Mostly unemployed youths engaged in pyramid schemes

Most of the members in the MagneSSa Bhutan and the Oriens Bhutan’s pyramid scheme are unemployed youth, according to the investigation carried out by the Office of Consumer Protection (OCP), economic affairs ministry.

The OCP notified on October 21 that these two companies violated the Consumer Protection Act of Bhutan 2012 and Consumer Protection Rules and Regulations 2015 (CPRR 2015).

As per the rule 38 (xiii) of CPR 2015, “Establishing, operating or promoting a pyramid promotional scheme where a consumer receives compensation that is derived primarily from the introduction of other consumers into the scheme rather than from sale or consumption of products” is considered an unfair trade practice.

Chief Program Officer, Jigme Dorji, OCP said because of the companies’ business strategy and the youths perceiving the scheme as not deceptive practice, the authority would not penalize them.

Additionally, he said the authority has the moral responsibility to guide them as responsible citizens and make them understand the outcome of such schemes.

For aggrieved members, they can redress to the OCP on these pyramid schemes.

“Not everyone is eligible, we are redressing only the genuine members who are innocent, vulnerable consumers like housewives, villagers, and recent entrants who have deposited the money,” said Jigme Dorji.

“The redressal system refunds the money to the aggrieved members however, each case is a unique, and they have to prove how they are aggrieved,” he added. The OCP has received few complaints from the members.

The mode of business operation of the MagneSSa Bhutan and the Oriens Bhutan requires a consumer to register as a member by purchasing products worth Nu 38,500 and Nu 6,000 respectively.

A member can introduce new members to receive compensation in the form of rewards and other incentives that increases with the increase of down line members.

Annually, each member has to renew his or her membership with deposit Nu 38,500 every year.

As per the OCP’s investigation, few higher rung members have received rewards worth more than 0.5mn.

“The scheme is designed to allure personal relationship like family members, friends, relatives, friends and neighbors,” said Jigme Dorji.

The scheme also unfairly targets vulnerable groups of consumers such as unemployed youth, housewives, villagers, illiterate persons, and monks.

The investigation found that these two companies engaged in misleading representation of goods and services, misleading advertisement, trade practices that lack professional diligence, and material distortion of economic behaviors of the consumers.

One point of time, such scheme is bound to collapse as it is dependent on the recruitment of members and the prospective members in any given community or geographical location is going to be exhausted, according to OCP.

Additionally, the scheme also concerns health safety as general consumers are made to believe and depend on their products, through members’ coercion, in substitute of allopathic and traditional medicines.

Moreover, the members function and claim as distributors without license, violating licensing regulations, and they are not competent to deal and recommend health and food supplements.

The person to person delivery without proper storage facilities also leads to product damage jeopardizing the consumer’s health safety.

The OCP suspects other four business entities-mostly cosmetic lines that include Avon, Amway, Oriflame and DXN to be involved in the pyramid scheme.

The OCP plans to investigate in collaboration with the Royal Monetary Authority, the Department of Trade, Drug Regulatory Authority, the Regional Trade and Industry offices, and the Royal Bhutan Police.

According to Labor Force Survey 2018-2019, the overall youth unemployment rate was at 15.7%.

pic courtesy: google

Thukten Zangpo from Thimphu