Although public notifications have been sent by the Office of the Consumer Protection (OCP) a few months ago cautioning the people to refrain from taking part in pyramid like schmes, , however, thousands of youth who have graduated from colleges are signed up in the an alleged pyramid scheme business called MagneSSa.
The scheme is currently under investigation by the OCP which is tightlipped about the details. The OCP in its notification had warned against such schemes saying that the selling of health supplements can cause health problems as it is not prescribed by a doctor and is sold on the urging of members,
The MagneSSa scheme calls for a person to be enlisted as a member to buy the products and then the person must further enlist new members to earn, apart from just buying and selling the products.
According to OCP, such trade practices are deemed as ‘pyramid schemes’ and ‘unfair trade practices’ since it compels to entice new members to derive a certain economic benefit. One has to pay minimum of Nu 35, 000 to become a member of MagneSSa.
The products sold are healthcare supplements and cosmetics. Saran, managing the MagneSSa franchise office in Babesa, said that they stopped ordering health supplements from India as soon as DRA declared not to sell some of the listed products under health supplements.
Sangay Lethro who first brought MagneSSa to Bhutan said, ‘’There are almost around 2,000 youth who do MagneSSa business as full timers in Bhutan. Almost 40 plus engineers who graduated from Jigme Namgyel Engineering College are also into this business. Apart from that, we also have housewives, civil servants and even few farmers as our members.’’
The investigation on whether it is a pyramid or Ponzi scheme or if it is a networking business is still going on, said Sangay Lethro, further adding that they are only called pyramid scheme because of the structure, but what sets MagneSSa apart is that it has products to sell, whereas, a pyramid scheme has no product to sell.
Meanwhile, Saran clarified that they do not exactly recruit people, but they just show them the business ideas and the products if they are interested to purchase and it is up to them whether they want to do the business or not.
Section 32 (XII) of the Consumer Protection Rules and Regulations 2015 strictly prohibits the service providers, suppliers and the manufacturers from ‘’establishing, operating or promoting a pyramid promotional scheme whereby a consumer receives compensation that is derived primarily from the introduction of other consumers into the scheme rather than from the sale or consumption of products.’’
Nonetheless, some of the MagneSSa members say that they have not been able to earn anything out of this business apart from losing huge sums of money. Some of the affected people have come on the social media to share the similar frustrations they faced, one person stating that he lost Nu 28,000.
Apart from the legal issues around such a business model, it may also affect the country’s economy in some ways according to officials.
The Chief Trade Officer from Department of Trade, Zecko, said, ‘’There can be both pros and cons with coming up of such pyramid business. If we have so many retail shops or wholesalers and if we have external agencies from outside coming in and doing such type of business, the other license holders with proper establishments will be affected in the country, and it will affect their sales and income which in turn will also affect country’s revenue because if they do not make proper businesses then ultimately their business is tied up with the revenue, and therefore, their contribution of tax to the government should be very minimum.”
He said such pyramid schemes are hard to track. “It’s very hard to track what they do, how much volume of trade transactions they actually do, how much they import and sell, how much revenue they make, and of that revenue, what is their profit, the sort of employment they have gained from that and ultimately how much they are paying as a tax to the government is something we do not know but I think disadvantage outweighs the advantages,‘’the Chief Trade Officer said.
Currently, Bhutan imports more than it exports with the trade deficit at Nu 20-30 billion. Therefore, illegal trade activities have to be minimized as Bhutan strives towards a trade balance said the official. “Now, if these products are produced in our country, and if somebody is coming up with this same idea or strategy under a licensed or legalized business form, we have no issue, but this kind of idea is coming from outside, the products are coming from outside and they are engaging our people.’’
Zecko added that the Ministry of Economic Affairs’ main responsibility is to facilitate trade. “While there is no restriction in any form of trade until and unless the product is banned in the country or something dangerous for the overall health of the public,’’ he added.