Amendment to Direct Selling Act 1993 (Malaysia)

Amended Direct Sales Act 1993 (Malaysia)

Datuk Seri Ismail Sabri Yakcob

KUALA LUMPUR (June 8, 2010): Amendments to the Direct Sales Act 1993, aimed at ensuring a more ethical direct selling business, are expected to enhance traders and investors' confidence on business prospects in Malaysia.

Domestic Trade, Cooperatives and Consumerism Minister Datuk Seri Ismail Sabri Yakcob said the ministry was also confident that the proposed amendments would curb unscrupulous practices through the pyramid scheme in the direct selling business.

The act was being amended to protect consumers' rights and interests, encourage growth and development of ethical direct selling activities and to ban all form of business using the pyramid and get-rich-quick schemes, he said when tabling the Direct Sales (Amendment) Bill 2020 for its second reading in the Dewan Rakyat today.

Ismail Sabri said the proposed amendments would also see an increase in penalty against offenders, including a higher fine fine of between RM1 million and RM10 million on companies found to promote or carry out business using the pyramid scheme.

For individual offenders, the fine will be between RM500,000 and not more than RM5 million or jail not exceeding five years or both, for the first time offender. --  Bernama.

How sincere and effective is the proposed amendment in policing the direct selling business in Malaysia?  The Ministry cannot police the industry effectively with the licenced players. What more to say about those illegitmate MLM companies?

Some licenced MLM companies with AJL number proudly printed on all business documents and forms. Their business are sactioned  and supported by other Ministers in their official launches. But these companies blatantly violated the DSA.

Just look at some of the application form for distributors and direct sellers and their sales invoices. Read those fine prints at the back or on the bottom before the doted line for applicants signature. Complaints were lodged with the Ministry. As usual, no action taken, especially for those crooked MLM companies with political connection.


Isn't this all hot air about protecting consumers?

Sample of these forms will be posted later.

Independent Business Owner (IBO)

I was an Amway distributor 30 years ago. My upline DD (Direct Distributor - a rank in Amway marketing plan) always remind me not to display the products at any commercial outlet.

Many part-time Amway distributors were coffee shop operators, dhoby shop operators, tailors or sundry shop owners. They displayed Amway products in their shops. Amway warned those distributors and threatened to terminate their distributorship. The reason being the shop owners have a competitive advantage over other distributors without a retail outlet.

Some MLM companies still practise this policy

My brain was conditioned by my upline that the key feature of the Amway business is “doing your own business without any overhead cost”. That means a distributor does not incur any stock holding cost and no fixed cost to pay every month. Sound great isn’t this? But in reality is this practicable?

Is MLM direct selling still running on the same principles today?  I am afraid not.  Today’s distributors are not on level playing field.

They have deviated from the original MLM concept.

 

Most MLM companies have started having retail outlets. Some of these retail outlets belong to the MLM companies, while others are distributor-owned. Some distributors open their own retail outlet on their initiative.  Some are stockist outlets.  
There are also distributors whom are compelled by the MLM companies to open retail outlets. These MLM companies discriminate the distributors with commission structure.

Is MLM direct selling dead?  Looks like it is heading to that direction. In the early day of MLM business, AVON was the only direct selling company operating via the franchised boutique store. They are the single-level marketing (SLM) company.  More and more established MLM companies are following the AVON concept by opening retails outlet directly or through their distributors.

These outlets are called Independent Business Owner (IBO), Franchise Business Owner (FBO), Franchise Stores or Distribution centres. You can called them by whatsoever name you may so choose but in substance these are retail outlets. 

The home party system by Tupperware, has also joined the bandwagon.

The key difference between conventional proprietary retail outlet and the IBO or FBO is that you are subjected to control by the MLM companies. MLM companies controlled the products you can sell, the price you can sell and the profit you can make. And your profit is your commission and you are still at the mercy of the MLM companies to pay you. Why there are still so many suckers around?

The true Independent Business Owner is  your neighbourhood papa-mama store.

Some of these MLM IBO or FBO operates a “side business” to re-coup the fixed cost. You would not be surprise to find foot reflexioloy, massage, facial treatment, manicure and pedicure, café, hair dressing and food business being transacted side by side.

The saying that the MLM companies keep shifting the goal post while the game is in progress is very true. The IBO and FBO earn higher commission for the same product sold, as compared to those without a retail outlet. Who can say the business is on level playing field?

The Myths of MLM is being challenged further.

See the picture of the MLM retail outlets of  Zhulian, Cosway, Elken and  Sunrider.

Did you notice a small piece of flyer sticked on the glass door of the shop? Most of these shops offer services like facial treatment, manicure  pedicure, foot reflexiology etc to supplement their revenues.

What is next on MLM?

Many entrepreneurs and businessmen are comtemplating MLM as a distribution channel.  In Indonesia, basic groceries such as rice, sugar, dressed chicken are sold via MLM. A few businessmen have approached me to sell their products via MLM. I am quite wary of those schemes with any element of money game or scam. 

