Centre notifies rules for direct selling companies

The Centre on Tuesday notified rules for the direct selling industry prohibiting promotion of pyramid schemes and participation in money circulation schemes.

The government said that the existing direct selling companies will need to ensure they comply with the Consumer Protection (Direct Selling) Rules, 2021 within 90 days. It also directed State governments to set up a mechanism to monitor or supervise the activities of direct sellers and direct selling entities.

The Consumer Affairs Ministry said that the rules lay down duties and obligations of both direct selling entities and their direct sellers to “safeguard the interest of consumers”.

Redressal mechanism

Under the new rules, direct selling companies will need to establish an adequate grievance redressal mechanism.

“A direct selling entity which explicitly or implicitly vouches for the authenticity of the goods or services sold, or guarantees that such goods or services are authentic, shall bear the liability in any action related to the authenticity of such goods or services,” the notification stated.

These companies will need to display information regarding their grievance redressal mechanism on their website including information about grievance redressal officers. The grievance redressal officer will need to acknowledge the receipt of consumer complaints within 48 working hours. Complaints will need to be resolved within a month and reasons will need to be given to the complainant if there is a delay of more than a month.

“Every direct selling entity shall appoint a nodal officer who shall be responsible for ensuring compliance with the provisions of the Act and the rules,” the official statement added.

The Rules also state that direct selling companies or their direct sellers cannot “induce consumers to make a purchase based upon the representation that they can reduce or recover the price by referring prospective customers to the direct sellers for similar purchases.”

Direct selling companies will need to monitor practices adopted by their direct seller to ensure they are in compliance with the norms through a legally binding contract with them. In addition, both direct selling entities and direct sellers “using e-commerce platforms” for sale need to comply with the Consumer Protection (e-Commerce) Rules, 2020.

Some of the key direct selling companies operating in the country include Amway, Tupperware, Herbalife and Oriflame among others.

‘Clarity in marketplace’

Rajat Banerji, Chairman, Indian Direct Selling Association, said,”We have been closely working with the government for the past two years and have been providing our inputs. These new rules would also bring clarity in the marketplace and would give impetus to the direct selling industry, which is already providing livelihood to over 70 lakh Indians, in which more than 50 per cent are women.”

Other compliances include maintaining a record of all direct sellers including those who have been delisted and such a list will need to be publicly displayed on their website.

Direct selling companies will also need to give a self-declaration that they are in compliance with the provisions of the Rules and are not involved with pyramid schemes or money circulation schemes.

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