CCPA Imposes ₹11 Lakh Penalty on E-Biotorium Network

In re E biotorium Network Private Limited (CCPA Delhi)

Summary: The Central Consumer Protection Authority (CCPA), in suo motu proceedings against E biotorium Network Private Limited, examined alleged non-compliance with the Consumer Protection (Direct Selling) Rules, 2021 concerning website disclosures, product information, statutory documents and consumer-facing representations. Following a preliminary inquiry, a Show Cause Notice dated 18 June 2024, investigation by the Director General (Investigation), and hearing on 4 August 2026, the CCPA found deficiencies including incomplete statutory disclosures, missing or inadequate product information, absence of certain licensing particulars, website deficiencies and inadequate pre-purchase information. The investigation also examined claims concerning biomagnetic products and the website’s “7 days full money back refund policy”. The Authority held that the acts and omissions amounted to dissemination of misleading information and constituted a misleading advertisement and unfair trade practice under the Consumer Protection Act, 2019. The CCPA directed the company to maintain updated direct-seller records and website disclosures and comply with the applicable Rules and Act. It also imposed a penalty of ₹11,00,000 under Section 21, requiring payment and a compliance report within 15 days.

Proceedings Before the CCPA

The Central Consumer Protection Authority initiated suo motu proceedings against E biotorium Network Private Limited concerning alleged non-adherence to Rules 4 and 5 of the Consumer Protection (Direct Selling) Rules, 2021. The preliminary inquiry found that mandatory documents and information, including the Self Declaration, Balance Sheet, Audit Report and certain licences and registration certificates, had not been updated on the company’s website.

The CCPA issued a Show Cause Notice dated 18 June 2024, requiring the opposite party to substantiate its response within 15 days. In its reply dated 5 July 2024, the company submitted that the required details and documents had been uploaded after issuance of the notice.

Upon examination, the CCPA found that further investigation was required because several compliance requirements remained unaddressed. These included the absence of a register of direct sellers, product information and prices, records identifying delisted direct sellers, certification of website information by the Company Secretary, properly updated financial documents and complete pre-purchase information required under Rule 5(2)(h).

Investigation by Director General

Under Section 19(1) of the Consumer Protection Act, 2019, the matter was referred for detailed investigation by the Director General (Investigation) pursuant to the CCPA’s order dated 23 August 2024.

The investigation report dated 24 September 2025 identified several deficiencies. Although the company had GST registrations in Maharashtra, Assam, Delhi and Karnataka, GST returns were uploaded only for Maharashtra, Delhi and Guwahati (Assam). The investigation treated the omission concerning Karnataka as a lapse in financial disclosure under Rule 4(e).

The investigation further found that the ingredients of the “Multipurpose Herbal Bath Soap” were not explicitly listed in text in the product description, and the company had not produced a valid licence or registration certificate under the Drugs and Cosmetics Act, 1940 for manufacture or sale of the product. In relation to footwear, the investigation noted that the mandatory BIS Quality Control Order licence had not been uploaded and that product listings lacked material composition, usage instructions and manufacturing details.

The investigation also identified a non-functional link for Women’s Shoes, which redirected to the Men’s Shoes page, and a non-operational Facebook link. At the same time, the report recorded corrective steps taken by the company, including uploading the register of direct sellers, certification of website content through the Company Secretary and provision of records concerning delisted sellers.

The investigation concluded that the company had made efforts to comply with several provisions but continued to have gaps in statutory disclosures, product licensing and accessibility. It recorded that these findings supported partial non-compliance and stated that the conduct fell within the ambit of “unfair trade practice” under Section 2(47) of the Consumer Protection Act, 2019.

Submissions of E biotorium Network Private Limited

In its written response dated 25 June 2026, the company submitted that the Karnataka GST registration had already been cancelled with effect from 5 March 2025 and that its continued appearance on the website was due to an oversight. It stated that the relevant details had subsequently been removed and supporting documents furnished.

Regarding the Multipurpose Herbal Bath Soap, the company submitted that the product page had been updated with product description, ingredients, usage instructions, disclaimers and other particulars. It also stated that the product was manufactured by a duly licensed manufacturer and furnished permission granted by the Food & Drugs Control Administration, Gujarat, for manufacture and marketing.

In relation to footwear, the company acknowledged the omission concerning the BIS Quality Control Order and undertook to apply for the applicable BIS licence/QCO compliance. It also submitted that the non-functional Women’s Shoes link and Facebook link were technical issues that had subsequently been corrected.

