Government Notifies Direct Selling Rules, Bars Entities From Promoting Pyramid Schemes

Under new direct selling rules, government barred entities from promoting pyramid schemes

Government notifies new direct selling rules that bar entities from promoting pyramid schemes


New Delhi:

The government on Tuesday banned direct selling companies from promoting pyramid schemes, as it notified new rules for the industry, which it needs to comply with within 90 days.

The Consumer Protection (Direct Selling) Rules, 2021, as notified by the nodal ministry of consumer affairs, are to be complied with by both direct selling entities and direct sellers using e-commerce platforms for sale.


Official sources said that if these rules are not followed, penal provisions under the Act will apply to them.

The move, which aims to protect the rights of consumers, restricts companies that are involved in direct selling such as Tupperware, Amway and Oriflame to encouraging money circulation schemes.

Now, such companies will also be liable for complaints arising out of sale of goods or services by their direct sellers.

As per the new rules, state governments will have to set up a mechanism to monitor or monitor the activities of direct sellers and direct selling entities.

As per the rules, direct selling entities and direct sellers are prohibited from promoting pyramid schemes or enrolling any person in such scheme or participating in such arrangement in any manner under the guise of carrying on direct selling business. goes.

The new rules state that they have also been banned from participating in money circulation schemes under the guise of doing direct selling business.

These rules shall apply to all goods and services purchased or sold through direct selling in India, all models of direct selling and all direct selling entities. They shall also apply to direct selling entities which are not established in India but provide goods or services to consumers here.

As per the new rules, a direct seller should not visit a consumer’s premises without an identity card and prior appointment or approval.

Seller must not provide any literature to a prospect that has not been approved by the direct selling entity. Seller must not make any claim in pursuance of the sale which is not in conformity with the claims authorized by the Direct Selling Entity.

In addition, the direct seller must have a prior written agreement with the direct selling entity to sell, or offer to sell, any goods or services of such entity.

The seller must also disclose the identity of the direct selling entity, the address of the place of business, the nature of the goods or services sold and the purpose of such solicitation to the extent possible.

Seller must make an offer of accurate and complete information, performance of goods and services, price, credit terms, payment terms, return, exchange, refund policy, return policy, terms of guarantee and the possibility of providing after-sales service.

Seller must ensure that the actual product delivered to the Buyer matches the description of the product and take appropriate steps in accordance with applicable laws to ensure the security of all sensitive personal information provided by the Consumer.

In the case of direct selling companies, they should be incorporated under the Companies Act, 2013, or if a partnership firm, registered under the Partnership Act, 1932, or if a limited liability partnership under the Limited Liability Partnership Act, 2008.

Such firms should have at least one physical location within India as their registered office and self-declaration to the effect that the direct selling entity has complied with the provisions of the Direct Selling Rules and that any pyramid or money Not included in the circulation plan. ,

They should ensure that all its direct sellers have verified identities and physical addresses, and issue identity cards and documents to such direct sellers only.

Direct Selling Companies shall take adequate safeguards to ensure that the goods and services provided by their Direct Sellers are in conformity with applicable laws and shall be “liable for complaints arising out of the sale of goods or services by their Direct Sellers”.

The companies have been asked to put in place an adequate grievance redressal mechanism and display on their websites the current and updated name, contact details, telephone number, e-mail address and designation of such officer.

The details of its website should also be prominently printed on the product information leaflet or pamphlet.

The Grievance Redressal Officer should report the receipt of any consumer complaint within 48 working hours of the receipt of such complaint and normally redress the complaint within a period of one month from the date of receipt of the complaint.

In case of delay beyond one month, the reason for the delay and action taken on the complaint should be informed in writing to the complainant.

In addition, direct selling firms are required to appoint a nodal officer who will be responsible for ensuring compliance with the provisions of the Act and rules.

Such firms should put in place a mechanism for filing complaints by consumers.

They should keep records of all their direct sellers, including their identity proof, address proof, e-mail and such other contact information.

According to the new rules, both the direct selling companies and the direct sellers will have to ensure that the terms and conditions of the offer to the consumers are clear.


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