Centre moves to regulate direct selling industry

Our Bureau New Delhi | Updated on January 16, 2018 Published on September 12, 2016

Ram Vilas Paswan

Setting the terms : Direct selling, according to the guidelines, means marketing, distribution and sale of goods or providing services as a part of network of direct selling, other than under a pyramid scheme

Model norms bar e-comm sites from selling without approval from direct selling firms

The Centre on Monday released model guidelines on direct selling, which among other things, prohibit such companies from charging any entry/registration fee from, or forcing suppliers to buy back unsold stock. It has also barred e-commerce firms from selling products without approval from direct selling firms.

Among the major companies operating in this unregulated sector in India are Amway, Oriflame and Tupperware. “The model guidelines are being sent to the States today. They can localise the guidelines but the broad framework of guidelines will remain. Later, we may bring in a regulation too,” Food Minister Ram Vilas Paswan said at a press conference here.

‘Voluntary in nature’

Hem Pande, Secretary, Food Ministry, said the basic idea behind the guidelines, which are “voluntary”, is to promote direct selling”, adding that “it will be a win-win for both consumers and sellers.”

The Ministry hopes that State governments will set up a mechanism to monitor/supervise the activities of direct sellers.

“Any direct selling entity conducting direct selling activities shall submit an undertaking to the Department of Consumer Affairs within 90 days, stating that it is in compliance with these guidelines and shall also provide details of its incorporation,” an official statement said. The model guidelines also propose that agents must get a written contract describing the “material terms”, a grievance redress system for consumers and have no provision that a direct seller will receive remuneration/ incentives for recruitment/enrolment of new agents. Also, the direct selling agency has to be a registered entity under the laws of India.

The Direct Selling Guidelines 2016 should serve as guiding principles for State governments to consider regulating the business of direct selling and multi-level marketing to prevent frauds and protect consumers, the Ministry said. The guidelines define a direct seller as a “person appointed or authorised, directly or indirectly, by a Direct Selling Entity through a legally enforceable written contract to undertake direct selling business on principal to principal business.”

Defining the business

Direct selling, as per the guidelines, means “marketing, distribution and sale of goods or providing services as a part of network of direct selling, other than under a pyramid scheme.”

Reacting to the guidelines, Anshu Budhraja, CEO, Amway India, said: “The guidelines represent an important step that will safeguard the interests of consumers as well as identify and help protect ethical companies. We believe it will spur the growth of direct selling in India and drive entrepreneurship.”

He said: “the next important step is to ensure that the States adopt these guidelines quickly as that is where the implementation will happen.”

Vivek Katoch, Director (Corporate Affairs), Oriflame India, hailed the move. “Due to prohibition of the pyramid scheme by the government, the direct selling industry now has an operational and definitional clarity,” he said, adding that “what makes us more relaxed is that e-commerce websites won’t be able to sell the products of direct selling companies without their approval”.

Amit Chadha, Secretary General, Indian Direct Selling Association, said: “In the absence of proper policy or guidelines, numerous fraudulent players have been taking advantage of the situation. Now that the Guidelines are out, it shall address industry concerns.”

The new guidelines have been framed as the direct selling industry is facing problems in the absence of clear legislation that defines the regulatory framework.

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Published on September 12, 2016
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