1. What is the difference between direct selling and direct marketing?
Direct selling is selling a product or service directly to consumers away from a fixed retail location either person-to-person, sales made through the party plan and other personal contact arrangements as well as internet sales.
Direct marketing, meanwhile, is an interactive system of marketing that uses one or more advertising media to generate a measurable response and/or transaction at any location, with this activity stored in database. This may include telemarketing, direct mail and direct response.
Therefore, the distinguishing characteristic of direct selling is that the direct seller or retailer initiates contact with the potential customer instead of waiting for the customer to come to a store or some permanent place of business.
2. What are the types of products and services marketed through direct selling?
In Malaysia, direct selling is a diversified business with a sizeable product category. Virtually every consumer product or service approved by the Ministry of Domestic Trade, Co-operatives and Consumerism (KPDNKK) can be marketed through direct selling. These may include but not limited to health products, food products and household items amongst others.
3. How big is the direct selling industry in Malaysia?
Direct selling industry is an important industry in Malaysia, contributing over RM10.638 billion* worth of sales in 2014 as of August 2015. The industry opens up avenues for both part time and full time business opportunities for the Malaysian public. The industry also provides a platform for entrepreneurs to promote their unique products and personal service by way of direct selling.
4. Who can become an MDDA member?
There are two types of membership:
- Corporate Membership
Any direct selling business with a valid AJL license obtained from KPDNKK can apply for MDDA corporate membership.
- Associate Membership
Any companies who deal with a direct selling business with a valid license obtained from KPDNKK can apply for MDDA associate membership.
5. Why should a direct selling company join MDDA?
MDDA membership can benefit you in a variety of ways:
- We have established a good working relationship with the Ministry of Domestic Trade, Co-operatives and Consumerism (KPDNKK) to shape the direct selling industry in Malaysia to make it an important contributor to the country’s economy. This also allows us to provide members with an effective platform to voice difficulties/problems faced to relevant authorities including KPDNKK, Ministry of Health and Royal Customs and Excise Department as well as providing updates on new rules and regulations of the direct selling industry.
- Members are entitled to join our activities and enjoy a variety of offers from time-to-time at an affordable membership fee.
- All members are eligible to be a voting corporate member upon registration.
- We are a close-knit community that provides a variety of programmes including service oriented activities to help members to grow together.
- We are a caring and socially responsible association who values our community as much as we do our members. In line with our core value of Rebuilding Lives, we are committed to give back to the society to create a positive environment.
6. I’m considering starting a direct selling company of my own. Where do I start?
Before starting a direct selling business, the following items will need to be considered:
- A registered company with Direct Selling or MLM as the nature of business with a paid up capital of (a) RM750,000 for Bumiputera company; (b) RM1.5 million for non-Bumiputera company and (c) RM5 million for a foreign company.
- A Compensation Plan.
- A minimum of 5 product range with the necessary approval by MOL and K.K.L.I.U (Lembaga Iklan Ubat, Kementerian Kesihatan Malaysia) amongst others.
- Product brochures and mock up of packaging.
- AJL License.
7. All direct selling companies in Malaysia are required to obtain a valid Direct Selling License (AJL License) from KPDNKK before commencing business operation. How do I apply for the license?
The AJL License or Lesen Akta Jualan Langsung can be obtained from the Direct Selling Division in KPDNKK. To start the application process, you will have to submit various documents which are listed under the Membership tab on MDDA’s website.
Upon successful application, your company will be given a direct selling license with an AJL number.
8. What do I need to do with the AJL license?
The AJL License will need to be displayed in companies’ offices or distributors and members can request to see the license. Each license has an expiry date thus distributors and members need to be mindful and check the validity of the license.
The AJL number will need to be displayed on all materials related to the company including signboards, products and marketing materials such as brochures, flyers and catalogues amongst others.
Alternatively, distributors and members can verify the status of a direct selling company by looking it up on the KPDNKK website (www.kpdnkk.gov.my). Proceed to the Trader (Peniaga) tab on the Main Directory and select Direct Sales Industry Management (Pembangunan Industri Jualan Langsung) to view the list of direct selling companies and license dates as well as the list of direct selling companies with revoked licenses.
