মাসিক আত-তাহরীক Multi-Level Marketing (MLM) with reference to GGN
Note: The following article was written by the author of the book at our request and was published in At-Tahreek; October 2000 issue. During that period GGN and the Newway Bangladesh (Pvt.) Limited were spreading their activities following the MLM technique throughout the country. It was a unique article on the subject analyzing the pros and cons of the activities of the companies. The article is appended to the book for the readers as the contents of the article are clearly related with the subject matter of the book. –The publisher.
Reports are published in various national dailies in details about the activities of the Global Guardian Network (GGN). Question of cheating was raised against the GGN and its associate organization the Newway Bangladesh (Pvt.) Ltd. Detailed reports about their activities were published in the daily Janakantha (9, 12, 17, 19 and 20th Sep., 2000) the daily Manabjamin (5th Sep., 2000), the daily Inqilab (9th Sep., 2000), the daily Muktakantha (15th Sep., 2000). The suspicion and questions about the GGN were appropriate. Based on what is learnt from various sources and understood from their circulated leaflets and handouts, it can be said undoubtedly that the GGN and its associate organization are working in this country without any challenge. Their strategy, policy and business techniques are so foolproof and mathematically accurate that they would be out of reach of the persons cheated by them.
The mathematical method on which the GGN and its associate organization are conducting their business is called the binary method. According to the theory of 'duplication of two' of this method, based on 'from one to two and each of this two will produce another two', the number of members based on groups will increase in a cyclical order. Mathematically this increase in number can be infinite. The companies in question are running their network business on this method. It may be mentioned that Mr. Noborotnom Sree Narayana Thasa is of Sri Lankan origin and currently a citizen of Canada established the GGN in question. It has been working in Bangladesh since March, 1999. Their head office is shown to be at Gulshan, Dhaka. But their commercial activaties are run from a house at Bonani, Dhaka.
In practice, network business is based on commission. At first a buyer purchases a product on a fixed price from the company that is many times higher than the prevailing market price. Condition is that this buyer will get commission. Company gives him commission from the excess money which was taken from him earlier in the form of higher price. The first person will collect two new men as an agent or distributor of the company, and then this two persons will also work as company's agent and collect two new persons for each of them. Now these two people will be eligible to get commission as the first one recieved. Now this new four buyers, as a representative of the company, will manage to get two new buyers for each of them. If they are successful these four buyers will get commission. In this way the number of agents and buyers will continue to increase. Nobody knows where the number will stop.
If the first buyer fails to be an agent that means it he becomes unable to manage two new buyers, he has no hope to get the promised commission. In that case his activity ends up there and the company grasps his money totally. But he cannot take any legal steps against them because he got himself trapped knowingly. Likewise if the first customer becomes an agent but his managed two persons fail to be agents in their turn they will be deprived of the commission in the same way.
A time may come in this system when it will be impossible to find an agent that means no new buyers will be available. Then the marginal buyer will definitely be cheated and the number of this kind of people will be millions in number. Unfortunately the majority of them are unemployed but educated youths.
Inherent defects of the activities and techniques of cheating of the GGN and its Bangladeshi associate the Newway Bangladesh (Pvt.) Ltd. needs to be explained. This is done below :
(1) The package of goods these companies are selling is priced at Tk. 7,500/=. They themselves claimed that they are earning a profit of Tk. 3,500/= per package. It may be mentioned that their goods are not of internationally recognized brand. Therefore, it is impossible to know the actual quality and price of the products they sell, and how much profit the company earns by selling that product. Even though the deal is made at such a high price, it seems halal from the Shariah point of view because he/they agreed to buy the product at the price. In reality the buyer agreed to be cheated knowingly with the hope that he can get back at least Tk. 1,800/= if he can manage two more buyers like him.