The company further stated that it had comprehensively reviewed its website, updated product pages and statutory disclosures and would periodically review the website to keep statutory information accurate and updated. It submitted that the deficiencies were neither deliberate nor intended to mislead consumers.

Hearing and Examination of Product Representations

The hearing ultimately took place on 4 August 2026 through video conferencing. During the hearing, representatives of the opposite party submitted that the company manufactures certain products itself, including biomagnetic mattresses, while soaps and footwear are procured from third-party manufacturers and marketed by the company. They also explained the direct selling model involving demonstrations, prospective consumers and training of other direct sellers.

The CCPA examined the company’s representations concerning biomagnetic products, including biomagnetic mattresses and products described on the website as “healing pads”. The Authority sought clarification regarding the scientific or medical basis for claims relating to magnetism, blood circulation, oxygen levels and purported product benefits. The company’s representative referred to his study of biomagnetism since 2007 and research and literature concerning magnetism, while, when questioned about impact studies involving consumers, primarily relied upon experience, demonstrations and consumer feedback.

The CCPA also examined the expression “Backbone Healing Pad” and observed that such terminology may convey a healing effect to consumers. The company submitted that it did not make an absolute therapeutic claim and that disclaimers were provided on product packaging. During the discussion, however, it was pointed out that packaging-level disclaimers would not be available to a consumer viewing the product on the website before purchase.

Refund Policy and Pre-Purchase Disclosures

The CCPA examined the “7 days full money back refund policy” displayed on the website with the expression “T&C applied”. Different explanations were initially given regarding whether products could be returned after use. The company subsequently clarified that its stated policy required products to be unused for return, although used products could be accepted in exceptional cases where complaints were received. It was acknowledged that the website policy did not specifically state that a used product could be returned.

The Authority also observed that mandatory declarations under the Legal Metrology framework appearing on product labels or packaging should be appropriately made available to consumers online at the pre-purchase stage. The company acknowledged this observation.

Consumer Protection Act and Direct Selling Rules Considered

Section 2(28) of the Consumer Protection Act, 2019 defines “misleading advertisement” to include an advertisement that falsely describes a product or service, gives a false guarantee or is likely to mislead consumers concerning its nature, substance, quantity or quality, conveys an express or implied representation amounting to an unfair trade practice, or deliberately conceals important information. The CCPA’s reasoning in the present matter centred on the requirement that information presented to consumers must be truthful, accurate, capable of substantiation and sufficiently complete for an informed transactional decision.

The Consumer Protection (Direct Selling) Rules, 2021 require direct selling entities to maintain specified records and documents and maintain a proper and updated website containing relevant information. Rule 5 also requires, among other matters, self-declaration, updated website information, Company Secretary certification, clear pre-purchase information and disclosure of information concerning products, prices, returns, refunds and grievance redressal.

The Rules also require relevant information concerning delisted direct sellers to be maintained and publicly shared on the website. The CCPA emphasised that mandatory documents and information must be properly maintained and made available in a clear and accessible manner.

The source order also considers the Consumer Protection (E-Commerce) Rules, 2020, noting that direct selling entities which are e-commerce or marketplace e-commerce entities are required to comply with the applicable duties and liabilities under those Rules, including grievance redressal, accurate product descriptions and disclosure of relevant seller and product information.

The order further refers to the Legal Metrology (Packaged Commodities) Rules, 2011 in the context of mandatory declarations and their availability to consumers at the pre-purchase stage.

CCPA Findings on Misleading Information

The CCPA held that information displayed on the website of a direct selling entity, where it induces a consumer to purchase goods, must be complete, accurate and capable of verification. According to the Authority, failure to disclose material information and displaying incomplete or unverified regulatory credentials can create a misleading impression concerning the nature, characteristics and regulatory compliance of products and impair consumers’ ability to make informed choices.

On the basis of the investigation report, written submissions and hearing, the CCPA held that the acts and omissions of the opposite party amounted to dissemination of misleading information to consumers and constituted a misleading advertisement and unfair trade practice within the meaning of the Consumer Protection Act, 2019.

