Network Marketing Malaysia

APPLICATION FOR DIRECT SALES LICENCES

Introduction

These guideline are intended to assist companies which are interested in applying for direct selling business license in accordance with the requirement of the Direct Sales Act 1993 and the Direct Sales Regulations 1993.  This document shall not be use in any litigation.  These guideline also contain the criteria, which maybe used as a guide when submitting applications for direct sales business licenses, and other procedures for various other application during the license period.

It is hoped that direct sales licenses fully benefit from these guideline in line with three important objectives of the Direct Sales Act 1993 which are:

- Licensing of direct sales activities for the protection of the consumer's rights and interest;

- To promote the growth and development of ethical direct sales activities; and

- To prohibit all activities involving pyramid schemes and ‘ get-rich-quick' schemes.

REMINDER

Before engaging in a direct sales business, you are advised to have a clear understanding of the DIRECT SALES ACT 1993 (DSA 93)

SECTION 4(1) DSA 93

"Subject to Section 14 and 42, no person shall carry on any direct sales business unless it is business incorporated under the Companies Act 1965 and holds a valid license granted Section 6"

SECTION 2 DSA 93

"Direct Sales" means a door-to-door sale and mail order sale within the meaning of this Act.

"Door-to-door-sale" means the sale of goods or services conducted in following manner:-

- A person or any person authorized by him

- Goes from place to place not being a fixed place of business; or
- Makes telephone call.

Seeking our persons who may be prepared to enter, as purchaser, into contracts for the sales of goods or services; and

That first-mention person or some person then or subsequently enter into negotiations with hose prospective purchaser with a view to the making of such contracts.

"Mail Order Sale" means the sale of goods or services which a person conducts, either by himself of through any person authorized y him, receiving an offer for sale contract by mail.

Under a direct selling, there are three types marketing plans as follows:

MULTILEVEL MARKETING PLAN

i.          The company recruits/appoint as individual as a member/distributor to distribute the company' goods;

ii.          The individual then appoints other individuals to form his network (downline) to sell the company's goods.  The process of recruitment of new members/distributors may continue to a reasonable level;

iii.         Each member/distributor shall receive a commission / bonus / incentive from his individual sales and from the sales made by his downline members / distributors (overriding bonus).

SINGLE MARKETING PLAN

i.          The company appoints sales representative / agents and pays them

salaries/commissions/a combination of salary and commissions on their sales;

MAIL ORDER SALES

Sale, by mail, of goods or services which a person conducts, either by himself or through any person authorized by him.

APPLICANT

Subject to the provisions of the Act and the conditions made thereunder as below;

QUALIFICATION

 A company incorporated under the Companies Act 1965

PAID-UP CAPITAL                                                          100% BUMIPUTRA

a)         Mail Order                                        RM   500,000                 RM 100,000
b)         Single Level Marketing                RM   500,000                 RM 100,000
c)         Multi Level Marketing                  RM1,500.000                RM 500,000
d)         Foreign-owned companies           RM5,000.000                           -

MARKETING PLAN

The marketing plans shall have the following characteristics:

•·          The business does not carry on or involve a pyramid scheme as specified under Section 7 DSA 93.

•·          Comply with the Direct Sales (Scheme and conduct) Regulations 2001, which come into operation on 15 August 2001, that is:

(a)              Presentation of scheme not to be misleading

(i)   In the presentation of the direct sales scheme, a person who carries on any direct sales business shall not mislead participants by overemphasizing on disproportionately high bonus or bonus payout.

(ii)  Each participants shall be provided with sales kit that includes the marketing plan and code of conduct of the company.

(b)       Payment of incentives

                        Any person who carries on a direct sales business shall provided an
                        incentive based on the volume or quantity of goods or services sold or
                        distributed by each participant and not based on recruitment of persons
                        into the scheme

(c)       Participants not to purchase goods or services in an        
            unreasonable amount

Each participants is required to purchase goods or service in an
            amount that can be expected to be resold or consumed within a
            reasonable period of time.

(d)       Agreement

(i)         Any person who carries on any direct sales business shall provide each participant with a written contract or statement which described the material term of the agreement.

(ii)        The agreement shall provide the following:

a.         The participant shall be given not less than ten working days from the date of the recruitment to cancel his membership (Cooling Of Period);

b.         Upon the cancellation of his membership under Paragraph ‘a' the participants shall be refunded all of payment as specified in the agreement; and

c.          At the request of the participant, a person who carries on any direct business shall buy pack any marketable goods sold to the participant with the previous six months at the price not less than ninety percent of the amount paid.  (Company must have a buy back policy).

d.          Any person who contravenes or fails to comply with any provision of these regulation commits an offence.

