Under New Direct Selling Rules, Government Bars Entities From Promoting Pyramid Schemes

New Delhi, Dec 28:  To protect consumers, the Centre on Tuesday banned direct selling companies like Tupperware, Amway and Oriflame from promoting pyramid or money circulation schemes, as it notified new rules for the industry to be complied with within 90 days.

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

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

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

Speaking with PTI, a senior consumer affairs ministry official said: “This is for the first time that the rules for the direct selling industry are notified under the Consumer Protection Act. If these rules are not complied with, the penal provisions under the Act will apply to them.”

According to the rules, direct selling entities and direct sellers are prohibited from promoting a pyramid scheme or enrolling any person to such scheme or participating in such arrangement in any manner whatsoever in the garb of doing direct selling business.

They are also banned from participation in money circulation schemes in the garb of doing direct selling business, the new rules said.

These rules will apply to all goods and services bought or sold through direct selling, all models of direct selling and all direct selling entities to consumers in India. These rules apply to those direct selling entities also that are not established in India but offer goods or services to consumers here.

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

The seller should not provide any literature to a prospect that has not been approved by the direct selling entity. The seller in pursuance of a sale should not make any claim that is not consistent with claims authorised by the direct selling entity.

Besides, the direct seller should have a prior written contract with the direct selling entity for undertaking the sale of, or offer to sell, any goods or services of such entity.

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

The seller should make an offer to the prospect providing accurate and complete information, demonstration of goods and services, prices, credit terms, terms of payment, return, exchange, refund policy, return policy, terms of the guarantee and after-sale service.

The seller should ensure that the actual product delivered to the buyer matches with the description of the product given and take appropriate steps to ensure the protection of all sensitive personal information provided by the consumer in accordance with the applicable laws for the time being in force.

In the case of direct selling companies, they should 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, under the Limited Liability Partnership Act, 2008.

Such firms should have a minimum of one physical location as their registered office within India and make self-declaration to the effect that the direct selling entity has complied with the provisions of the direct selling rules and is not involved in any pyramid or money circulation scheme.