The Authority also referred to Section 21 of the Consumer Protection Act, 2019 concerning directions and penalties against false or misleading advertisements. The provision was considered in determining the action against the opposite party. The CCPA’s discussion also referred to factors under Section 21(7), including the population and area affected, frequency and duration of the offence, vulnerability of affected persons and gross revenue from sales effected by virtue of the offence. The Consumer Protection Act, 2019- False & Misleading Advertisements material on TaxGuru also addresses the statutory framework concerning misleading advertisements and CCPA powers.

Directions and ₹11 Lakh Penalty

After considering the written submissions, the submissions during the hearings and the investigation report, the CCPA issued directions under Section 21 read with Section 20 of the Consumer Protection Act, 2019.

• To always maintain a proper and updated list of direct sellers stating the ID number, name, contact number and city in which the direct seller operates.
• To always comply with the Consumer Protection (Direct Selling) Rules, 2021 and the Consumer Protection Act, 2019 and regularly update the register of active and delisted direct sellers.
• To always maintain a proper and updated company website where all mandatory documents and relevant information are prominently displayed and readily available to consumers.

The CCPA further held that the opposite party had failed to make requisite information and documents available until intervention by the Authority and that the conduct fell within the scope for levy of penalty under Section 21(2) of the Consumer Protection Act, 2019. Having regard to the facts and circumstances and the factors under Section 21(7), the CCPA imposed a penalty of ₹11,00,000 on the opposite party for publishing false and misleading advertisement that affected consumers as a class.

The opposite party was directed to submit the penalty amount and a compliance report to the CCPA within 15 days from the date of the Order. The order and directions were stated to have been passed in exercise of the powers conferred upon the CCPA under Sections 10, 20 and 21 of the Consumer Protection Act, 2019.

FULL TEXT OF THE JUDGMENT/ORDER OF CENTRAL CONSUMER PROTECTION AUTHORITY

referred to as ‘CCPA’) suo moto against E biotorium Network Private Limited (hereinafter referred as opposite party) regarding alleged non-adherence to Rule 4 and 5 of the Consumer Protection (Direct Selling) Rules, 2021.

2. The opposite party had allegedly failed to adhere to Rule 4 and 5 of the Consumer Protection (Direct Selling) Rules, 2021 by:

i. Omitting to disclose/publish essential information on their website.

ii. Not updating their websites with required documents and declarations.

3. Accordingly, in the exercise of the powers under Sections 18 and 19 of the Consumer Protection Act, 2019 (hereinafter referred to as Act), CCPA conducted a preliminary inquiry to examine whether the opposite party was in violation of the Consumer Protection (Direct Selling) Rules, 2021. As per the preliminary inquiry, it was found that some of the mandatory documents like Self Declaration, Balance Sheet and Audit Report, License and Registration Certificate issued under the Drugs and Cosmetics Act, 1940 (23 of 1940) for the purposes of manufacture or sale of drugs, including Ayurvedic, Siddha and Unani drugs and Homoeopathic Medicines relating to the direct selling by E biotorium Network Private Limited on its website were not updated.

4. Thereafter, the CCPA issued a Show Cause Notice (hereinafter referred to as ‘SCN’) dated 18th June, 2024 to the opposite party for alleged violation of Rule 4 and 5 of the Consumer Protection (Direct Selling) Rules, 2021. CCPA directed the opposite party to substantiate a response within 15 days of receipt of the above-mentioned show cause notice.

5. In response to the Notice, a reply dated 05th July, 2024 was received wherein the opposite party submitted that all details and required documents have been uploaded on the official website after the issuance of the SCN.

6. The response of the Opposite Party was examined. CCPA observed that the response of the Opposite Party required further examination and a detailed investigation, since the Opposite Party had still failed to comply with all the necessary compliance requirements, including the following:

i. The Opposite Party did not maintain a register of direct sellers, as provided under Rule 4, on its website or in its response to the SCN.

ii. The Opposite Party did not furnish product information, as required under Rule 5(d), on its website or in its response to the SCN.

iii. The Opposite Party did not furnish product prices, as required under Rule 5(d), on its website or in its response to the SCN.

iv. Further, Rule 5(16) required the entity to maintain a record of relevant information allowing for the identification of all direct sellers who had been delisted by the direct selling entity. The same had not been provided on its website or in its response to the SCN.

v. All the information provided by the entity on its website had not been duly certified by the Company Secretary.

vi. The Balance Sheet and the Audit Report had not been properly updated.

vii. Correct and complete information at the pre-purchase stage, in addition to the mandatory declarations required under the Legal Metrology (Packaged Commodities) Rules, 2011, as per Rule 5(2)(h), had not been provided.

