Centre notifies new direct selling rules; bans pyramid and money circulation schemes

The entities have to ensure that these new rules are complied by within 90 days.

It is to be noted that Tupperware, Amway and Oriflame are the direct selling companies and key players in the industry.

The Consumer Protection (Direct Selling) Rules, 2021 will apply to all goods and services bought or sold through direct selling, all models of direct selling, all direct selling entities offering goods and services to consumers in India, all forms of unfair trade practices across all models of direct selling and also to also to a direct selling entity which is not established in India, but offers goods or services to consumers in India.

The direct sellers as well as the direct selling entities using e-commerce platforms for sale will have to comply with the requirements of the Consumer Protection (e-Commerce) Rules, 2020.

Direct selling entity and direct sellers are prohibited from promoting a Pyramid Scheme or enroll any person to such scheme or participate in such arrangement in any manner whatsoever in the garb of doing direct selling business.

The rules also prohibit them from participating in money circulation scheme in the garb of doing direct selling business.

According to the rules, every state government has to set up a mechanism to monitor or supervise the activities of direct sellers and direct selling entity.

The rules require driect selling entities to be incorporated under the Companies Act, 2013 or if a partnership firm, be registered under the Partnership Act, 1932, or if a limited liability partnership, be registered under the Limited Liability Partnership Act, 2008.

Further, such entities should have a minimum of one physical location as its registered office within India.

They should make self-declaration that they have complied with the provisions of the direct selling rules and is not involved in any pyramid scheme or money circulation scheme.

Such entities should have a prior written contract with its direct sellers in order to authorize them to sell or offer to sell its goods or services, and the terms of such agreement shall be just, fair and equitable.

The rules also makes the diect selling entities liable for the grievances arising out of the sale of goods or services by its direct sellers.

Every direct selling entity's website should provide information about the registered name of the direct selling entity; registered address of the direct selling entity and of its branches; contact details, including e-mail address, fax, land line and mobile numbers of its customer care and grievance redressal officers; a ticket number for each complaint lodged through which the complainant can track the status of the complaint.

They should provide information relating to return, refund, exchange, warranty and guarantee, delivery and shipment, modes of payment, grievance redressal mechanism and such other information which may be required by the consumers to make informed decisions.

They should provide information on available payment methods, the security of those payment methods, the fees or charges payable by users, the procedure to cancel regular payments under those methods, charge-back options, if any, and the contact information of the relevant payment service provider;

Their website should have clear information realted to total price of any goods or service in single figure, along with its break-up price showing all compulsory and voluntary charges, including delivery charges, postage and handling charges, conveyance charges and the applicable tax.

They are liable to provide correct and complete information at pre-purchase stage to enable buyers to make informed purchase decisions.

No direct selling entity shall adopt any unfair trade practice in the course of its business or otherwise, and shall abide by the requirements specified in any law for the time being in force, the notification said.

All products of a direct selling entity to comply with the declarations to be made under the Legal Metrology Act, 2009.

Every direct selling entity has to establish an adequate grievance redressal mechanism and display the current and updated name, contact details including telephone number, email address and designation of such officer on its website, and the details of its website shall also be prominently printed on the product information sheet or pamphlet.

The grievance redressal officer must acknowledge the receipt of any consumer complaint within forty-eight working hours of receipt of such complaint and redresses the complaint normally within a period of one month from the date of receipt of the complaint and in case of delay of more than a month, reasons for the delay, and the actions taken on the complaint, are informed to the complainant in writing.

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 made there under, and to ensure compliance with any order, or requisition, made in accordance with the provisions of any other law for the time being in force or the rules made thereunder.

Every direct selling entity shall establish a mechanism for filing of complaints by consumers through its offices or branches or direct sellers, either in person or through post, telephone, e-mail or website.

Every direct selling entity shall maintain a record of all its direct sellers, including their identity proof, address proof, e-mail and such other contact information.

Direct selling entities shall, on the request in writing made by a consumer after the purchase of any goods or services, provide him with the information regarding any direct seller from whom such consumer has made a purchase, and such information shall include the name, address, e-mail, contact number and any other information which is necessary for making communication with such direct seller for effective dispute resolution.

Such entity shall ensure that the advertisements for marketing of goods or services are consistent with the actual characteristics, access and usage conditions of such goods or services.

No direct selling entity shall, directly or indirectly, falsely represent itself as a consumer and post reviews about its goods or services or misrepresent the quality or features of any of its goods or services.

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.

Notwithstanding the distribution system adopted by it, a direct selling entity shall monitor the practices adopted by its direct sellers and ensure compliance with these rules by means of legally binding contract with such direct sellers.

Every direct selling entity shall maintain a record of relevant information allowing for the identification of all direct sellers who have been delisted by the direct selling entity and such list shall be publicly shared on its website.