Dateline Irrawaddy: Myanmar's Multi-Level Marketing Scourge

By The Irrawaddy 29 September 2018

Kyaw Kha: Welcome to Dateline Irrawaddy! This week we’ll discuss whether it is time to end multi-level marketing (MLM), which the government recently banned. I’m The Irrawaddy chief reporter Kyaw Kha and I’m joined by Lower House MP U Aung Kyaw Kyaw Oo, the first lawmaker to have urged Parliament to abolish MLM, and Ko Zin Zin Lwin, who has been educating the public about the disadvantages of MLM.

The government has banned MLM, saying it is not appropriate for the public. U Aung Kyaw Kyaw Oo, you were the first lawmaker to urge Parliament to abolish MLM. Can you tell us briefly why you submitted the proposal?

Aung Kyaw Kyaw Oo: I often received complaints from the people about MLM. So I asked a question about it in Parliament. A complaint letter from a Bago resident made me raise the question in Parliament. She said MLM had almost ruined her life. So it aroused my interest and I studied MLM.

As I live in Yangon, I studied MLM products sold to Yangon residents. Most of them are herbal supplements. One of the things I noticed was a pendant that is said to be good for health if worn. I asked the Customs Department about its price. They are $6 each, and [suppliers] officially import them by paying tariffs on the $6. But when it reaches the end user, the selling price is 8000,000 to 850,000 kyats ($502 to $533).

I studied the way MLM products are sold and bought, and I found that the government doesn’t get tax from the transactions and the consumers have to pay exorbitant prices for things of little value. Though some pharmaceutical products are certified by the FDA [Food and Drug Administration of Myanmar], many are not. MLM companies import and sell things, and exchange the earnings for US dollar, which flow out of the country. So there is nothing good for the people, the government or the country. I thought it should be curbed, and I asked a question in Parliament.

KK: Ko Zin Zin Lwin, the Commerce Ministry announced an official ban on MLM on Sept. 18. What is your view as an opponent of MLM?

Zin Zin Lwin: MLM companies have existed in the country for more than 20 years. The first MLM companies opened in 1995, 1996. So it has been a long time. Many people have suffered from MLM in various ways. Some suffer financially. They are convinced by the incentives MLM marketers offer and buy large amounts of MLM products. Some suffer only slight financial losses. They only buy as much as they can sell to others. Other costs they have to bear are [transportation] the costs of going to [potential] buyers to sell the products, and the costs to attend [MLM] training classes. But those costs are relatively small.

When [MLM companies] apply for approval from the FDA, they describe their products as herbal supplement. Lately, the FDA released an official statement that [MLM companies] are not allowed to advertise that their products can heal or mitigate particular diseases. But then, along the way, 95 percent of MLM products have advertised that their products can heal or mitigate this or that disease. It is not bad if MLM marketers have legitimately studied human health for years. But the problem is that they sell after they have attended a few training sessions. As a result, many have suffered health problems. For example, some are allergic to particular substances. And we even saw some deaths as a result.

In order to sell their products, some MLM marketers say Western medicine has many side effects. So some patients stop using Western medicine and rely solely on MLM products. Their health deteriorates over time. Those who are on medication for high blood pressures and diabetes suffer most. So they suffer in terms of their health. And MLM has negative impacts on the education of youths.

[MLM companies] give the message to many youths that they don’t need to complete their education and can become rich and successful even if they do not graduate. This message is very dangerous, and it should only be given carefully. There is a huge difference between saying “You can be successful if you have such or such qualifications even if you don’t have a degree” and “You can be successful even if you don’t have a degree.” So this distracts youths from education. And they join a community that apparently is very enjoyable. On the surface, it is very enjoyable and exciting, and youths are therefore persuaded by it.

As my profession is teaching, I have more intense feelings about it. After many people have suffered from MLM, I think the government has taken about two years [to handle MLM] cases. Previously, it took action against two or three MLM companies. After you asked about MLM in Parliament in 2016, concerned departments have been investigating MLM. It imposed the ban two years after the anti-MLM campaign was launched. So we believe the government thought a lot before making the decision. I feel that it is the right decision for now.

KK: There are reports that MLM companies will be allowed back by the government to sell directly to customers. Do you think it is likely? We don’t even have laws in place to control MLM. There is speculation that MLM may come back officially as a direct selling system despite the ban. What is your assessment of it?

AKKO: There was a call to allow direct selling after MLM was banned.The best thing the government could do is totally ban MLM while the education level of people is still low and information flow is still weak in the country. The time is not yet ripe to allow MLM. It should be allowed back only when the education level of people has improved, there is good flow of information, the FDA can properly examine [MLM products], and there are adequate rules and regulations. It should be allowed only when the government has laws and regulations to can prevent direct selling from reverting to MLM.

KK: Ko Zin Zin Win, many might have bought MLM products. The government banned it abruptly. Those in different levels of MLM might have bought many products. But companies said nothing about whether they will compensate them. What should be done to be fair to them?

