Wed, 05 Apr 2000

Govt to control multilevel marketing

JAKARTA (JP): The Ministry of Industry and Trade has issued a a decree to regulate multilevel marketing businesses and to protect the public from fraud, a top official of the ministry said on Monday.

Director general of domestic trade Teddy at the ministry, Setiadi, said that the decree was aimed at creating a clean atmosphere in the multilevel industry and to prevent fraud.

The new regulation requires multilevel marketing companies to apply for a special permit to do their businesses aside from the common permits necessary for all corporations.

The so-called Multilevel Marketing Business Permit will be only issued to companies that have secured operating licenses as limited liability companies.

Under the decree, the companies should also register their products or services with the ministry and the products and the services should comply with the standards of quality set by the government.

The multilevel marketing companies should also have a marketing program that is clear, transparent and rational, and they should provide opportunities for their sales people to profit.

Teddy said the mushrooming of multilevel marketing businesses and the frequent cases of frauds in the industry have helped quicken the issuance of the decree.

Penalties for operating against the permit range from warning letters to permit withdrawals.

Chairman of the Indonesian Direct Selling Association (APLI) -- which groups the country's multilevel marketing companies -- Helmy Attamimi, said of an estimated 200 multilevel marketing companies in the country, about 30 were doing "dirty" businesses.

He said the fraudulent companies focused on collecting funds from the public with dirty marketing tricks instead of making money by boosting marketing.

One case of fraudulence was performed by PT Banyumas Mulia Abadi in July last year.

The company's founder M. Yusuf and his wife Sakinah allegedly embezzled trillions of rupiah in funds received from customers.

Teddy said that Banyumas' operating license had been suspended and the company promised to settle its debts to its customers by the end of next month.

"If the company has not settled its debts by the deadline, we will revoke its license," he said.

Banyumas which trades in textiles was founded in Medan, North Sumatra in June 1997, and had since opened branches in Bandung, West Java; Surabaya, East Java and Jakarta. It offered members a 90 percent return on a minimum initial investment of Rp 2 million within 25 days.

Police closed down the company's offices in July, last year, and former customers has since been trying to recover their money.

APLI currently has 39 company members with some 1.4 million sales people. It said its members made Rp 790 billion in sales in 1999.

"APLI will help uphold the new decree by selecting and screening its members carefully," Helmy said.(10)