Network Marketing And The Law In Singapore

For many years, legitimate network marketing companies and illegal pyramid schemes were grouped together and frowned on by authorities in Singapore. This has changed in recent years and many companies are now moving into the lucrative Singapore market.

In countries like Australia, the main difference in the eyes of the law is that for a business to be legitimate, the income must come from the sale of products and not simply from recruiting people. So it must be a real network of distribution - a way of distributing products or services and not just a scheme of recruiting.

As a method of distributing products or services it is very powerful and extremely attractive to manufacturers. Consider the comparison between the financial outlay for a company to put their products in a supermarket chain, compared with the outlay to introduce products to a Network Marketing group. Instead of the company having to outlay millions of dollars in advertising before they sell a single product, they have a team of dedicated people who use the product promoting it for them - and they don't pay out a cent in commissions until they have sales!

So how do Singapore authorities now view this distribution method?

In Singapore, Direct Selling practices come under The Multi-Level Marketing and Pyramid Selling (Prohibition) (Amendment) Act 2000, which came into operation on June 1, 2000. An Exclusion Order was made at the same time that the Act was amended. Under the Order, there are classes of schemes that are automatically allowed to operate.

Any company could, on the strength of the legal advice they presumably sought and received, make the case that they are excluded by the Order, as long as they fulfill the criteria for one of the excluded classes of schemes. There is no application for approval required for any of these excluded schemes.

The following are criteria that a company might be looking at when evaluating whether they can operate in Singapore. Note that the onus of making sure a compensation plan complies with the Exclusion Order lies with the company.

Under Exclusion Order 2 (1) (c), any scheme or arrangement, or any class of such scheme or arrangement, must satisfy the following conditions:

(I) any benefit received by any promoter or participant in the scheme or arrangement accrues as a result of the sale, lease, license or other distribution of a commodity to any other person, and not as a result of the recruitment of one or more persons to be additional participants in the scheme or arrangement;

(ii) the promoter of the scheme or arrangement shall not knowingly make, or cause to be made:

(A) any representation relating to the scheme or arrangement, or relating to the commodity, which is false or misleading; or

(B) any omission in a material particular relating to the scheme or arrangement, or relating to the commodity;

(iii) the promoter of the scheme or arrangement shall not make, or cause to be made, any representation to any person that benefits will accrue under the scheme or arrangement in a manner other than as specified in sub-paragraph (i); and(iv) the commodity shall be distributed with a refund or buy-back guarantee that is exercised on reasonable commercial terms, and every participant in the scheme or arrangement and every consumer of the commodity shall be informed of the existence of the guarantee and the manner in which it can be exercised.