QNET and Supreme Court: Demystifying QNET & Direct Selling

Contents

Introduction What is direct selling?What is QNET?6 myths around QNET and direct selling 1.“QNET India runs a pyramid scheme.”2.”Only those on the top get rich.”3.”QNET India does not refund customers.”4.“QNET is a money deposit/money investment scheme.”5.“Direct selling is outdated and useless.”6.“Direct selling companies are not credible.”Legal challenges faced by QNET India QNET and Supreme Court: Important legal verdicts in favour of QNET India Honourable Karnataka High Court quashed cybercrime complaints against QNET QNET and Honourable Supreme Court ruling of 2017 The Honourable Supreme Court in 2019 issued a no coercive action notice in favour of QNET!Conclusion FAQs Q. Is QNET a scam?Q. What is the QNET code of ethics and grievance redressal?Q. What are all the QNET products?Q. How does the QNET business opportunity work?Q. What are the QNET compliances in India?Q. Does QNET train its distributors?Q. What are the direct selling guidelines issued by the government of India?Related Articles

Introduction

At times, media houses have alleged that QNET’s business model is a scam or a pyramid scheme, but the facts narrate a different story – a business model that is built solely on high-quality products, sold by motivated distributors. By providing a balanced perspective, we aim to equip our readers with the necessary information to bust the myths surrounding QNET. In this article, we will shed light on what is direct selling and information about QNET’s legacy and products. We will also tackle myths around QNET, and interpret the legal aspects of the Honourable Supreme Court’s verdict.

Let’s begin!

What is direct selling?

Direct selling is a network marketing business model. Here, products and services with unique features are exclusively marketed through the direct selling company and sold directly to customers. These products are primarily sold by registered distributors – who are many times also loyal customers that believe in the products – and promoted through word-of-mouth marketing. Relationship-based marketing is at the core of a direct selling business model. It has existed for more than 150 years and is growing in popularity. In direct selling, the distributor’s income directly depends on the volume of product sales they are able to make, using the network marketing model.

Direct selling has proven to be successful for QNET as well as many brands world-over, such as Tupperware, Amway, Oriflame, etc. and continues to be an effective go-to-market approach that offers micro-entrepreneurial opportunities to aspiring entrepreneurs. The global revenue of the direct selling industry was around $192.2 billion in 2018, as reported by the World Federation of Direct Selling Associations. FICCI-KPMG predicts that India’s direct selling industry will grow and reach INR 645 billion by 2025. The report also states that by then, the direct selling industry in India will create entrepreneurial opportunities for more than 18 million individuals.

What is QNET?

QNET is one of Asia’s leading direct selling companies. It integrates business and technology to empower millions of entrepreneurs through direct selling.

A global direct selling company that started in 1998, QNET was one of the first companies in the world to incorporate e-commerce into traditional face-to-face direct selling. It is headquartered in Hong Kong, with over 25 offices in Asia, the Middle East, Europe, Sub-Saharan Africa, Russia, and the CIS region. QNET is a member of direct selling associations of Malaysia, Singapore, Philippines, UAE, and Indonesia.

QNET offers innovative products and services to customers around the world, with the aim of improving people’s lives. These products are exclusive and of high quality, relating to lifestyle, health and wellness, personal care, and home care.

In India, QNET operates through a local sub-franchisee called Vihaan Direct Selling (India) Pvt Ltd, registered in Bengaluru.QNET offers home care and personal care products, nutritional supplements, and luxury watches through Vihaan Direct Selling. The products are sold by a network of over 600,000 registered QNET distributors in India. While individuals can buy directly from QNET as retail customers as well, many loyal customers who have experienced the quality and integrity of the products and the back-end processes that go into making them, have subsequently become distributors of QNET’s products themselves.

All QNET products meet the highest quality standards and are backed by certifications, guarantees and warranties. QNET also ensures adequate quality testing of all partner companies’ and suppliers’ products. In addition, third-party quality tests are performed, and FSSAI and Ayush certifications are sought for consumable products.

6 myths around QNET and direct selling

A signpost with "Myths" and "Facts" written over it

Due to various misconceptions around direct selling, QNET India has been under the spotlight because of baseless rumours. Here are some of these common misunderstandings and false allegations that cause people to sometimes question the legitimacy of QNET’s business model.

Six most popular myths regarding QNET are busted below!

1.“QNET India runs a pyramid scheme.”

QNET’s sales are run via a network marketing model that engages distributors – people who are self-employed and earn commissions only on the basis of sale of products. If the distributor sells a larger number of products, their commissions are obviously higher. In contrast, a pyramid scheme makes a profit by recruiting new sellers rather than selling the product and usually involves a large upfront fee that is not returnable. QNET complies with all domestic consumer protection laws and has a sustainable sales model of commissions through product sales. Legitimate direct selling companies such as QNET pay commissions only based on the sale of products. If there is no sale of products by the seller, then there is no commission.