ZZW: Companies should be responsible and accountable. They have reaped profits from their work for several years and some companies have reaped profits for more than 10 years. It is reasonable for them to spend from their own pockets and do something for them. They should release official statements and say that they will take back all the [unused] products. In so doing, they should place announcements in newspapers and make sure every member knows about it. Some companies only inform a few people perfunctorily just to defend themselves and make sure we can’t complain.

They should make announcements on a wide scale that they will take back the products and also provide the rewards they promised. Some companies reportedly told their members that they don’t need to provide rewards because the business is banned by the government. They shouldn’t do that. They must provide the appropriate rewards. A few company unexpectedly said they would also compensate their members. It is a big local MLM company. It said so in order to protect its image as it is also engaged in other business. It said it would give three months’ worth of bonuses as compensation to its members. So that company is being accountable and responsible.

We have stressed that people suffer [financial losses] not because the government has banned MLM, but because of MLM itself. So MLM companies should take responsibility. In fact they have already got a lot of money from their members. If they are considerate toward their members, they will be less impacted financially.

By nature, Myanmar people are shy and not willing to offend others. Especially those who are overwhelmingly influenced [by the incentives of MLM] may think that those products are great value for money. Such people will not return the products and ask for their money back. But a small number of people may finally see the light, and I hope they will boldly ask for their money back. But it is not easy for them to ask the companies directly. Companies will put pressure on them and hamper the recall process as much as they can. The members will not be able to bear it. They have asked us what they should do, and we tell them to talk directly to those companies. But they dare not. Most of them are concerned that the companies will hold grudges against them. I think the government will soon set up complaint centers regarding MLM. So it would be best for them to file complaints with those centers. The complaint centers will deal with the companies directly, so members need not worry about offending their companies.

KK: Do you think MLM should come back as it is or in a different form, or should it come to an end?

AKKO: Considering the current situation in Myanmar, MLM businesses should cease now. The rule of law is still weak and the judicial branch is paralyzed in the country. And laws are not being properly enforced. Under such conditions, it is impossible to properly regulate MLM businesses. It would be better to completely ban it.

KK: What is your take on this, Ko Zin Zin Lwin?

ZZL: I share the same view. It would be best to ban it given the current conditions. Let’s take a look at the top MLM companies in the United States. Amway is the No.1 MLM company in the world and Herbalife is No. 3. They have to release official figures on their total number of members, the number of high-ranking members who have reached particular positions and their average incomes annually.

Taking a look at those figures, we found that at least 80 percent of members fail to cover the costs. In some companies, up to 99 percent of members can’t break even. So you can see it is very bad even if it is allowed by law. Though the amount of loss is not that significant for people in [developed] countries like the United States, it is quit huge, I think, in the case of our country.

My point is MLM is a business disadvantageous to people even in countries where laws are effectively enforced. I would compare it to gambling. Legitimizing gambling might have the advantage of creating job opportunities, but its disadvantages outweigh the advantages. So while gambling is not yet legitimized, it is a good idea to ban MLM businesses for the time being.

If the products are really good, they can sell the products as they are, without giving false promises of their health benefits. I want them to clearly state the ingredients of the products on the label to make sure they don’t promise too much. People will notice if the products have labels in Burmese saying they are only intended as health supplements and cannot cure any medical condition. If companies promise too much of their products, they might face complaints later on. So it would be best to cease MLM in Myanmar right know.

AKKO: While the country is being rebuilt and undergoing a democratic transition, the resources of the country should be used only where necessary. Money should be spent only on procurement of technologies and building infrastructure. You will see at the markets and City Mart that there are hardly any locally manufactured products. The only locally manufactured product might be the plastic bag [used to pack imports]. Even fruits and flowers at the markets are imported from Thailand. Beauty products are also imported. If we always have to rely on imports, we will never be able to recover from the current situation. We should not waste our resources on unnecessary and unimportant things. I don’t want US dollars to be spent on MLM products.

ZZL: MLM companies claim that there is a market that can’t help using herbal supplements. I want health experts to discuss in public whether something can really happen to them if they stop using those herbal supplements, or if their health problems can be solved with Western medicine and scientific methods. Only health experts can convince them. We have locally produced herbal supplements produced by the FAME pharmaceutical company. But the prices of MLM herbal supplements are five times higher than those sold by FAME. So those who say they can’t help using herbal supplements have two options. First, they can buy them from the [defunct MLM] companies, though I think the prices will still be high. Or they can use FAME products, whose prices and quality are reasonable. Or they should consult with health experts. They have been overwhelmingly swayed by MLM marketers. I would like to ask the health experts to come and talk for those who can’t help using lingzhi, pollen, [weight-loss] coffee and so on. What they say would be much more effective.

KK: Thank you for your contributions!

Translated from Burmese by Thet Ko Ko.