Indian arm of Amway whose arrest on Monday sent shockwaves across the fledgling direct marketing sector and

once again raised concerns about

the country's image as an invest

ment destination. The three, including Amway India managing director and CEO William S Pinckney, were remanded to

14 days custody by the chief judicial

magistrate court in Wayanad in

Kerala on Monday, under a 2011

complaint that accused the compa

ny of running a pyramid-type oper

ation and selling overpriced products to customers. The court granted bail on Tuesday afternoon.

           Pinckney and two other directors,

Anshu Budhraja and Sanjay Malhotra, were arrested by the Crime Branch of the Kerala Police in Kozhikode and later taken to Wayanad and produced before the chief

judicial magistrate.

       The arrests were made on the basis

of three cases registered against the

company in Wayanad in 2011.

         The main charge against Amway

India is that its operations have voilated the Prize Chits and Money Circulation Schemes (Banning) Act of 1978, a law primarily aimed at ponzi schemes that involve taking public deposits and offering

promised returns "Companies like Amway sell its products by enrolling new members. The sales by members at the

lower level will bring in returns for

the members at the higher level,

which is in violation of the Act," said PA Valsan, a superintendent of police in the Superintend Economic Offenses Wing of the Crime Branch.

       The company is also accused of

cheating its customers by selling its

products at inflated prices. Finally, there were also complaints about the way it operated,notably a complaint from a Kozhikode-based woman in which she

said that she was asked to buy - or complaint, has been misinterpreted and booked" under the 1978 PCMCS law, which is a scourge of the direct selling industry because it was conceived at a time the direct sales business model did not exist. "This has repeatedly been a challenge not only in Kerala, but elsewhere across India, for the direct selling industry," Amway said, adding that the sector has been seeking an amendment to the PCMCS law on the  grounds its business model involves the sale of products and does not involve taking deposits or makes promises of financial returns."Such rash action serves little purpose but to tarnish the image of India as an investment destination," the firm said, adding that it was alegitimate direct selling FMCG organisation which operates in 108 countries across the world retailing

more than 450 products globally and140 products in India.

sanandakumar.s@timesgroup.com