Slated multilevel ruling 'to curb fraud'

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)