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The spotlight that was firmly on him in the last week of May still rankles Amway India Managing Director & CEO William S Pinckney. He was arrested by the Kerala police for alleged violation of the Prize Chits and Money Circulation Scheme (Banning) Act. In this interview with Surajeet Das Gupta & Sounak Mitra, the India head of the country's largest direct-selling company says the Act has nothing to do with Amway's business model which operates successfully in around 100 countries. Excerpts:
Direct selling companies like you have been under scrutiny from authorities. What is the reason for this?
India, unlike every other country in the world does not have any specific guidelines for direct-selling companies. Various authorities try to put the industry under various laws and those laws are not really applicable. In any industry, there would be good and honourable operators and there would be some who operate scams.
You have had a number of chit fund scams, you had a number of fly-by-night companies that have came in and gone out. Regulators, unfortunately, in absence of clear definition, can’t tell the difference. And often these companies caught and what they say is, oh you have heard of Amway? We are just like them. And, we get brought under scanner for the wrong reasons.
But when you set up shop in India you must have known that you come under the Prize Chits and Money Circulation Schemes (Banning) Act. So why complain now?
Prize Chits and Money Circulation Schemes (Banning) Act (PCMCS), has nothing to do with what a direct-selling company like Amway does. We sell products, we don’t sell cheques. We don’t collect money, in anyway. Simply, people become Amway distributors, it cost them nothing. It’s free.
There is no obligation to become Amway distributor, to buy anything or sell anything. That’s totally upto you. It’s a pretty straight forward business model and it’s there for over 100 years, operates in some 100 countries around the world very successfully and should also work here very successfully.
But when you got FIPB clearance you knew you will be under this Act?
Absolutely not. We came to India in 1995, and it took us three years to get approval to enter from FIPB. We gave them a document that explained every detail of our business plan. Why would we get the approval to enter when, in fact, we are going to be infringed, when the Act was currently there? How stupid is that.
When you read the Act, it has nothing to do with people who sell products. It’s got to do with chit funds. How can you call a fast-moving consumer goods (FMCG) company a chit fund? Is Hindustan Unilever a chit fund? Is ITC a chit fund? That is not the case. We are just like any other FMCG company.
You came under scrutiny because you used to charge a membership fee and made money from it. This was not allowed as it is what a pyramid marketing company does?
I do not charge now. But I don't think it was wrong after all where ever in the world can you start a business with Rs 995, have three months to try, get free education for the business, and get out anytime within 90 days, if you wish to discontinue, and we give you back the Rs 995.
It is very reasonable. But, people did not understand, regulators misapprehended even though we did not make any money from the entry fee. So, we decide to take it off the table. As far as I know, we are the only company in the country who has done that. Across the world, there are registration fees, entry fees, and no body has any problem as long as there is comprehensive money-back guarantee. .
Don’t you think there was lot of miss-selling happens at the ground level by the people who actually represent Amway to the consumers, or the to-be distributors of this company?
We do everything we can. We try to prevent that, stop that. And, we do that through education, we do that in all the possible ways. This is another reason why we have such comprehensive money-back guarantee. If somebody has promised something and that does not happen, bring it back. We will give you back the money.
There is also a perception that your products are priced much higher compared to any other competing products, primarily because you pass a lot to the direct distributors and there is no transparency in pricing. Is it true?
We are absolutely transparent. You become an Amway distributor and you know the price that we sell to the distributors, as we sell as wholesale. We have products like coconut oil priced below Rs 100, priced competitively with Parachute and also super premium nutrition products. It’s the consumer who makes the choice.
Our products cost no more or no less than any other company’s products cost to make. It’s just that our distribution system is different. Other companies spend huge amount of money in advertisement, we do not. We share that money into commissions. At the end of the day. We don’t have super stockists, distributors, dealers and others who also make huge money from commissions. We just offer commissions to our distributors. It’s just a different way to pay the same money. That’s how it is.
Does the present system of offering membership free to distributors, impact others as now anyone who wants to buy a product for his own use can become a distributor and get a lower price. Will this impact the model as distributors will not be able to expand their business by selling to others.
That happens a little bit. But Indian consumers like to be serviced, they don’t want to take their car and pick up the products from the outlets. Yes, it affects the model a little bit. But not completely.
There has been consistent attack on you? Is it because you have become a pretty large FMCG company and there are companies who are worried?
I really struggle to comprehend this. I understand that if you get bigger more folks look at you. May be this is because of the folks who personally do not like it. They have decided that it is bad, for everybody else as well. And they become crusaders.
Do you follow a pyramid marketing model which is coming under scrutiny, and might not be allowed?
We are not a pyramid. We just create more business opportunities for our distributors by getting more people joining the business, or sponsoring other people. In every company, there is hierarchy. In any pyramid scheme, the guy on top makes more money than the guy down.
But, in our structure, the guy down can make more money than the guy on top. It’s not about when you come in. It’s not about your place in the network. It’s about how much work you do. Also in a pyramid the recruitment fee is shared with the distributer who gets him, in our case he gets anything.
After your arrest has Amway changed its stance about India ?
Not at all, we have a long term view of India and Kerala was an aberration. We are investing Rs 500 crore to set up a manufacturing unit. We are committed as we always been.10 years from now, this will be a Rs 10,000 crore business.
