Many of these illegal schemes are marketing themselves as multi-level marketing companies, says Malaysian Direct Distribution Association.
The Malaysian Direct Distribution Association (MDDA) claims that the fraudulent acts by illegal schemes have adversely affected the reputation of genuine direct selling companies.
“Many of these illegal schemes are marketing themselves as multi-level marketing (MLM) companies but their business models are unsustainable as they are centred around recruitment and networking, not on selling products,” MDDA president Rosedy Issa was quoted as saying by The Star.
He said since these companies claim that they are MLM companies, the public thinks all MLM companies are scams and are unwilling to buy from the genuine direct selling companies.
Rosedy said some of the illegal schemes would require members to buy products in absurd quantities or at an extremely high price.
He said legitimate MLMs were not allowed to do such things as the prices of products they sell must be approved by the domestic trade, cooperatives and consumerism ministry.
“Legitimate MLMs are not allowed to mark up their prices exceeding four times its cost,” he said.
“If a company says you need to buy a package at RM500 or RM1,000 before you can sell, then it is not right. They are not qualified to be called MLM companies,” Rosedy said.
MDDA deputy president Sylvia Koh said genuine MLM companies had to comply with the regulations under the Direct Sales and Anti-Pyramid Scheme Act, while illegal “money game” scheme operators using the MLM business model did not have to do so.
“Many small homegrown direct selling companies have closed shop as they are unable to compete on such an uneven playing field,” said Koh, adding that five MDDA members had wound up in the last two years due to adverse competition.