7. As per sub-section (1) of Section 19 of the Act, “The Central Authority may, after receiving any information or complaint or directions from the Central Government or of its own motion, conduct or cause to be conducted a preliminary inquiry as to whether there exists a prima facie case of violation of consumer rights or any unfair trade practice or any false or misleading advertisement, by any person, which is prejudicial to the public interest or to the interests of consumers and if it is satisfied that there exists a prima facie case, it shall cause investigation to be made by the Director General or by the District Collector”. The matter was referred to DG investigation by CCPA’s order dated August 23, 2024 for detailed investigation.

8. The Director General (Investigation) in its investigation report dated September 24, 2025 submitted the following:

Pursuant to the issuance of the Show Cause Notice (SCN) under the Consumer Protection Act, 2019 and the subsequent Notice to Join Investigation dated 15.09.2025, the Investigation Authority undertook a detailed examination of the compliance status of E-Biotorium Network Pvt. Ltd. under the Consumer Protection (Direct Selling) Rules, 2021. The findings are set out below:

A. The company has declared GST registrations in four states: Maharashtra, Assam, Delhi, and Karnataka. However, GST returns were uploaded only for Maharashtra, Delhi, and Guwahati (Assam). The omission of Karnataka’s GST return constitutes a lapse in full financial disclosure under Rule 4(e), thereby impacting transparency and public access to statutory financial records.

B. The company failed to explicitly list the ingredients of the “Multipurpose Herbal Bath Soap” in the product description section of its website. While the ingredients are visible on the product image, this does not satisfy the requirement for clear, accessible, and text-based product information under Rule 5(4). Furthermore, the company failed to produce a valid license or registration certificate under the Drugs and Cosmetics Act, 1940 for the manufacture or sale of the said product, which is mandatory for herbal and cosmetic items.

C. The company is selling shoes on its website but has not uploaded the mandatory BIS Quality Control Order (QCO) license for footwear bearing IS 17043 Part 2: 2024. The product listings lack essential information such as material composition, usage instructions, and manufacturing details, violating Rule 5.

D. Additionally, under the “Product by Category” tab, two shoe categories are listed i.e. Men’s Shoes and Women’s Shoes. However, the link for Women’s Shoes is non-functional and redirects to the Men’s Shoes page, indicating a technical and informational deficiency that affects consumer experience and access.

E. The company’s website contains non-operational link to its Facebook tab. Therefore, the presence of inactive or misleading link may misrepresent the company’s engagement channels and consumer outreach.

F. Following the issuance of the Show Cause Notice and subsequent direction to join the investigation, the company has demonstrated compliance with several operational requirements under Rule 4 and Rule 5. These include uploading the register of direct sellers, certifying website content through the Company Secretary, and providing records of delisted sellers.

G. While E-Biotorium Network Pvt. Ltd. has made efforts to comply with several provisions of the Consumer Protection (Direct Selling) Rules, 2021, the investigation reveals persistent gaps in statutory disclosures, product licensing, accessibility. These findings support the existence of partial non-compliance and warrant further regulatory review or remedial direction.

In view of the findings on record, the investigation report conclusively established that the operations and disclosures of E-Biotorium Network Pvt. Ltd. under the Consumer Protection (Direct Selling) Rules, 2021 reveals a mixed pattern of compliance.

While the company has demonstrated responsiveness to regulatory communications and has taken corrective steps following the issuance of the Show Cause Notice including uploading key documents, certifying website content, and instituting internal monitoring mechanisms it remains non-compliant in several critical areas:

• Failure to upload GST return for Karnataka despite declaring registration in the state.
• Incomplete product disclosure for the “Multipurpose Herbal Bath Soap,” including absence of ingredient listing in text format and lack of manufacturing license under the Drugs and Cosmetics Act, 1940.
• Deficient product information for footwear, including missing material specifications and broken website links affecting consumer access.

These lapses constitute violations of Rule 4 and Rule 5 of the Consumer Protection (Direct Selling) Rules, 2021, and compromise the principles of transparency, consumer protection, and regulatory accountability that the Rules are designed to uphold.

The conduct of the entity, as established through investigation, falls within the ambit of “unfair trade practice” under Section 2(47) of the Consumer Protection Act, 2019.