Read: Why is direct selling not a pyramid scheme?

2.”Only those on the top get rich.”

When a person is registered as a direct seller or an independent distributor, their position in the team is irrelevant to the amount of income they can earn. Selling products and earning your own commission is the only way to make money. Commissions are not earned based on member recruitment. The truth is that the distributors who generate the most product sales make the most commissions. Interestingly, at times, some distributors earn more than the seller who introduced them to the business. Here, individuals can succeed if they help their team succeed.

3.”QNET India does not refund customers.”

Customer satisfaction has always been QNET’s top priority. QNET’s business is built on word-of-mouth marketing and high levels of trust in quality products. Customers who are unsatisfied with their products must contact the company within the 30-day buyback period. Only within these 30 days will the company accept a refund request, subject to review of refund related terms and conditions. QNET cannot process refund requests after 30 days.

4.“QNET is a money deposit/money investment scheme.”

QNET sells products and services, and customers only pay to purchase these products and services. QNET has never accepted any money deposits or investments. It is important to understand that QNET is not an investment scheme.

5.“Direct selling is outdated and useless.”

Direct selling may not be everyone’s cup of coffee or tea. One must work hard to stand out in the crowd and be a successful entrepreneur in the long run. This industry is already poised to grow to rupees 65000 crore by 2025 and is certainly an exciting opportunity for gig workers. Reports show that by 2025, around 2 crore self-employed direct sellers will be engaged in direct selling; this shows that direct selling cannot be classified as outdated or useless.

QNET is driven by innovation, and its products enhance customers’ lives. Many still think that direct sales involve overpriced products that have no strong practical use. However, QNET’s premium products directly address needs related to personal care, lifestyle, health and nutrition, and leisure. QNET’s products meet the highest quality standards, and the company also ensures adequate quality testing of all partner companies’ products. In addition, third-party quality tests are performed, and FSSAI and Ayush certifications are sought for consumable products.

6.“Direct selling companies are not credible.”

QNET has a customer presence in more than 100 countries, 25 offices across Asia, the Middle East, Europe, Sub-Saharan Africa, Russia, and the CIS region. The company is a member of multiple direct selling associations of various countries and is also deeply dedicated to ethical marketing, as it lives up to its commitments and keeps its promises. QNET is able to leverage high-profile partnerships and memberships because of its credibility. QNET is an official partner of Manchester City Football Club, the current champions of the English Premier League, an official sponsor of the Confederation of African Football, Malaysian hockey confederation, and supports motorsport Formula 3 racer Chetan Korada in India.

Legal challenges faced by QNET India

QNET’s sub-franchisee Vihaan’s legitimacy was recognized in January 2022 by the High Court of Karnataka after the Court heard the submissions of the Company on the illegal invocation of the provisions of the Karnataka Protection of Interest of Depositors in Financial Establishments Act, 2004, as stated against the company by the government of Karnataka.

While directing the company to cooperate with the authorities in the investigation, the Court protected QNET from any coercive action. Presiding over the division bench, Chief Justice Ritu Raj Awasthi and Justice Suraj Govindaraj passed the order after hearing the petition filed by the company questioning the legality of invoking the provisions of the KPIDFE Act.

QNET successfully explained to the Court that it is a “Direct selling company” and not a “Financial establishment” and that it never was in the business of accepting deposits. Therefore, the provisions of the KPIDFE Act are not applicable against it.

Source: The Hindu

QNET and Supreme Court: Important legal verdicts in favour of QNET India

The initial positive verdicts for QNET came at a crucial moment. The government was taking important steps towards recognising and regulating the direct selling industry, and soon the Ministry of Consumer Affairs announced the direct selling guidelines of 2016. These guidelines helped set industry standards (that QNET was already following to conduct its direct selling business) for direct selling industry.

Honourable Karnataka High Court quashed cybercrime complaints against QNET

In February 2017, the Karnataka High Court quashed a cybercrime case by rejecting the FIR. The chargesheet arose from a complaint filed under the provisions of the Indian Penal Code and the Information Technology Act.

The High Court made certain valuable observations concerning the company’s business and legitimacy. After hearing arguments from both sides, the court dismissed the FIR and stated:

“The instant case is a typical case where criminal legislation which is not even remotely applicable to the circumstances of the case have been invoked to substantiate the charges. The dispute, if at all, is between a consumer and a direct seller and (is) out to be adjudicated under the provisions of the Consumer Protection Act. As a consequence, the First Information Report and the charge sheet are unsustainable and deserve to be quashed.”

