Proper legal framework required as new businesses enter the market

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MagneSSa and Oriens are not ponzi schemes clarify RMA officials

As new business ventures enter the market, the need for proper legal frameworks has become necessary.

The two new entrants – MagneSSa and Oriens – both dealing in health supplement and cosmetic items, claiming health benefits, have lately raised eyebrows. Both these business ventures engage in Multi-Level Marketing (MLM) or direct selling of the products.

RMA’s Financial Intelligence Department maintains that the products are being sold in this case and that it’s more like a trading i.e. a person agrees to buy that product for specified consideration to be sold at higher prices to earn that little income.

Clarifying that these business ventures are not ponzi schemes, RMA official said all ponzi schemes are pyramid schemes but not all pyramid schemes are ponzi schemes.

Ponzi scheme, meanwhile, is a fraudulent investment scheme promising high rate of return with little risk to investors. In ponzi scheme, an individual is required to make an investment in cash and then look for downlines.

According to the RMA official, the pyramid scheme is to get your money and then use the money to recruit others to get money. The pyramid scheme, which involves products, which is called MLM, the income is earned through sales made by an individual as well as earning certain percentage from the sale your downlines make.

“This business is MLM and it is not a central bank’s mandate,” said the official, adding that it would require forming a multi-sectoral taskforce to sit together and submit it to the government whether such business models should be legally allowed to operate or not.

“In absence of a legal framework, this would be left unattended,” said the RMA official.

Meanwhile, the Drug Regulatory Authority (DRA), the sole authority that allows the import of products of health supplement in the country only after listing with them, issued a notification on March 13, stating that the authority has received complaints from reliable sources that the listing certificate issued by the authority for MagneSSa health supplements has been misused for promotion of all other products of the same company.

After receiving a written application for withdrawal of the three products that were earlier listed, the DRA cancelled the listing with effect from February 27 this year. “No health supplements of MagneSSa are listed or registered with the authority,” stated the DRA notification.

DRA also stated that it will take regulatory actions against any individuals or licensees if found engaging in promotion and sale of any such products claiming health benefits without approval from the authority.

DRA has listed 23 products of Oriens.

DRA’s Chief Regulatory Officer Ngawang Dema said listing is provided for generally low risk groups of products and just involves scrutiny of minimal documents for evaluating the safety and quality.

She added that claims should not be false, misleading or imply to treat or cure any disease or condition. All claims mentioned on the product label or product manual must be substantiated with evidence. The evidence must be specific to claims as mentioned on product label and should not contain other unnecessary information.

 She said three listed MagneSSa products were cancelled since the market authorization holders (approved product applicant) confirmed that they were not dealing with sale and distribution of MagneSSa products and the listed certificates issued by DRA were being misused for marketing and promotion of products of MagneSSa by other individuals or agents.

“Due to increased trends of influx of wide range of health supplements and to safeguard the consumers, DRA is working in close consultation and collaboration with the relevant government stakeholders such as the Office of Consumers’ Protection, Department of Customs and Department of Trade,” said Ngawang Dema.

Similarly, Chief Trade Officer from the Office of the Consumer Protection unit, Gopal Pradhan said they are working closely with concerned agencies and closely monitoring whether these business ventures are misusing the license for selling health supplements in the name of cosmetics license.

Meanwhile, Saran Kumer, who owns a MagneSSa shop in Thimphu, said he has a license to sell cosmetics of MagneSSa products, adding that he doesn’t sell any health supplement products.

However, it has been learnt that most of these products are sold in the country at individual level and not from retail shops. Currently, around 500 to 600 Bhutanese people are engaged with MagneSSa.

Talking to Business Bhutan, the focal person of Bhutan Oriens said they got retail license in October 2016 and wholesale license in February 2018. Bhutan Oriens has a retail outlet in Phuentsholing for all the products. The Oriens was officially launched in 2017.

The focal person said there are around 5,000 to 6,000 active members in the country and that members get incentives and bonus every month and those who perform well get higher incentives. There are also incentives where members get opportunity to visit other countries and some members have already visited so.

However, he said the wholesale license of Bhutan Oriens has been kept in hold because a task force team from the government agencies conducted a survey on their products and indicated that this business could be similar to Ponzi and pyramid scheme in March 2018.

“But our company is not a Ponzi scheme neither pyramid. It’s a worldwide brand,” said the focal person, adding that taxes are also paid to the government for the business. Meanwhile, Chief Regulatory Officer Ngawang Dema said they are also talking with the trade department whether such businesses can be done at an individual level.

Dechen Dolkar from Thimphu

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