9. The report for the Director General (Investigation) was shared with the opposite party via email dated 19th June, 2026, for their comments within 07 days. The opposite party submitted its written response on 25th June, 2026 stating that:

i. With respect to the Karnataka GST registration, the Opposite Party submitted that the said registration had already been cancelled on the application of the taxpayer with effect from 05.03.2025 and had inadvertently continued to appear on its website due to an oversight. It further stated that the Karnataka GST details have since been removed from the website and furnished supporting documents reflecting the cancellation status and the updated website.

ii. With respect to the Multipurpose Herbal Bath Soap, the Opposite Party submitted that the product page has been updated to include complete product information, including the product description, ingredients, usage instructions, disclaimers and other relevant particulars. It further stated that the product is manufactured by a duly licensed manufacturer and furnished the permission granted by the Food & Drugs Control Administration, Gujarat, for manufacture and marketing of the product.

iii. With respect to the applicability of the BIS Quality Control Order (QCO) to footwear products, the Opposite Party acknowledged the observation and submitted that the omission was inadvertent. It further undertook to apply for the applicable BIS licence/QCO compliance at the earliest and to ensure compliance with the applicable legal requirements.

iv. With respect to the non-functional link pertaining to the Women’s Shoes category, the Opposite Party submitted that the issue was purely technical and was neither deliberate nor intended to mislead consumers. It stated that the non-functional link has since been removed/corrected and necessary technical changes have been made to ensure proper navigation on the website.

v. With respect to the non-functional Facebook link available on its website, the Opposite Party submitted that the technical issue has been rectified and its official Facebook page has now been properly linked to the website.

vi. The Opposite Party further submitted that it has undertaken a comprehensive review of its website and updated the product pages and statutory disclosures wherever necessary to ensure greater transparency and consumer awareness. It stated that it shall periodically review its website to ensure that all statutory information remains accurate and updated.

vii. Lastly, the Opposite Party submitted that the deficiencies identified in the Investigation Report were neither deliberate nor intended to mislead consumers and that immediate corrective measures have been undertaken wherever required.

10. The opposite party vide letter dated 19th June, 2026, was provided an opportunity for a hearing as per section 21(8) of the Act on 13th July, 2026, through video conferencing mode to further substantiate their response in the above-stated matter.

11. The hearing scheduled for 13.07.2026 was postponed to 22.07.2026 due to the unavailability of the Central Authority. Subsequently, the hearing scheduled for 22.07.2026 was also postponed and rescheduled for 04.08.2026.

12. Thereafter, the hearing was held on 04.08.2026, wherein Sh. Sagar Joshi, Sh. Puneet Jadwani, Smt. Sandhaya and Adv. Janali Shah appeared on behalf of the Opposite Party through video conferencing. At the outset, the Opposite Party submitted that, pursuant to the observations contained in the Investigation Report, several changes had been made to its website and certain deficiencies arising on account of technical issues had also been rectified.

13. During the course of the hearing, the Central Authority sought clarification regarding the business model adopted by the Opposite Party and the manner in which its products are manufactured and marketed. The Opposite Party submitted that it manufactures certain products itself, including biomagnetic mattresses, while certain other products, such as soaps and footwear, are procured from third-party manufacturers and marketed by the Opposite Party. It was further submitted that such products are locally manufactured. The Opposite Party explained that its direct sellers approach prospective consumers through meetings and demonstrations, explain the products to them and, where a person is interested, facilitate the purchase of the product. It was further stated that direct sellers may also introduce and train other direct sellers and are provided commission under the direct selling model.

14. With respect to the Multipurpose Herbal Bath Soap and footwear products, the Central Authority observed that complete product information, including the list of ingredients and requisite manufacturing licence particulars, was not earlier available in respect of the soap, while the requisite BIS/QCO-related particulars were not furnished in respect of the footwear products. In response, the Opposite Party submitted that the relevant licence and other information had subsequently been updated. It was further clarified that the soap and footwear products are procured from third-party manufacturers and marketed by the Opposite Party.

15. Further, during the hearing, the website of the entity was opened on screen sharing mode, wherein the Central Authority examined the claims made by the Opposite Party in relation to its biomagnetic products, including biomagnetic mattresses and products described on its website as “healing pads”. The Central Authority sought clarification regarding the scientific or medical basis for claims relating to magnetism, blood circulation, oxygen levels and the purported benefits of such products. The representative of the Opposite Party submitted that he had been studying biomagnetism since 2007 and referred to research and literature concerning magnetism. However, upon being specifically questioned regarding impact studies undertaken in respect of consumers using the Opposite Party’s products, the representative primarily relied upon his experience with consumers, demonstrations and feedback received from persons who had used such products.