An applicant for a licence shall be made by submitting completed AJL-1 form (typed) with company's seal and together with;

(a)        Memorandum and Articles of Association verified by a statutory declaration made by a director;

(b)        The latest Forms 24 and 49, which have been certified by Companies Commissions of Malaysia (SSM);

(c)        Company information (Original SSM print out);

(d)        Background all of members of the board of directors and shareholders of the company (resume and copy of IC/passport)

(e)        Complete explanation on the company's marketing plan;

(f)         Buy-pack policy (for multi-level/single level plans only);

(g)        Products/services price structure form (please refer Format A);

(h)        Brochure/leaflet/print material of the product/services;

(i)         Quotation/invoices/contract from supplier's of the product/services;

(j)         A sales contract sample (for single level and multi level plans only);

(k)        A mail order advertisement sample (for mail order sales only); and

(l)         For companies which provide services, documents or written agreement from all service providers, where relevant.

Goods/services permitted/encouraged for sale under a direct selling system;

•a.       The product posses its own strength which makes it difficult to be marketed through the normal sales system or a product which requires detail explanation from the sales person. 

•b.       Product which have been granted the following certification and approval are preferred: Certification, as to the product's safety and quality, such as ISO90000, MS (SIRIM), halal label etc., by recognised local and foreign bodies;

•c.       Product of manufacturers with GMP (Good manufacturing Practices) certification. 

•d.       The following product are not allowed to be marketed under a direct sales business;

i.    Insurance product, unless the company has obtained authorized agency status from PIAM/LIAM and they are not permitted to be package with order products;

ii.    Landed property; any immovable products; and

iii.   Virtual product such as Website.

a.         For health foods/food supplements/traditional medicines, the following conditions precedent must be satisfied:

i.          Submit a product registration approval with the National Pharmaceutical Control Bureau (BPFK), Ministry of Health;

ii.          If the product certified as "Registration Not Required" or categories as "Food" by BPFK, the product must be referred to the Food Safety and Quality Division (BKKM), for Classification and comply with labelling regulation under Ministry of Health;

iii.         Display the approval serial number of the drugs Advertisement Board, Ministry of Health (KKLIU) on all brochures/advertisement print materials of health food/traditional medicines with medical claims.

iv.         Cosmetic product must be registered with the Pharmaceutical Services Division Ministry of Health and this regulation shall come into operation beginning 1 January 2008.

v.         Petroleum based product must possess PDA (Petroleum Development Act 1974) license.

vi.         Electrical product must obtain import and manufacturing approval from the Energy Comission Malaysia.

•vii.                 Health care services programmes must be registered  with the Medical Practices Division, Ministry of Health.

•viii.                Board of directors/share holders shall attend for marketing plan presentation.

Committee will make consideration and suggestion of application to Controller accordance with;

•i.                     Company's background/information

•ii.                   Company's marketing plan

•iii.                  Company's products/services

•iv.                 Issues/complaints about company's

a.         The Controller Of Direct Selling

•i.                     Grant the licence;

•ii.                   Refuse to grant the licence;

•iii.                  Revoke the licence;

•iv.                 Impose new conditions and regulation under the Act.

•b.                  Minister

Receiving and considering appeal cases under the Act.

1.         Licensee shall not practice a marketing plan which has not been approved  by the Controller of Direct Sales;

2.         Licensee shall market the products/services which has been approved by the Controller of Direct Sales;

3.         Licensee must seek for approval from the Controller of Direct Sales before ammending any part of company's marketing plan, approved product range or approved product price;

4.         Licensee is not allowed to ammend any part of company's marketing plan for at least two (2) years after the licence has been obtained;

5.         Licensee must ensure that all the distributors/sales agents do no perform sales by force/cheating which includes lucky draws, promise of free gifts, discounts on sponsorship and that they do not issue any leaflets other than those issued by the company;

6.         Licensee need to send written acknowledgement to the Ministry before commencing any campaign, promotion, or any type of advertisement for the purpose of marketing company's products;

7.         Licensee need to get Ministry's approval regarding any plan to market new products, ammending product's price structure and any other matters related to products, before marketing the products;

8.         Submit company's latest audited Financial Statement, copy of Form 24 and copy of Form 49 (both certified by Companies Commission of Malaysia (SSM)) and original print out of company information produced by Companies Commission of Malaysia (SSM) on annual basis to the Ministry;

9.         Licensee must provide training to their distributors / member. There shall  not be any charges for basic training and courses with a view to  promotion;

10.        Licensee shall provide exhibition area which is spacious enough to accommodate the public;

11.        Licensee must enclose price tag to all displayed product;

12.        Licensee must display their direct sales license number on all the  
company's billboards, advertisements, print materials and letterheads;

13.        Mail order licensee must ensure that their mail order advertisements comply with the provisions of the Direct Sales Act 1993;

14.        Licensee with Single Level marketing plan need to submit a list of all sales agent and branch address to KPDNKK;

15.   Licensee need to acknowledge the Ministry about any amendment with regards to business premise address or company equity structure within 14 days after the amendment;

16.        Licensee shall always provide complete and accurate information/explaination when requested by Direct Sales Controller within fourteen (14) days after the date of letter receival;

