Slated multilevel ruling 'to curb fraud'
JAKARTA (JP): Companies adopting multilevel marketing systems would be required to obtain a special license under the new regulation currently being prepared by the Ministry of Industry and Trade, a senior official said on Saturday.
Director General of Domestic Trade Teddy Setiadi said the license for multilevel marketing, called the License for the Operation of Direct Sales (SIUPL), would be issued to curb possible fraud in multilevel businesses.
The new ruling is being prepared by the ministry in cooperation with the Indonesian Consumers Foundation (YLKI) and the Association of Indonesian Direct Sales Companies (APLI).
"We expect to issue the regulation soon so that the requirement to obtain the special license could be effective immediately," he told reporters.
Teddy acknowledged the special license was needed to curb fraud in multilevel businesses.
Several companies in Medan and Surabaya were recently attacked by clients after owners ran away with hundreds of millions of rupiah they had invested in the firms.
Many people invested money in the companies after being lured with promises of big returns in a relatively short time.
Teddy acknowledged under existing regulations, companies adopting the multilevel system were not required to have a special license to operate.
"They only need to obtain a License for the Operation of Trading Businesses (SIUP), just as other companies working in retail businesses do.
"It is therefore difficult under existing law to impose any penalties on errant multilevel companies, because they had obtained the SIUP to back up their operation. We can only impose a penalty if they have no license to operate."
Under the new ruling, companies adopting the multilevel system would be obliged to obtain both SIUP and SIUPL.
"We believe the new regulation will not create a burden to multilevel marketing businesses," he said.
The government would impose several requirements for companies to get SIUPL which would include the clear and reasonable rule of games, the clear definition of goods to be traded and the minimum paid-up capital for the company to start operation.
Teddy said Indonesia was "several steps behind" other members of the Association of Southeast Asian Nations (ASEAN), which had implemented such regulations to control growing multilevel trading.
Neighboring countries, including Malaysia, established a specific regulation on multilevel marketing, the direct sales act, several years ago, he said.
Asked about his opinion on the businesses, Teddy said based on his office's study, most multilevel companies in the country only sold "dreams" to customers with the promise of big bonuses.
"It is illogical to think that with only a small investment we can obtain a huge income or sizable amount of goods, in such a short time. They are merely selling dreams," he said. (gis)