One proposal involved live bird, fish, processed meat and ready-to-cook food.

Today, the Chinese burial plots are being sold via MLM. Restaurant franchise, gold bullion, unit trust, holiday resort, time sharing resort, land investment and your own future funeral package are also being sold via MLM.  What is next to join the queue?  Probably, the China woman will be available through MLM.

Imagine buying your own funeral package for future use. And, this is transferable to any other buyers. 

And, the word  MLM really stinks. A new term is therefore coined. They called it NETWORK MARKETING.  A new term does not change the substance. There are many scams involving the network marketing activities.

The most recent scam involving an established food outlet was reported in the cyber media.

Investors cry foul over KL cafe chain

Police are investigating a restaurant franchise chain after 10 investors, including a Singaporean, lodged a report claiming one of its directors had absconded with more than RM9 million.
The investors are part of a group of more than 3,000 people, mostly Malaysians, who bought shares in the franchise known as Island Red Cafe. About 200 Singaporeans are said to have invested in the company, which claimed a monthly turnover of about RM2 million.
Each lot of shares was sold for about RM6,000.
The first Island Red Cafe opened in Kuala Lumpur in 2007. The cafe is known for its range of local and Western food and has 15 outlets throughout Malaysia.
The 10 investors lodged their police report at the Nusa Bestari police station in Johor Baru on Sunday.
The MCA Youth’s consumer affairs bureau, which promotes and enforces consumer rights, is working with the police to deal with complaints.
The Singaporean who lodged the report, Ng Ee Siong, 50, said he was lured into investing in the business by its concept.
Ng, who works in a multi-level marketing business in Singapore, said that in return for a lot of shares that he bought some time last year, he was given a voucher worth RM100 to spend at any Island Red Cafe and RM300 in cash on a monthly basis.
He said: “I could easily have made back my principal sum in two years that way and earned a profit too.”
He said he bought a second lot of shares late last year and also introduced five Singaporean friends as investors.
But Ng claimed that he stopped receiving the vouchers and cash payouts earlier this year, adding that he had not been able to contact any of the company’s four directors — including the one who is said to have absconded. (article extracted from Malaysia Insider)


MLM, Networking Marketing or the newest IBO ( Independent Business Owner) are the same old stuff by the same old gang of people.  My next write up will be on IBO.

Things you need to know about MLM companies and their products

There are many scams involving MLM companies nowadays. These MLM companies no longer preserve their ethics that they endeared so much in the past. The principle of delivering quality products directly to the consumer at a “value for money” price and with money back guarantee has diminished.

The motive of many MLM companies today is to make “BIG” bucks and make it fast.  Product quality and price have become secondary.

To avoid being cheated by the unscrupulous MLM companies, consumers must be able to differentiate the products, the MLM companies and the direct sellers.

As at February 2009, there are 670 licensed direct selling companies approved by the Ministry of Domestic Trade, Co-operative and Consumerism. The direct selling industry generated a total revenue of RM4.56 billion in the year 2007. The ministry revoked the license of 12 direct selling companies. (source: Ministry of Domestic Trade)  On top of this figure, there are hundreds of unlicensed/illegitimate direct selling companies.

There are two direct selling trade associations in Malaysia. One is the Direct Selling Association of Malaysia (DSAM) and the other is the Multi-level Marketing Association of Malaysia. (MLMAM). The former consists of the big players whilst  the latter belongs to  the small timers.

All approved direct selling companies in Malaysia carries a license number with the prefix AJL 123456.  This license is issued by the Ministry of Domestic Trade , Co-operative and Consumerism.  This license number must be printed on all the official documents of the companies. Every direct seller of approved companies must carry an ID card with the AJL number.

Most MLM companies are in the business of health food, food supplements, traditional medicines and cosmetic & skin care. These products are subject to control and approval by the Ministry of Health, National Pharmaceutical Control Bureau. All approved products must carry the approval code BKP- MAL12345T.

All product inserts, brochures, leaflets and catalogue of health food, food supplement, traditional medicines and cosmetic & skin care must be vetted and approved by the Medicine Advertising Board. Approved product inserts, brochures, leaflets and catalogues carry a code number KKLIU12345/YYYY/ABCD.

So, to all the wise consumers, please ensure that direct sellers, be they your relatives, friends, colleagues, acquaintances or strangers, fulfill all the above-mentioned conditions before looking at their products and talking to them. If you are not cautious, there is a high chance that you will be scammed. There are now many unlicensed products being sold in the market.

Can you remember the famous “Slimming Pill” case in Singapore which caused liver failure? So, don’t be gullible.

MLM Companies Opening Retail Stores and Self Service Stores

MLM is a Multi-level Marketing system of direct selling. The fundamental concept of MLM is to sell products or services directly to the consumer via their own individual network of distributor, thereby by-passing the conventional channel of wholesaler and retailer. The advertisements of the product or services are also through the network of distributors by words of mouth and brochures, and hence eliminate the huge advertising and promotion cost usually borne by the marketing company or the manufacturer/producer.

