1- Multi Level Marketing System in Turkey in General
Although Multi Level Marketing System is given as a course in many universities worldwide and is a very old marketing method, debates regarding whether it is legal or not are still go on in Turkey.
This has a two reason. Firstly, there is still not a specific law regarding these systems. Secondly, by abusing these system (which was began to be used in 1990s) many people was been defrauded by ones who want to acquire illegally.
In fact, there is not any law regarding MLM System (alias pyramid marketing method and multilevel selling system) in Turkish legislation. This system is applied based on some articles of laws such as “Law on Protection of Consumer”, “Regulation of Door to Door Sales” and “Regulation on Distance Contract”. Because there are not clear provisions of law regarding how a MLM Marketing System should be and therefore the prohibition are not clear, it is acted within the framework of general provisions in practice and sometimes company directors who are using this system may face up with many penal sanctions, notably the fraud crime.
2- Criminal Dimension
What first comes in mind when it comes to MLM Marketing System in Turkey is “Ponzi Scheme” and then “TITAN Scheme”. The company “Titan” which operated in 1990s gained Money without selling any product and the managers of that company got so rich enough to collect luxury cars and finally all of the company managers got prison sentence for 25 years each. The following decision of the Supreme Court was made about the MLM system as a conclusion of trials about companies like the one abovementioned:
These defendants acted in unity with trick and intrigue to affect the intellectual activity of the victims, created a psychological blindness on victims, formed an illusion with mathematical calculations and charts, removed victims’ common sense with the promise of a lot of money to be won, high-volume music and continuous applause, maintained this fake belief and illusion all the time, stated defendants deceived victims from the attending to the meetings till initiation of membership with skillfully crafted scene and lies , usage of tricks and fraud utilized by the defendants defined as deceptive natured action considering subjective state of the victims, defendants did not tell the truth, because it will get difficult when circle of chain expands and to get fresh member will be more difficult, after some certain period to get new member will be impossible, and the system will collapse at this stage, last member in the system will not be able to get any Money, this situation was intentionally hidden, thus victims suffered loss and defendants gained unlawful profits, in despite of some victims could manage receive back their paid participation fees by getting new members , this can not eliminate defendant’s crime, thus defendant’s action is beyond the legal zone and should be considered in the realm of crime and defined as act of fraud.........
Shortly, the Supreme Court, by showing reason on how can be got rich by giving examples of some members, creating a false faith on members at events and on complex mathematical tables, creating a psychological blindness, hiding the fact about the market and hiding the possibility of making loss, accepted that, according to Artc. 503 of the old TCK (Turkish Criminal Code) (Artc. 158 of the new) a fraud crime occurred and approved a 25-year-prison-sentence of defendants in terms of separately punishing for each victim party.
3- Legal Dimension
As I mentioned above, that there is not a direct provision about the MLM System may cause companies being face up with some problems both criminal and fiscal even they do not harbor ill-will against their customers.
The “door to door sale” and the “distance sale” which I also mentioned above about MLM System is extremely insufficient. The full text of these two laws is dealed in Chapter 4.
Together with the global economic crisis, MLM System has started to become popular in Turkey again. The worldwide known companies like “Amway” and “Herbalife” has entered the industry and a criminal investigation has been started about companies like “Quest.net” and “Erol Marketing”. And for that reason, the Ministry of Industry and Trade saw it as necessary to issue a press release on how the MLM System should be.
Even though the press release of the related Ministry does not have the force of law, it is extremely important as it is the first official document determining the rules of MLM System. That’s why the full text of press release is below:
"Press release about Network Marketing Systems...
“Recently, we have been asked many questions and complaints about the selling systems as “Network Marketing” and “Multilevel Marketing” from our citizens. It is seen from the complaints made to our Ministry that, the so-called industry misdirected our citizens by making benefit from the legislative gap, hidden some important information and abused the trust of our citizens. As a conclusion of inspection of some companies which operates in the so-called system by our Ministry’s Consumer Controllers; the following are vitally announced to public:
1) It is not compulsory to get a kind of permit or a license for operating in Network Marketing (Multilevel selling) sector in our country and if that kind of activity is organized by establishing a limited company or a corporation, it does not mean that a permission has been received from our Ministry and also neither our Ministry nor another authority does not have power to permit for such an activity and it is performed under free market conditions.
2) The condition that network marketing companies pay their tax by fulfilling their tax liabilities regarding their business activities and charges their representatives doesn’t mean that the companies operate in a perfectly legal way, on the contrary these companies only execute their tax liabilities and it must be separately investigated whether they fulfill their other liabilities or not.
