Bangkok Post : Too good to be true

BUSINESS FOCUS: CONSUMER PROTECTION

Anchan, a Suphan Buri native, watched the Super Cheng channel a few months ago and was impressed by the miracle medicine from Aunty Cheng that purported to cure many diseases. She purchased the cure-all over the phone and used it on her eyes.

After several drops, her eyesight became clearer. Several of her fellow teachers became loyal customers as well.

But news last month that Aunty Cheng's products were full of bacteria and not certified stunned Ms Anchan and her teacher friends and they became worried about the product's quality. Yet because the liquid makes them feel better, they continue to use it.

The story is a reminder that the uninformed are vulnerable to cheats.

Big scams like the Mae Chamoy chit fund 20 years ago or the more recent Poodang pyramid fund have cost several thousand people hundreds of millions of baht.

A marketing expert said the poor and uninformed are easily drawn into these networks because they are looking for a short-term financial solution.

"It's a business with no rules and it can happen anytime when victims want something to make them feel better during hard times. The scam can come in many forms, using direct marketing or direct-sales methods," he said.

Direct sales are often blamed when pyramid or multi-level direct-sales scams draw members.

Nalinee Phaiboon, president of the Thai Direct Selling Association (TDSA), said scam operators also use online tools.

Many websites invite people to do business or invest with them through unusual methods. Such firms come mainly from the United States, she said. This is because Thailand has more relaxed laws on direct sales than other countries.

The law allows any firm to engage in direct sales if it has real products to sell to customers. There is nothing in the law specifying product categories or requiring approval of direct-sales business plans.

"Taiwan has a stricter direct-sales law, which looks at the company's registration and screens business plans and products," she said.

There are many honest direct-sales businesses, but scams have made some wary. The TDSA aims to inform the public about what to look for.

There are about 500 firms in direct sales in Thailand, but only 300 are registered with the Commerce Ministry. Of those 300, about 100 are transparent while the other 200 change their corporate names without suitable reason.

Mrs Nalinee, also president of Giffarine Skyline Unity, the operator of the Giffarine brand, suggests people wishing to join a good direct-sales operation consider many factors including products, business plan and structure and the real actions of direct-sales representatives while in the field.

One can also check with the Office of Consumer Protection Board (CPB) about consumer complaints about the firm. Also ask to see the company's balance sheet to evaluate its financial status and consider the reputation of the CEO.

"Make sure when you buy a product from any direct-sales company, you must ask for a receipt from the sales representative immediately," she said.

Jirachai Mooltongroy, the CPB deputy secretary-general, said the office received about 300 to 400 complaints about direct-sales businesses last year and most were from sales representatives who did not get the benefits the companies claimed.

"The problem comes from direct-sales firms with a weak financial status that can't pay commissions or benefits to their sales representatives," he said.

Some scams that use direct-sales tactics can be investigated under related laws. Aunty Cheng was investigated for violating the food and drug law for consumer complaints about her liquid's exaggerated powers.

The government is pledging to beef up measures to protect consumers from exaggerated direct-sales ads on satellite and cable TV channels.

Prime Minister's Office Minister Sathit Wongnongtoey said the CPB had been directed to forge closer co-operation with agencies such as consumer protection associations and the Satellite Television Association to find evidence of violations of the Direct Sales and Direct Marketing Act of 2002 for exaggerated advertising.

In the face of mounting pyramid fund schemes and direct-sales ploys, Niroj Charoenprakorb, the CPB secretary-general, said the office was checking the status of 500 direct-sales companies to curb repeated fraudulent practices.

In the meantime, the Department of Special Investigation (DSI) and the Lawyers Association warned people not to fall prey to pyramid frauds on TV and websites.

A senior official said these fraudulent websites were mostly collaborations between local people and foreigners.

He said the main reason a large number of people were persuaded was the attractive returns and incentives in a short period of time. Low bank deposit rates also gave a reason for people to move their money to other sources that promise higher returns.

"With the growth of the internet, fraudulent pyramid schemes will surely surge," the official said.