The Office of Consumer Protection (OCP) has declared QNET, an online marketing company, as an illegal scheme.
The OCP directed all promoters and members of QNET to immediately discontinue the promotion of the scheme and recruitment of the downline members.
QNET is a Hong Kong-based business owned by Qi Company. It is claimed to be a multi-level marketing (MLM) business and e-commerce-based direct selling company.
According to the members of the scheme, there are more than 200 Bhutanese individuals including those living abroad who are members of this business scheme.
A person has to pay Nu 120,000 to become a member or independent representative (IR). This amount covers registration fees, agreement charge and the cost of the virtual products. Members have to pay USD 30 annually as membership fees.
The IRs are required to maintain and recruit downline members in a binary model where members need two direct recruits with subsequent recruits (known as downlines) placed under the direct recruits as well as the recruits under them.
Chief program officer of OCP, Jigme Dorji, said that there was a recruitment of downline members and the commission or payout is based on the downline member which contravenes Consumer Protection Rules and Regulations, 2015.
He said that there are no substantive products or services distributed to Bhutanese IRs/members other than virtual products – tripsavrs that are useless. “The products and services available under the scheme are not offered in the Bhutanese market.”
“It is evident that the underlying objective of QNET business is to expand the network of IRs and emphasize luring the prospective members to join the business, register as an IR and introduce new members to achieve sales and business volume, ranks, commissions and bonuses,” Jigme Dorji said.
He said that the compensation and commission in Bhutan depend on their direct referrals or downline members, sales by the referred or qualified IRs, rank achieved, business volume and repeat sales point.
The QNET promises high returns in short periods of time which is not possible without the introduction of downline members.
In order to be an active member and earn bonuses, the members are obliged to purchase a certain value of products over a given time, recruit downline or sell a certain volume of the products.
Jigme Dorji said that the advertisement, marketing and promotion are done through social media and group meetings using misleading information about high returns, where vulnerable groups including unemployed youth are targeted.
According to OCP, such a scheme contravenes Rule 38 (xiii) of the Consumer Protection Rules and Regulations, 2015 wherein “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 the sale or consumption of products” is classified as unfair trade practice and therefore deemed illegal.
QNET claims that it offers a wide range of products in the areas of health, wellness, lifestyle and education to customers around the world.
In Bhutan, QNET operates through its sub-franchisee Vihaan Direct Selling (India) Pvt. Ltd and promoted by the Bhutanese members.