Trade and Industry Secretary Ramon M. Lopez said that they wanted to institute an accreditation body that would screen direct-selling companies, an attempt to weed out firms engaged in the practice of pyramiding.
Lopez told reporters last week that the Department of Trade and Industry (DTI) would coordinate with the Direct Selling Association of the Philippines (DSAP) in reviewing this policy.
“We have to address the issue on scams in direct selling. We want to institute a mechanism to have an accreditation so that we would only allow direct-selling companies that would be approved by a body,” he said.
However, he said they have yet to come up with an actual mechanism that would pave the way for this accreditation body, which might be composed either by a council or by the DTI alone.
One way to currently determine whether or not a direct seller is part of the pyramiding scam is through the eight-point test, which lists a set of questions that included seeing if the operation made a profit based on product sales or recruitment size.
In particular, the test asks a series of categorical questions for the following information: If there is a product; if commissions are paid on sale of products and not on entry fees; if the intent is to sell a product and not a position; if there is no direct correlation between the number of recruits and compensation; if participants would still make money should the recruitment process stop; if there is a reasonable product return policy; if the products have fair market value, and if there is a compelling reason to buy.
According to DSAP’s official website, a positive answer on these questions would mean that the company is legitimate. On the other hand, a negative answer means “there is a high probability that it is a pyramid scam.”
Leni Olmeldo, who heads DSAP’s committee on communication, said that they have drafted a bill that would outlaw pyramiding. The bill would build on the 8-point test.
“I think right now when companies register, you don’t know if it’s direct selling or not unless it starts operations. What we actually want to do in the future is that if there’s any company registering as a direct-selling company, we want us to be part of the screening committee to see if this is compliant,” she told reporters last week.
Olmeldo, who is also country manager of direct selling giant Amway Corp., said that they were in discussions with members of Congress. She said that they have already finalized the draft of the law.