3) Due to the fact that there occurs not a specific regulation for network marketing system in our country, activities of network marketing companies are evaluated under the scope of provisions of the Law on Door to Door Sales and Distance Contract no 4077. In case of detecting the contrary applications against the related provisions and the consumers’ demnifications, and that the company operates abroad and doesn’t have a representative or a branch in Turkey, there is not an addressee about the subject and the consumers’ demnifications could not be solved.
4) Some network marketing companies operate in our country with a representative or a branch and this is published in the trade registry gazette. These companies perform their sell and contracts in favor of representative or branch in our country, not of the company abroad. So, such companies are much suitable for finding an addressee and a solution about the possible problems and demnifications.
5) It is understood that the Quest.Net system about which a press release was performed on 26.05.2010 changed his name and operated under the name of QNet. It is estimated that a lot of our citizens are members of this system and it is claimed that the so-called system is handled in our country by “QNet Promosyon Pazarlama ve Turizm Ltd. Şti.”. On the written statement sent to our Ministry by QNet Promosyon Pazarlama ve Turizm Ltd. Şti.; it was stated that the company had started its commercial activities since 18.12.2010 and had no relations with the limited company QNet (head Office abroad) and/or with the people who introduced themselves as the free representatives of this company. Accordingly, anyone who doesn’t have a written Turkish contract signed by parties and arranged with QNet Promosyon Pazarlama ve Turizm Ltd. Şti. can not stake out a claim.
6) Some network marketing companies give their members products in exchange for a member fee and they claim that there is not a possibility of loss-making hereby. However, this claim doesn’t change the fact that people make loss for two reasons: Firstly, the product subjected to sell didn’t feature the same with the said one and it was sold with a higher value than its real price. Secondly, even if the products presented their real value, the related company highlighted that the people earn money while introducing the system of the company and in this way made the system attractive for them.
7) As a conclusion of unpleasant experiences about network marketing in the world and in European countries, some comprehensive regulations were performed. Accordingly, it is observed that a company operates in network marketing conducts honestly and in respect of customers considering the implementations in the world and in European countries and also the following rules:
7.1. A written contract signed by parties should be drawn up with the member / representative who will join the system.
7.2. End users should be able to return the products they purchased within a specific time range.
7.3. Representatives who effectively work in the system should be able to return the products they purchased within a specific (min. 3 months) time range.
7.4. Any charge should not be given for membership. However, it shall be given to the end user when he/she sells the product.
7.5. The level of sub participants who are given charges or premium should be limited and it shall be indicated that a charge will be given up to 5th sub-level.
7.6. A membership fee should not be requested.
7.7. Sufficient information should be provided fort he ones who will join the system about the market situation, costs and the true sale.
7.8. The personal life and area of the person should not be violated for product sales. Also, the relationship with family, relatives and friends shall not be used with commercial purposes.
7.9. Promise of large amounts of earnings, misleading information and promotions about the earning are not allowed.
7.10 It should not be compulsory to purchase a product in a minimum amount and periods.
7.11. Representatives should be informed about their position in the system.
7.12. The price of the products should not be too high.
7.13. It should be available all the times that an exit from the system is possible and a refund should be paid.
And relying on the companies which are not in line with the abovementioned rules can be risky.
8) Network marketing companies may introduce themselves such as binary system, matrix, breakaway or unilevel. In this situation, we ask our citizens investigate whether the company implementations are in line with the rules on Art. 7 in order not to get confused.
9) Our citizens should always demand for a written contract from the addressee local company in our country whenever they make a payment or use their credit cards. It should be noted that in such a contract, there should be a guarantee for product return and refund.
10) Statement of earnings and charge appropriation should be investigated approved by a certified public accountant or an independent auditing firm rather than success stories from the representatives or network marketing companies and stories of large amounts of earnings which was gained by the ones who got member to the system earlier.
Regarding all of these conditions, we kindly ask our citizens to be very careful and not to give credit to hearsays and make a decision consideringly and by investigating it.“
The rules regarding MLM System stated on the press release made by the Ministry of Industry and Trade generally include the principals laid on the report no A0/7050/98/000156 “Door To Door Selling — Pyramid Selling — Multi Level Marketing” published in 1999 by the EU.
Owing to the fact that some cosmetic companies which have been operating in Turkey for a long time are to a large extent in line with the directives of EU and thus the criteria of Ministry of Industry, they don’t face up with a serious problem. I firmly recommend people who will use this MLM system in Turkey to arrange their activities considering these criteria.
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