16. The Central Authority further questioned the use of descriptions such as “Backbone Healing Pad” on the website and observed that such terminology may itself convey to a consumer that the product has a healing effect. The Opposite Party submitted that it does not make any absolute therapeutic claim and that appropriate disclaimers are provided on the product packaging, including advice to continue medical treatment, diet and exercise. However, when it was pointed out that a consumer viewing the product on the website would not have access to such packaging-level disclaimers at the pre-purchase stage, the Opposite Party stated that detailed information was available on the packaging and was explained by its direct sellers.

17. The Central Authority also examined the “7 days full money back refund policy” displayed on the website along with the expression “T&C applied” and sought clarification regarding the applicable terms and conditions. During the discussion, differing explanations were initially given as to whether a product could be returned after being used. Upon further clarification, the Opposite Party submitted that its stated policy requires the product to be unused for return, although used products may be accepted in exceptional cases where complaints are received. It was also acknowledged that the policy displayed on the website did not specifically state that a used product could be returned.

18. Further, the Central Authority further observed that the mandatory declarations required under the Legal Metrology framework and appearing on the product label/packaging should also be appropriately made available to consumers online at the pre-purchase stage. The Opposite Party acknowledged the said observation.

19. It may be mentioned that Section- 2(28) of the Act defines “misleading advertisement” in relation to any product or service means an advertisement, which—

i. falsely describes such product or service; or

ii. gives a false guarantee to, or is likely to mislead the consumers as to the nature, substance, quantity or quality of such product or service; or

iii. conveys an express or implied representation which, if made by the manufacturer or seller or service provider thereof, would constitute an unfair trade practice; or

iv. deliberately conceals important information.

20. From a plain reading of the above provision, it is evident that any advertisement or representation made to consumers must adhere to the following principles:

i. The information disseminated to consumers must be truthful, accurate and capable of substantiation;

ii. The advertisement must not create a false or misleading impression regarding the nature, quality, characteristics, approval status, certification, composition or regulatory compliance of the product or service;

iii. The representations made by the advertiser must not have the effect of inducing consumers to make a transactional decision on the basis of incomplete, inaccurate or unverified information;

iv. Material information necessary for consumers to make an informed choice must be disclosed in a clear and transparent manner and must not be concealed, omitted or presented in a manner likely to mislead consumers; and

v. Any claim, certification, approval, endorsement or regulatory credential displayed in relation to a product or service must be genuine, verifiable and supported by appropriate documentary evidence.

21. It may be mentioned that Rule 4 of the Consumer Protection (Direct Selling) Rules, 2021 provides for the mandatory maintenance of records and states that:

4. Mandatory maintenance of records.— Every direct selling entity shall maintain at its registered office, either manually or electronically, all such documents as are required under any law for the time being in force, including the following documents or records, as may be applicable, namely:—

a. Certificate of Incorporation;

b. Memorandum of Association and Articles of Association;

c. Permanent Account Number and Tax Deduction and Collection Account Number;

d. Goods and Services Tax registration;

e. Goods and Services Tax Returns;

f. Income Tax Returns;

g. Balance Sheet, Audit Report and such other relevant reports;

h. Register of direct sellers;

i. Certificate of Importer-Exporter code (in case of imported goods)

j. License issued under the Food Safety and Standards Authority of India Act, 2006 (34 of 2006) for the purposes of manufacture or sale of food items;

k. License and Registration Certificate issued under the Drugs and Cosmetics Act, 1940 (23 of 1940) for the purposes of manufacture or sale of drugs, including Ayurvedic, Siddha and Unani drugs and Homoeopathic Medicines;

l. Certificate of Registration of Trademark.

Further, Rule 5 of the Consumer Protection (Direct Selling) Rules, 2021 provides for the obligation of the direct selling entities and states that:

5. Obligations of direct selling entity.—

(1) Every direct selling entity shall—

(c) make self-declaration to the effect that it has complied with the provisions of these rules and is not involved in any Pyramid Scheme or money circulation scheme;

(d) maintain proper and updated website with all relevant details of that entity, including the documents or records specified in rule 4, the self-declaration specified in clause (c), contact information which is current and updated, details of its nodal officer, grievance redressal officer, its management, products, product information, price and grievance redressal mechanism for consumers;

(g) get all information provided by it on its website duly certified by a Company Secretary.

