The distribution and promotion of Enagic products are pyramidal: OCP
…orders promoters and distributors to shut it down immediately
The online and offline system in Bhutan that deals with Enagic machines or Kangen water filter is a pyramid scheme, according to the Office of Consumer Protection (OCP).
The bureau ordered existing promoters and distributors, whether they operate online or offline, to immediately cease such business practices.
In a press release issued yesterday afternoon by OCP, it said that participation in a pyramid scheme is prohibited and will be dealt with in accordance with the Bhutan Consumer Protection Act 2012 and other relevant laws of the country. .
He also said that OCP owns the commercial mode of operation, online and offline, adopted by the promoters and distributors of Enagic Alkaline Ionizer and water filtration machines or Kangen Water machines in the form of a pyramid scheme.
The problem was brought to light when some social media users alerted people to be careful with online digital commerce earlier this year.
According to the OCP, the program is mainly based on encouraging individuals to buy machines, claiming the health benefits of Kangen water, which is not validated by any competent authority.
Furthermore, it states that the program incentivizes buyers to sign up as members by promising compensation (commission) when they sign up new members. “To become a member, the purchase of any of the products is compulsory, such a practice breaches section 38 (xiii) of the Consumer Protection Rules and Regulations 2015.”
The section states that the establishment, operation or promotion of a promotional pyramid scheme in which a consumer receives compensation that comes primarily from introducing other consumers into the scheme rather than from selling or consuming of products is classified as an unfair and illegal commercial practice.
The OCP, however, ruled that the importation and sale of the machine through retail or online Enagic products was permitted.
after obtaining a valid business license or e-commerce license to ensure that they will not engage in new member scouting and registration.
The office asked the public to refrain from participating in this program by becoming a member in order to further promote the program by introducing downline members.
Before advertising their products as having health benefits, OCP has required retailers or e-commerce companies of these products to obtain prior approval from relevant authorities, in accordance with the Medicines Act of the Kingdom of Bhutan in 2003.
The OCP investigation
Enagic activity, both online and offline, started in Bhutan in 2019.
According to OCP Program Director, Jigme Dorji, the online method which started in 2020 is operated and promoted by a business entity called “Digital Business” and uses the Enagic business model to sell Enagic products and remunerate members. .
Potential online members are first introduced to “Digital Business” and encouraged to participate in activities such as attending webinar sessions and pre-coaching, after paying 149 USD.
Next, a mentor and coach introduce Enagic business models and the products involved (Enagic alkaline ionizer and water filtration machine or Kangen water machine).
He said that in the offline method, members do not have to undergo prescribed “Digital Business” activities, and there is no requirement to pay a fee of USD 149.
The registered distributor promotes the Enagic business, Enagic machines and Kangen water. Distributors promote the prospects and benefits of Kangen Water or Alkaline Water through product demonstrations, face-to-face presentations, and targeted group presentations using various platforms claiming health benefits, selling products and looking for potential members to join as distributors and members.
Jigme Dorji said that in order to participate in the program as either a distributor or a member and earn commissions, both methods require members to first purchase Enagic machines and register with the company using the distributor’s referral code. or the upstream member.
According to him, compensation or commission is paid on direct and indirect sales based on the patented 8-point compensation system based on distributor ranks and product model. “For each sale, the commission is divided into eight parts and is paid to eight distributors or upline members. To remain active in the program and earn a commission, the distributor must make direct sales within a specified time frame.
It was found that the program emphasizes introducing downline members and that commission is based on downline members in addition to direct sales. “But the program also offers a direct sales option to achieve certain ranks.”
According to OCP’s findings, the scheme requires the distributor to remain active or risk the deduction or non-receipt of the commission. Terms include distributor making direct sales within six months to receive full commission. If there is no direct sale within six months but there is a direct sale within two years, the distributor gets half the commission. “The commission is not paid if there is no sale within two years. In this case, the distribution is terminated. »
Jigme Dorji said that it is mandatory to purchase a product to become a registered distributor and participate in the program, adding that such a practice poses sustainability issues as the program requires the recruitment of downline members who will burn out at a given time in a given geographical area. location.
He said new entrants, who form the large groups, will be hit hardest if the system collapses.
“There is an affordability issue as Enagic products are expensive which will limit entry for new entrants or distributors.”
According to OCP, the cost of Enagic products ranges between $2,890 and $5,980.
Jigme Dorji said a few entities used business licenses to import and distribute Enagic products, including Kangen water machines, and about 15 products sell bottled Kangen water.
He said more than 150 online members, including Bhutanese living abroad in places like Australia, the Middle East, the United States and Canada, are selling Enagic products online without a license from valid e-commerce.
Jigme Dorji said distributors and promoters were instructed to immediately stop selling and promoting Enagic products through the pyramid scheme. “Failure to comply will result in the imposition of a penalty under the Consumer Protection Act 2012, which will result in fines for the first breach and cancellation of the trading license and prosecution for repeat breaches. “
He said online promoters who do not have a valid e-commerce license and continue to engage in the pyramid scheme should face penalties and prosecution for repeat violations under the CPA 2012 and other laws.
Drug regulatory authority
Director of the Medicines Regulatory Authority, Wangdi Gyeltshen, said if distributors claim the device has medicinal values, they must register with the DRA because the equipment becomes a medical device.
He said the DRA and the distributor have come to an agreement that if they claim medicinal values they cannot sell the device and if they want to claim medicinal values they must register with the DRA. DRA. “Distributors have agreed not to claim medicinal values and sell the device like any other water filter. They should remove the posters claiming the machine has medicinal values.
The director said only authorized technical people such as pharmacists, technicians and doctors certified by the DRA could sell or distribute devices with medicinal value. “Any product that claims medicinal values can only be sold by retail pharmacies and authorized providers.”