17,        Licensee is required to display the original direct sales license at an appropriate place on the premises of the management office with copies  of the original license on every premise of the company's stockist for  public viewing;

18.        The license is not transferable without the approval of the Ministry of Domestic trade and Consumer Affair;

19.        Where a license is revoke or where a licensee ceases direct sale  business, the licensee must immediately surrender the licensee to the  Direct Sales Controller;

20.        Licensee can only pay bonuses after cooling-off period;

21.        Licensee is not allowed to implement any marketing plan which contains product package as a compulsory purchase for bonus requirement;

22.        Licensee is not allowed organise / run / allow any element of lot/position buying or re-entering in marketing plan;

23.        Company need to submit Company Information and Performance form before 30 April every year.

24.        Licensees is required to comply with all the conditions herein as stated above.

a.         License fee is RM500 a year.

b.         Payment in the form of bank draft or money order payable to the Secretary-
            General Ministry of Domestic Trade and Consumer Affair.

c.          Payment can be made through RHB Bank ONLINE (the commencing date will  be announced soon)

 COLLECTION OF LICENSE

RENEWAL OF DIRECT SELLING LICENSE
      
An applicant for a licence shall be made by submitting completed AJL-1 form (typed) with company's seal and together with;

a.         A copy of the existing license*;

b.         Profit and Loss Accounts of the company for the preceding year;

c.          The latest Form 24 and 49 which have been certified by SSM;

d.         Original SSM print out;

e.         Sales Kit.

*(note: The original license must be surrendered after a new license has been issued)

APPLICATION FOR CHANGES OF MARKETING PLAN

a.         Distinguish between the existing plan and new plan together with justification for the proposed changes (please refer Format B);

b.         Detailed explanation on the new marketing plan; and

c.          Leaders/agents/distributors consent.

APPLICATION TO ORGANIZE CAMPAIGNS/PROMOTIONS/INCENTIVES

a.         Complete information on the campaigns/promotions/incentives, including their procedures and duration;

b.         The campaigns/promotion/incentives are not use as a tactic/means of forcing /inducing the public to become members of company; and

c.          Applications must be submitted at least one month before the campaigns/promotions/incentives are carried out.

APPLICATION TO ADD NEW PRODUCTS

a.         Products price structure from (please refer Format A);

b.         Brochures/print materials on the new products/services; and

c.          Contract/quotation or invoices form products/services suppliers'.

APPLICATION FOR PRICE CHANGES OF EXISTING PRODUCT
        
a.         Product price structure form (please refer Format A);

b.         Suppliers' invoices and justifications for the proposed changes.

All enquires regarding applications for direct sales business licenses shall be deal  with in person or addressed to :

Controller of Direct Sales
No 13, Level 4,

Persiaran Perdana, Precint 2
Pusat Pentadbiran Kerajaan Persekutuan
62623 Putrajaya.

Tel No. :     03-8882 5899 / 5896 / 5933 / 5921
Fax No. : 03-88815981 / 5941

Information on direct sales companies, Application Form (AJL -1) and these Guidelines may be accessed from the Ministry's website :

http://www.kpdnkk.gov.my or http://www.mdtcc.gov.my 

ADDITIONAL INFORMATION

National Pharmaceutical Control Bureau
Ministry of Health, Malaysia
Jalan Universiti, P.O. Box  319,
46730 PETALING JAYA.

Tel : 03-79573611
Fax : 03-79562924 / 79581312
http:/www.pbfk.gov.my

Food Quality Control Division
Ministry of Health, Malaysia
Aras 3, Blok E7, Parcel E,
Pusat Pentadbiran Kerajaan Persekutuan
62518 PUTRAJAYA.

Tel : 03-88833558
Fax : 03-88893815 /3341

Pharmaceutical Services Division
Ministry of Health, Malaysia
Locked Bag No. 924,
Jalan Sultan Post Office,
46790 PETALING JAYA.

Tel : 03-79682200
Fax : 03-76982222

Medical Practices Division
Ministry of Health, Malaysia
Aras B, Blok E1, Parcel E,
Pusat Pentadbiran Kerajaan Persekutuan
62518 PUTRAJAYA.

Tel : 03-888831039
Fax : 03-88831040

Enforcement Division
Ministry Of Domestic Trade, Co-operatives and Consumerism,
Level 3, Lot 2G3, Precint 2,
Pusat Pentadbiran Kerajaan Persekutuan
62623 PUTRAJAYA.

Tel : 03-8882-6012 / 6009 / 5997 / 5998
Fax : 03-88826171

Companies Commission of Malaysia
Tingkat 11-17, Putra Place,
100, Jalan Putra,
50622 KUALA LUMPUR.

Tel : 03-40433366
Fax : 03-40436031

Consumer Claims Tribunal
Ministry Of Domestic Trade And Consumer Affairs,
Level 5, Lot 2G3, Precint 2,
Pusat Pentadbiran Kerajaan Persekutuan
62623 PUTRAJAYA.