(2) Every direct selling entity shall provide the following information on its website in a clear and accessible manner, which shall be displayed prominently to its users, namely:—

a. registered name of the direct selling entity;

b. registered address of the direct selling entity and of its branches;

c. contact details, including e-mail address, fax, land line and mobile numbers of its customer care and grievance redressal officers;

d. a ticket number for each complaint lodged through which the complainant can track the status of the complaint;

e. 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;

f. 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;

g. 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;

h. provide correct and complete information at pre-purchase stage to enable buyers to make informed purchase decisions, and such information shall, in addition to the mandatory declarations to be provided under the Legal Metrology (Packaged Commodities) Rules, 2011, contain the following information, namely:—

i. the name of purchaser and seller;

ii. description of goods or services;

iii. quantity of goods or services;

iv. the estimated delivery date of goods or services;

v. the process of refund;

vi. warranty of the goods;

vii. exchange or replacement of goods in case of it being defective;

viii. all contractual information required to be disclosed by or under any law for the time being in force.

(3) 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.

(6) Every direct selling entity shall, having regard to the number of grievances ordinarily received by such entity from persons in India, establish an adequate grievance redressal mechanism and appoint one or more grievance redressal officers for redressal of consumers’ grievances 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.

(16) 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.

(17) Every direct selling entity shall become a partner in the convergence process of the National Consumer Helpline of the Central Government

22. From a bare reading of the above provisions of the Rules, it is clear that every direct selling entity has certain mandatory obligations in order to ensure that it is in complete compliance of the law and the interests of consumers is protected against any unfair trade practice. Every direct selling entity should maintain the above-mentioned documents and information on their company website in a clear and accessible manner. The direct selling entities shall:

i. Maintain all the documents and records enlisted in Rule 4 of the Consumer Protection (Direct Selling) Rules, 2021 properly on their website and update the same from time to time.

ii. Get all such information to be provided on the website, verified by the Company Secretary.

iii. Information enlisted in Rule 5(2) of the Consumer Protection (Direct Selling) Rules, 2021 should be prominently displayed on the website in a clear and accessible manner.

iv. Entities must declare compliance with rules and confirm they are not involved in pyramid or money circulation schemes.

v. Maintain adequate redressal mechanisms with designated nodal officer and grievance redressal, and provide clear information regarding active and delisted direct sellers on their website.

23. It may also be mentioned that Rule 4 of The Consumer Protection (E-Commerce) Rules, 2020 provides for duties of e-commerce entities and states that:

4. Duties of e-commerce entities. —

(4) Every e-commerce entity shall establish an adequate grievance redressal mechanism having regard to the number of grievances ordinarily received by such entity from India, and shall appoint a grievance officer for consumer grievance redressal, and shall display the name, contact details, and designation of such officer on its platform.

5. Liabilities of marketplace e-commerce entities. —

(2) Every marketplace e-commerce entity shall require sellers through an undertaking to ensure that descriptions, images, and other content pertaining to goods or services on their platform is accurate and corresponds directly with the appearance, nature, quality, purpose and other general features of such good or service.

(3) Every marketplace e-commerce entity shall provide the following information in a clear and accessible manner, displayed prominently to its users at the appropriate place on its platform:

(a) details about the sellers offering goods and services, including the name of their business, whether registered or not, their geographic address, customer care number, any rating or other aggregated feedback about such seller, and any other information necessary for enabling consumers to make informed decisions at the pre-purchase stage:

Provided that a marketplace e-commerce entity shall, on a request in writing made by a consumer after the purchase of any goods or services on its platform by such consumer, provide him with information regarding the seller from which such consumer has made such purchase, including the principal geographic address of its headquarters and all branches, name and details of its website, its email address and any other information necessary for communication with the seller for effective dispute resolution;

(b) a ticket number for each complaint lodged through which the consumer can track the status of the complaint;

6. Duties of sellers on marketplace. —

(4) Any seller offering goods or services through a marketplace e-commerce entity shall:

(b) appoint a grievance officer for consumer grievance redressal and ensure that the grievance officer acknowledges the receipt of any consumer complaint within forty-eight hours and redresses the complaint within one month from the date of receipt of the complaint;

(5) Any seller offering goods or services through a marketplace e-commerce entity shall provide the following information to the e-commerce entity to be displayed on its platform or web site:

