The government is formulating a policy to regulate multi-level-marketing companies in the wake of widespread controversies centring on a number of companies including unipay2u.
A law is also being drafted to create a legal basis for monitoring the companies.
The draft policy proposes a ban on such companies to issue or trade in shares, to pay their clients commission or bonus.
The ministry incorporated in the policy draft these provisions to stop any attempts by these companies to manipulate the stock market and to check the possibility of money laundering.
‘The commerce ministry has incorporated this provision after the widespread allegation that an MLM company was involved in recent share market crash,’ said a senior commerce ministry official.
The official also said the government was considering formulating a law so that any of such companies, formed overnight, cannot offer false hopes to their clients.
The proposed policy also bans the involvement of cooperatives, banks, leasing companies, insurance companies and similar financial institutions in multi-level marketing business.
The ministry feared that if such financial institutions were involved with MLM businesses, it could result in severe price increase and the clients of those institutions may be harmed.
The commerce ministry has finalised the policy draft which is now pening wit the minister for approval. After this, it will be sent to the cabinet division for the final approval.
The commerce minister, Muhammad Faruque Khan, earlier sat with the business communities to discuss actions that should be taken after the central bank had frozen 200 bank accounts of the unipay2u after it was claimed there had been suspicious transactions.
The draft policy also proposes barring MLM companies from trading unmoveable property such as land, house, flat, shop, office space and trees.
The companies will need to obtain approval or a quality certificate from relevant institutions.
The proposed policy also makes it mandatory for the companies to take prior approval from the government to market unfamiliar commodities through networking and bans marketing anything ‘immaterial.’
The commerce ministry will open a cell to monitor the activities of the companies and will provide a guideline for the deputy commissioners and upazila nirbahi officers for monitoring MLM business at the local level.
Both local and foreign MLM companies would have to pay all relevant taxes.
Before issuing a licence or registering a foreign company, the existence of the mother company should be properly scrutinised, the draft policy says. Foreign companies will be required to have a local office in Dhaka.
The companies will have to deposit a specified amount of money with the government and the trade licence issuing authorities, such as the city corporations or the municipalities, should be provided information on the marketing plan and commission distribution strategy.
The proposed policy also suggests that legal action should be taken speedily in cases of alleged fraud and embezzlement.
The companies will have to abide by the Consumer Rights Protection Act and the proposed competition act.
MLM business has spread widely in Bangladesh since 1999 through the Global Guardian Network.