It is like the tale of Eashop's fable about a fox with a tail cut off. After his own tail was cut the fox was trying to incite his fellows to cut their tails also. In this case the first buyer or agent and each of the two of his victims will continue to spread this cheating by managing two more clients. They will do this because each of the two clients of the first agent will get Tk. 1,800/= and consequently the first agent will get back Tk. 2,400/=. It may be mentioned that each of them paid excess Tk. 3,500/= while buying the package. The ‘profit’ or commission is given from that excess money realised earlier. It is a unique example of tricky cheating by an alluring trap.
(2) Out of the package of Tk. 7,500/= the two companies have earmarked Tk. 3,500/= (43.67%) for security, service charge and distribution cost. That means the price of the basic product is 53.33% or Tk. 4,000/=. Once the original customer becomes an agent or distributor, he may get back Tk. 600/= if he can manage two new buyers. Otherwise he will not get anything back. In this case the company will take away the whole money.
(3) Generally no company claims service charge for selling their products. In cases where installation of the machinery is intricate and requires expert service 2%-2.5% of the net price may be claimed as service charge. If service charge is claimed then a further claim in the name of service distribution is unethical. These two companies are doing this unethical thing.
(4) After a stipulated period the original buyer is always paid back the security money charged for a good. But in this case the two companies will never return the security money to the original customer, not even a part of it if he fails to be an agent or distributor later on. To embezzle money in the name of security is nothing but exploiting the customer.
(5) These two companies earn a profit of Tk. 3,500/= per package in the first step. But there is no provision to return any part of the profit to the customer. But if the customer becomes an agent or distributor in step-2 then he will have to sell three packages and will get back Tk. 600/= for each package i.e. a total Tk. 1,800/=. In this case the net profit of the company will be Tk. 8,700/=. If this is not cheating then what cheating is?
(6) According to the company's rule in the 11th step the buyer or the distributor is supposed to be given 80% profit. That means according to their claim they will keep only Tk. 700/= per package as profit i.e., the rate of profit will be 17.5%. But by this time they have accumulated a healthy amount of profit. In the first step they did not give any profit to any body, in the second step they give only Tk. 600/= and Tk. 1,114/= in the third step as profit. In this cycle the profit due to an agent/distributor will increase gradually only when the new buyers increase in number under the supervision and control of the same person. The fewer the steps the more profit the company will earn. In the process the customer/agent/distributor will be able to increase his profit if he is able to increase the steps.
(7) According to company's announced policy, any agent/distributor can claim up to 73.40% profit if he can produce 511 buyers in a continuous series. This must be done under the supervision and signature of the same person. No buyer can skip any step or break any stair. In that case the channel or the continuity will be broken. As a result promotion of that distributor will be hampered and recieving commissions or profits at the increased rate will be stopped.
(8) There is no way to know in advance the quality, standard and real price of the product sold through package. Once sold the product can never be returned. There is no after sell service. So the client is not getting any chance of repairing or servicing the product which is contrary to business ethics of any recognized or established company.
(9) There is no guarantee or warranty for the sold products. If the product becomes unusable or damaged within a year the companies are not liable to make good for the loss. But reputed companies have this kind of facilities available.
(10) One more important aspect is to be looked into. According to the binary method it is possible to create infinite stratum through the 'Duplication of two' policy. These two companies adopted this policy. Theoretically a distributor can reach the peak of the pyramid and can get the company's announced huge profit. But it is next to impossible. Only few distributor/agent can reach beyond the fourth step. There is always a chance to break the chain. As a result the company will be much gainer. The lesser step the agent will reach the more profit the company will reap. For example, if 63 packages are sold at step-6 the profit of the company will be Tk. 2,20,500/=. The net profit of the company will be Tk. 96,900/= if normal due of the agent Tk. 1,23,600/= is deducted from it. But if these 63 packages are sold in 3 stages in separate 9 channels through customer/agents then the profit of the company will be (Tk. 24,500 – Tk. 7,800)= Tk. 16,700×9= Tk. 1,50,300/=. Hence, the company will always prefer that the customer crosses fewer steps and gains less.
