Business Today

Amway India CEO arrest will scare away investors: Industry

Ten days after the arrest of Amway India's Managing Director and CEO William Scott Pinckney, corporate leaders remain upset and worried.

E. Kumar Sharma | June 9, 2014 | Updated 10:17 IST

Ten days after the arrest of Amway India's Managing Director and CEO William Scott Pinckney, corporate leaders remain upset and worried. They are concerned at the way the arrest is being handled.
Speaking on condition of anonymity to Business Today, the CEO of a major Indian company said: "Businessmen are scared by the way the CEO of an American company, approved by the FIPB (Foreign Investment Promotion Board), is being treated by police officials in Andhra Pradesh with FIRs (First Information Reports) being filed in various small towns one after the other on similar charges. He is clearly being harassed and it doesn't smell right." He added: "Multi-level marketing may be unconventional but it is not a scam... in any case, proper justice can be done without this kind of police action."
Check the website of Amway India and there is a video message from Samir Behl, Regional President, Europe, India and Africa of Amway decrying the arrest as "a well-planned and orchestrated attack" on Amway's business. Behl says: "This was done when there was little oversight from the state government because of the transition happening on the political front during the period (Read: the new Telangana state was formed on June 2, while bifurcated Andhra Pradesh is witnessing the swearing-in of its first chief minister N. Chandrababu Naidu on June 8th). He also says: "What is also very disturbing is the way Bill Pinckney, 65, is being moved from one police station to another under the pretext of investigative detention." Pinckney, who was arrested by the Kerala Police last year under similar circumstances, has now been arrested by the Andhra Pradesh police in connection with a complaint against the direct-selling firm under the Prize Chits and Money Circulation Schemes (Banning) Act (PCMC Banning Act). Behl argues that the police's "actions are based on a misapplication of the Prize Chits and Money Circulation (Banning) Act of 1978. This Act was put in place way before the direct selling industry entered India....." He says in his video message that his company is "fully committed to working with the central and state governments to ensure suitable regulations and law are passed to make sure we can differentiate between legitimate and illegitimate direct selling companies" adding his company remains committed to India and is going ahead with its plans to invest Rs 500 crore in a manufacturing facility in Tamil Nadu and to get it ready before the end of this calendar year. Nevertheless, he does point out that the arrest "will certainly have a big impact on the confidence of international investors in India."
At the moment, all eyes seem to be on the next steps the governments (at Centre and state) take on this and as far as the argument that all this has been a result of "a misapplication of the Prize Chits and Money Circulation (Banning) Act, 1978, there are many who think, there are several Acts that need to be revisited and updated in India as would be evident from the recent Business Today story.

In its response to the arrest, Federation of Indian Chambers of Commerce and Industry (FICCI) on May 27th quoted Bejon Misra, a consumer activist and advisory board member - FICCI Direct Selling Taskforce as saying:  "It is most unfortunate that consumers in India are not protected in an unbiased and non-discriminatory manner. Consumers need prompt redress, why a complaint made in December 2013 gets suddenly activated in May 2014 under the provisions of the Prize Chits Money Circulation Banning Act 1978, when the consumer has not bought any financial product. The complaint should have got escalated under the provisions of the existing laws like the Consumer Protection Act 1986. It appears that the misinterpretation of the PCMC Banning Act was deliberate and the result of incompetence in the investigation process." Strong words but then, it's an issue industry can hardly ignore.

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