…The Court further stated

“Material of unimpeachable character pertaining to the Activities of QNET have been produced before the Court. A perusal of the material and the charge sheet averments prima facie indicate that the Activities of QNET and Vihaan, i.e., the multilevel marketing companies, do not constitute offences under the Prize Chits and Money Circulation Scheme (Banning) Act, 1978. The Activities of the company do not fall within the definition of ‘Money Circulation Scheme’ under Section 2(c) of the Act, nor does it fall within the definition of ‘Prize Chit’ under Section 2(e) of the Act. When the Activities of these companies do not constitute either (the) Money Circulation Scheme or Prize Chits, the offences under sections 4 and 5 of the Act do not even remotely apply to such Activities and, consequently, charging the accused for such offences is unsustainable.”

The order clearly stated that direct selling, particularly QNET, does not fall under the “Prize Chits and Money Circulation (Banning) Act”, PCMC Act of 1978, reinstating the fact that QNET is not a ponzi scheme and is a legitimate e-commerce direct selling company.

Source: India Today

Explanation: The PCMC Act bans ‘Prize Chits’, ‘Money Circulation’ and schemes aimed at making quick or easy money and on the happening of a contingent event. This Act is a variation of colonial laws updated in 1978 that aimed to ban small-time lotteries and Ponzi schemes. It was drafted decades before direct selling companies started doing business in India, and direct selling mistakenly became classified under it. The state regulators have allegedly mentioned that a few companies doing direct selling business conduct ‘Money laundering activities’ and promote or conduct schemes to make quick money. These are clear misconceptions and the truth is that the direct selling industry may be the only industry insisting on further government intervention.

QNET’s India business is not a prize chits or money circulation business because the products and services must be purchased for any payment acceptance. It means that the consumer always gets something for their money. No ‘Entry fee’ or “Subscription” is required, complying with Section 2(c) of the Act.

QNET India also does not fall under the purview of the Maharashtra Protection of Depositors (in Financial Establishments) Act, 1999 (MPID), as the company is not a “financial establishment” and does not accept any deposit for any monetary return.

Therefore, any payment for products is not a ‘Deposit’ for MPID Act, as the orders for goods and services fall within the exception of section 2(c)(v)(d) of the MPID Act. The entire product transaction process complies with the provisions of the Sale of Goods Act and the model direct selling guidelines from the Ministry of Consumer Affairs.

QNET and Honourable Supreme Court ruling of 2017

An investigation into QNET India was started in August 2013 based on an allegation against a non-existent commercial transaction. After 3 years of investigation, in March 2017, the case was filed with the Supreme Court of India. Earlier, in the same year, the Hon’ble High Court of Karnataka had quashed a charge sheet filed by the CID in Bangalore.

Eventually, in March 2017, the Supreme Court stayed all FIRs and investigations into the company.

Source: Business for Home

The Honourable Supreme Court in 2019 issued a no coercive action notice in favour of QNET!

In January 2019, the Supreme Court of India directed no-coercive action against QNET India and its directors in more than 60 FIRs, including several cases filed in Karnataka and Telangana. Despite this order, the Cyberabad police in Telangana arrested the company’s director. Later the Hon’ble Supreme Court issued notice to the commissioner of police, Cyberabad, based on a petition filed by QNET India for “contempt of orders”.

Going against the orders of the Supreme Court, the Cyberabad police harassed the independent representatives (Distributors) of the company and registered cases against them for cheating. QNET Distributors Welfare Association (QDWA) filed a petition against this harassment in the High Court of Telangana seeking protective orders, reacting to which the Court ordered a no-coercive action against the independent representatives of QNET India.

Similar orders were passed by the High Courts of Karnataka and A.P. on petitions filed by the QDWA.

“The action taken by the police has no civil and criminal law conformance and is in direct contempt of the order granted by the Supreme Court of India that has directed all states, including the state of Telangana, not to take any coercive Action against the company”, according to a statement.

Source: Times of India

Conclusion

QNET has received validations from the Courts through various positive orders. All these verdicts have helped QNET prove its credibility in India as a genuine direct selling company.

QNET reiterates that it is a legitimate direct selling business. It offers a wide range of high-quality, innovative health, wellness and lifestyle products through its proprietary e-commerce platform that aims to transform people’s lives positively. It also advocates ethical marketing practices and is committed to the sustainable development of the industry in India.

FAQs

Q. Is QNET a scam?

NO. QNET runs a legitimate direct selling business. It offers a wide range of high-quality and innovative products. Read to know more.

Q. What is the QNET code of ethics and grievance redressal?

Code of ethics: When a customer decides to become a QNET distributor, they must agree to Policies & Procedures that provide guidelines for conducting the business. It includes QNET’s Code of Ethics and professional guidelines set by the company.

Grievance redressal: The company can take action only when a complaint or grievance is filed. Unsatisfied customers can cancel their order and terminate their contract with us within the 30-day product refund period. QNET India houses a grievance cell where customers can report product or service-related grievances. We have a dedicated customer support team to help you find the best possible solution to your problem.

Q. What are all the QNET products?

QNET offers a wide range of high-quality, innovative health, wellness and lifestyle products that aims to transform people’s lives positively. Check products offered by QNET.