(d) all relevant details about the goods and services offered for sale by the seller including country of origin which are necessary for enabling the consumer to make an informed decision at the prepurchase stage;

(e) the name and contact numbers, and designation of the grievance officer for consumer grievance redressal or for reporting any other matter;

24. From a bare reading of the above provisions of the Rules, it is clear that every direct selling entity which is an e-commerce entity or a marketplace e-commerce entity shall comply with the duties and liabilities prescribed under the Consumer Protection (E-Commerce) Rules, 2020. This includes establishing an adequate grievance redressal mechanism, appointing a grievance officer whose name, contact details, and designation shall be displayed on its platform, and ensuring that all sellers affiliated with the platform provide accurate descriptions and relevant details of goods or services, including the country of origin. Such entities must also require their sellers to appoint grievance officers, acknowledge consumer complaints within forty-eight hours, and resolve them within one month. Further, they shall ensure that seller information- such as business name, registration status, address, contact details, and feedback- is prominently disclosed to enable informed consumer decisions, along with the provision of a trackable ticket number for each complaint.

25. It needs to be noted that, after the issuance of the SCN, the Opposite Party updated certain requisite documents and mandatory compliances under the Consumer Protection (Direct Selling) Rules, 2021. However, several deficiencies, including those relating to the register of direct sellers, product information and prices, delisted direct sellers, certification of information, financial documents, and pre-purchase information, were rectified only after the intervention of the Investigation Wing.

26. The Authority is of the view that where a consumer is induced to purchase goods on the basis of information displayed on the website of a direct selling entity, such information must be complete, accurate and capable of verification. Failure to disclose material information and display of incomplete or unverified regulatory credentials creates a misleading impression regarding the nature, characteristics and regulatory compliance of the products and the entity. Such conduct has the effect of impairing the ability of consumers to make an informed choice and falls foul of the obligations prescribed under the Consumer Protection (Direct Selling) Rules, 2021.

27. Accordingly, the Central Authority holds that the aforesaid acts and omissions of the opposite party amount to dissemination of misleading information to consumers and constitute a misleading advertisement and unfair trade practice within the meaning of the Consumer Protection Act, 2019.

28. Considering the above findings and the violations noted in the foregoing paras the CCPA is empowered under Section 20 and 21 of the Consumer Protection Act, 2019 to issue directions to modify the advertisement or discontinue such advertisement and practices, if necessary, it may, by order, impose a penalty which may extend to ten lakh rupees and for every subsequent contravention may extend to fifty lakh rupees. Further, Section 21 (7) of the above Act, 2019 prescribes that following may be regarded while determining the penalty:

i. the population and the area impacted or affected by such offence;

ii. the frequency and duration of such offence;

iii. the vulnerability of the class of persons likely to be adversely affected by such
offence;

iv. the gross revenue from the sales effected by virtue of such offence

29. In light of the above, CCPA has carefully considered the written submissions as well as submissions made by the opposite party during the hearings and investigation report submitted by the Director General (Investigation) and hereby issues the following direction to the opposite party under Section 21 read with Section 20 of the Consumer Protection Act, 2019:

a. To always, maintain a proper and updated list of direct sellers stating the ID number, name, contact number and city, in which the direct seller operates.

b. To always be in compliance of the Consumer Protection (Direct Selling) Rules, 2021 and the Consumer Protection Act, 2019 and update the register of active direct sellers and delisted direct sellers regularly.

c. To always, maintain a proper and updated website of the company where all the mandatory documents and relevant information is prominently displayed and readily available to the consumers.

d. In light of the above discussions in foregoing paras, CCPA finds it necessary to impose a penalty on the opposite party. It has been adequately highlighted in para 25 above, Opposite Party failed to make the requisite information and documents available until the intervention of the Authority, falls in the scope for levy of penalty envisaged in Section 21(2) of Consumer Protection Act 2019. Considering the facts and circumstances of the case and having regard to the factors enumerated in section 21(7) of Act, the CCPA rules that opposite party shall pay a penalty of 11 ,00,000 for publishing false and misleading advertisement that affected the consumers as a class.

e. The opposite party shall submit the amount of penalty and a compliance report to CCPA on the above directions within 15 days from the date of this Order.

The above order and directions are passed in exercise of the powers conferred upon CCPA under section 10, 20, 21 of the Consumer Protection Act 2019.