(11) Another important aspect of the system should be taken into consideration seriously. The system looks like inverse pyramid. Those who stay at the bottom stage of the inverse pyramid sale structure will certainly purchase products from the agent with the hope to become an agent/distributor in the next higher step. All of them will be looser if it becomes impossible to collect new client or the company wraps up their business abruptly. If 10,000 persons stay at the bottom of the pyramid then 51,11,000 clients will be in the step-9 (if the chain remains unbroken). They will buy the packages to the amount totaling Tk. 38,325 million. The company will earn Tk. 17,885 million as profit. If the chain breaks down the profit earned by the company will automatically be increased.
(12) If this policy were really the best and reliable, all the multinational companies (MNC) would not operate their business in various countries by building mills and factories. They are operating their business in many countries on partnership by establishing limited company. They earn millions of Taka as profit annually. But neither the clients feel cheated nor the company is suspected about their products and activities. They advertise their products, present the goods in the showroom for inspection and establish numerous outlets to sell their goods. Even they have chain shops but do not have any network system such as MLM.
On the other hand the GGN is trying to sell their products anyhow to the customers without informing them about the quality and particulars of the products. No opportunity is given to inspect the products in advance. They rather train their customers how to manage more clients. Meanwhile complains are raised against them that after recieving money they do not supply the products even after 3 months. Persons who became their clients, paid the price of the products but failed to manage two more new buyers are neither getting the goods nor the commission. They are, on the contrary, being pressurized for collecting clients anyhow.
(13) It is most unfortunate that few Ulama passed opinion in favour of the GGN's business as legal from the Shariah point of view. They are requested to kindly examine the above mentioned points. Apparently it may seem that the GGN has fulfilled the conditions of being a legal business from the Shariah point of view. But their implicit goal is dishonest and the consequences are very dangerous which can be perceived by concentrating on the above mentioned analysis.
According to the news published in the national dailies they have wrapped up their business from Chittagong after collecting Tk. 500 million. It becomes clear from the analysis of their methods and tactics that they are using thousands of unemployed young males and females in their favour very cunningly and cheating the mass with their help. The way they are provoking the job seeking young people by presenting colorful dreams of the future through the lectures using the multi-media in the air-conditioned room seems to be unethical. They are being tutored how to allure more customers in these `orientation' classes. Training is required for a good salesman. But the companies in question train their clients/agents with ulterior motives.
(14) On September 12, 2000 the GGN and the Newway Bangladesh (Pvt.) Ltd. published an advertisement in the daily Inqilab where they informed that they are conducting business taking all necessary permissions from the government, completed registration, and maintained other formalities according to the law of the land. They claimed that they have no confidentiality in their business. All their papers are open to all for verification.
This kind of announcement is unnecessary. It rather reminds the Bengali proverb `Who is in the room of the temple? I did not eat the banana'. It is known to everyone that one is to fulfill all government and local formalities of a country to run a business there. It does not guarantee honesty or reliability of any company. So, if in one fine morning these two companies close their business, the goverment will have nothing to say. Similarly if they leave the country secretly there will be no opportunity to realise claims due to them.
(15) It is claimed in the same advertisement that there is not a single example in the history of the GGN and the Newway (Pvt.) Ltd. that after being qualified anyone was not given their commission. They also claimed that there is no written complain against them and there is no prosecution for cheating against the GGN and the Newway (Pvt.) Ltd anywhere in the country. The statement should be taken with all seriousness.
There is no denying of the fact that the GGN and its associate company are giving `commission' to their customers but it should also be remembered that the companies have cheated them in the name of the `price' of the product. They are selling inferior goods at much above the market price and are realizing much more money in the form of other charges. Not only that. The victim has to qualify himself for worthiness of commission by managing more persons like him.