9. What are the regulations governing health products sold via direct selling?
All health products have to be registered with the National Pharmaceutical Control Bureau (BPFK) division in the Ministry of Health. Once these products are registered, they will be given MAL numbers which should be included on the product’s label. The validity of the MAL numbers can be verified by checking the BPFK’s website (www.bpfk.gov.my).
10. How to report an unregistered direct selling company?
You can report the case either to the police or to the Enforcement Division of KPDNKK at No 13, Aras 2 & 3, Persiaran Perdana Presint 2, 62623 Putrajaya. They can also be contacted at 03 8882 5500 or 03 8882 6015.
11. Who is the governing body for direct selling companies in Malaysia?
All direct selling companies are governed by KPDNKK.
12. As a self-regulator, how does MDDA ensure that its members adhere to the regulations governing the companies?
MDDA has developed Code of Ethics & Conduct which governs how our members should act in order to promote greater public confidence in the industry amongst the general public. We encourage our members to practice and to abide by the proper Code of Ethics & Conduct which helps to protect the industry, its members and consumers.
13. What are the questions I should be asking to find out if a direct selling company is legitimate?
Valid AJL License
As a consumer, you have the right to ask if a direct selling company is registered with KPDNKK by asking for the AJL license. The license must be displayed at the office or distributors as well as consumers can request to see the license. Ensure that the license is still valid by checking for the validity period on KPDNKK’s website.
Every product sold by a direct selling business needs to be approved by the relevant authorities including KPDNKK, Ministry of Health (MOH) as well as K.K.L.I.U amongst others. Each product must also be of good quality and priced reasonably.
Consumers are advised to ask for the direct selling business’ compensation plan or also known as the marketing plan. A good compensation plan is easy to understand, clear and concise, based on the sale of products instead of recruitment of new members and should not violate the Direct Sales & Anti-Pyramid Scheme Act 1993. A pyramid scheme can be identified when multiple features listed below is fulfilled:
Features of a Pyramid Scheme or Arrangement
- The promotion of a scheme or the payment of bonus or other benefits is solely or primarily through recruitment of introduction of participants, into the pyramid scheme, plan, operation or chain process rather than the sale of goods, services or intangible property by the participants.
- The bonus is paid to the participants or the other benefits are received by the participants solely or primarily through the recruitment or introduction of other persons into the pyramid scheme, plan, operation or chain process rather than the sale of goods, services or intangible property by the participants or other persons.
- A written contract or statement which describes the material terms of the agreement is not provided to participants who join the pyramid scheme, plan, operation or chain process.
- A mandatory purchase of goods, services or intangible property or a minimum payment or sale requirement is imposed as a condition to satisfy the eligibility or start-up requirement for participation or payment of bonus or other benefits in the pyramid scheme, plan, operation or chain process.
- The participants are required to purchase goods, services or intangible property in unreasonable amount which exceeds the expectation to be resold or consumed within a reasonable period of time. The participants may not be given full liberty in buying but they are pressured to purchase selected goods packages to meet sales requirements to qualify them for position or bonus in the pyramid scheme, plan, operation or chain process.
- The refund policy for goods, services or intangible property purchased by participants or consumers is not provided.
- The buy-back policy by the operator of the pyramid scheme, plan, operation or chain process for currently marketable goods, services or intangible property upon the request of participants within reasonable terms or agreement is not allowed or provided for.
- A strict or unreasonable structural requirement of the pyramid scheme, plan, operation or chain process for the eligibility of participants to be paid bonus or other benefits.
- Withdrawal by participants from the pyramid scheme, plan, operation or chain process is not allowed.
- The participants are allowed or encouraged to buy up more than one position or right to participate in the pyramid scheme, plan, operation or chain process.
Explanation 1 – A reference to the word “bonus or other benefits” shall relate to return or profit gains from a pyramid scheme, plan, operation or chain process.
Explanation 2 – A reference to the words “material terms” shall include buy-back policy, cooling-off period, warranty and refund policy.
Explanation 3 – The goods or services shall not be considered as currently marketable and shall not subject to the specified features if the goods or services are seasonal, discontinued or special promotional items which are disclosed to the participants at the time of sales.
*Source – Section 27A, Direct Sales & Anti-Pyramid Scheme Act 1993