The original concept and philosophy of MLM is to deliver quality products to consumer at lower cost and with personal touch and integrity. “Money back guarantee” was a practice they uphold strongly with pride. The MLM company, like Amway, also use simple, functional and cost effective packaging for their products. They save huge amount of money on advertising & promotion, packaging and distribution cost. The saving in cost is paid to the distributors in the form on commission.

Does the MLM company today still conserve the original concept and the core values of MLM? I am afraid the answer is “NO” to many established ones, as well as the newly sprung up MLM players.

I have been in the MLM industry for more than 20 years as a distributor and an employee of a MLM company. Both the MLM companies and its distributors no longer practice direct selling with the fundamental concept of delivering quality product at lower cost with personal touch and integrity. Instead, every MLM company and distributor practice “Make “Big’ money fast” and disappear quickly. It is sad to see a genuine business distribution channel being tarnished and destroyed by greed. Nowadays, the MLM people have no ethics and principles. They will go to the great extreme to extort money from whomever they can get hold of. Stranger and relatives are not spared.

Due to the aggressive and disgusting approach taken by direct seller, many MLM companies now resorted to opening retail outlets and self-service convenience stores, hoping to attract consumers, without the harassment of the “unwanted” direct sellers.

So, is this the dead nail of MLM and back to conventional distribution channel? Only time will tell.

The Magic Stone

“This is a magic stone pendant.” claimed one direct seller. “This is a miracle stone pendant!” claimed another direct seller. “This is a cure-all stone pendant!” said a friend of the direct seller. They collaborate, support and reinforce each other’s statement. These are the tactics of the direct sellers to convince consumers and rip off their money. This is the current craze among the direct sellers today. Every MLM company wants to join the money ripping opportunity. Both established MLM companies and the “Fly-by-night” MLM companies are joining the fray to rip off innocent consumers. The over-zealous or “conmen” direct sellers exaggerate on the medical benefits of the stone pendant. They claimed that it can relieve all kinds of body aches and pain, including insomnia and chronic illnesses. I was given a sample of the first generation stone pendant by a friend a couple of years ago. This made-in-USA pendant costs only RM80.00. He attached it to an attractive necklace and packaged it in a beautiful box.He then sold it for RM950.00 through direct selling. Within two years, he pocketed RM2 million (USD650,000) and emigrated to the United States. Other MLM companies joined this band-wagon. They imported a cheaper version from Korea that costs RM50.00 and sold to the consumers for RM350.00 a piece. They used “live testimony” of “consumer” to convince other consumers of the benefits of the pendant. Is there any scientific or medical proof that the pendant is worth the money you paid for? I wore the pendant as a jewellery piece due to its beautiful semi-transparent stone with a ‘meaningful” logo on it. The logo is only ‘meaningful” to me but not necessary to others. Unless you want to buy a stone pendant as a jewellery piece or a pyschological instrument to calm your worry of pains, don’t take a second look at this. Otherwise, you will be conned by their super exaggerated claims of medical benefit.

A Ponzi scheme in disguise

Invest in art collection with “Image Direct”, a Holland-based company, and earn 300% return on your investment within one year.
.
Have a share of unconverted agriculture land in United Kingdom and earn four times return on your investment, when the land is converted to commercial use.

Invest in land in Canada and USA that gives you a guaranteed return of 300% in three years.

You hear these statements from your so-called “investment adviser” friends or the “expert financial consultant” or read about them in the advertisements in newspapers or banners in shopping malls,

Recently, the UK land company that sold investment in land to “greedy” investors in Asian countries was declared bankrupt. The owner of UK Land who collected monies from gullible Asian investors with promises of high returns has disappeared.

A Canadian company operated the same business scheme as UK Land. Its office in Kuala Lumpur was raided by Bank Negara (Malaysia’s Central bank) for operating an illegal money deposit taking business.

These UK, Canadian and USA land investment companies are operating a Ponzi scheme in disguise.

Similarly, a few art and antiques collection “investment” companies are operating web-based Ponzi scheme with investment in Michaelangelo’s art collection. Each “investor” is given a replica copy of the art and a letter to signify their share in the art collection. This piece of paper issued over the internet has questionable legal effect. The replica copy of the “art collection” is no different from the RM20.00 (USD6.00) poster from the stationery outlet.

All these investment schemes are sold via the MLM concept. But there are no goods or ownership titles changing hands. For the investment in land, there is no land title or strata title given. Neither is there any deed of assignment given for your share or your right to the property. All that is given after you have parted your money is a piece of paper to signify that you have a share in the property. This is a worthless piece of paper.

More scams are expected to surface during this financial crisis. Be cautious and be wise with your hard-earned money. Don’t be greedy and gullible. Don’t trust you so-called “Financial Advisor” or ‘Investment Advisor” blindly. Money doesn’t fall from the sky. Only hard work can bring in money.