They claimed that there is no prosecution against them for cheating. There are two reasons for it: (i) Those who become their prey they are trapped for their greed. How dare they lodge protest against the company? (ii) It is alleged that the companies make unusual delay in supplying the goods sold. Even then no one makes any complain because if he discloses the fact to the two new buyers he meanwhile managed will just turn their back to him. Eventually he will loose the 'commission' sought after.
(16) They have claimed that there are many such companies throughout the world. That is true. But that does not justify cheating because cheating is cheating. It may not be out of place to mention that recently names of the MLM companies working in the USA were dropped from the Business Directory of the country for their unethical tactics in business. In Islam Riba is strictly prohibited but it is inpractice in almost all the countries of the world and the governments are also a party to it. Does it make Riba Halal? No Muslim can agree to it. So is the case with the business of the GGN and its associate. They are cheating the customers and earning in the Haram way.
(17) It is alleged in some national dailies that the GGN and its associate are conducting their business following the policy of ‘managing the situation’. Mr. Noborotnam Sree Naryana Thasa was a citizen of Sri Lanka. But in Bangladesh he claimed to be a citizen of Canada. It rouses curiosity that how could such a person be issued trade license by the Dhaka Metropolitan City Corporation when he obtained no work permit earlier. By the same token question also arises as to how the Board of Investment of the Government of Bangladesh could give registration to the Company. All the necessary permits and papers were procured through the policy of ‘managing’ the concerned persons, it is alleged.
(18) One very pertinent question may be asked about the GGN. Why did Mr. Thasa choose Bangladesh for his business operation instead of Canada of which he is a citizen or in any other country of the West? The answer is simple. Cheating as a business is safe in poor countries. Moreover, country with large number of unemployed people is a place where youths can easily be allured in the name of employment. Even the government also offers many incentives if the concerned ministries/directorates can be convinced that the company is creating opportunities for employment. The GGN has very cunningly used that scope.
(19) It is reported that already more than 34 thousand people have been entrapped by the GGN. The amount of money collected from them exceeded Tk. 1,020 million (The Daily Janokontho, 17 September, 2000). Pulling of such a big amount of money in a span of less than 18 months in a poor country like Bangladesh is worth noticing. The company is gradually expanding its network throughout the country and is doing aggressive business. Unemployed youths are caught unaware by them. It is reported that people are withdrawing their savings from banks to become the agents and distributors of the GGN. This reminds us the situation that prevailed in the share markets of Bangladesh in 1996 and also in 2010 and 2011. Many people withdrew their time deposits from the banks, took loans from friends and relatives, and even sold gold ornaments of wives to invest in the share market. Suddenly the bubble burst and hundreds and thousands of people became penniless overnight. Newspapers published in their front pages the pictures of the agitating and crying men. Some even committed suicide (The daily Nayadiganta; 31 January, 2012). The same horrible incident should not be allowed to be repeated in the cities and suburbs of the country.
(20) The instance of Albania deserves to be mentioned here. The network marketing system began to spread in the country in 1996. People jumped on it, utilized their savings and even sold out their properties to invest in the scheme heavily with the hope of earning a high profit. Even the Albanians who were working in Italy and Greece invested their savings in the scheme. The network companies distributed profit at the rate of 15%-25% at the initial stage. Gradually they raised the rate of profit to an unbelievable height−80%. More and more investors, even from the rural areas jumped on it; their numbers increased at an incredible speed. As a result, only sixteen companies bagged US $1500 million in less than six months. A severe financial catastrophe occurred in the Albanian economy from which the country yet not fully recovered.
Cheating is strictly prohibited in Islam. It should be avoided totally and in all situations. The GGN has used the binary method of mathematics and practicing it in `inverse pyramid' system. They are cheating the people in the name `business' and earning 'commission'. But this does not make it Halal. It is better not be involved in their business and thus save our soul from Haram income and save others by not cheating them. Because it is Gunah Kabira.
