Direct Selling is also known as Multi Level Marketing. Government of India has passed Rules for Direct Selling Business dated 28th December, 2021. This Rule is called as the Consumer Protection (Direct Selling) Rules, 2021.
Now most of the Direct Selling Entity or Direct Seller thinks that Direct Selling Business has been banned in India. The answer is NO. If you want to do Direct Selling Business then you have to comply with new rule.
APPLICABILITY OF CONSUMER PROTECTION (DIRECT SELLING) RULES, 2021
- 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
Existing Direct Selling Entities shall comply with the provisions of these rules within ninety days from the date of publication of these rules in the Official Gazette.
This rule shall also apply to a Direct Selling Entity which is not established in India, but offers goods or services to consumers in India.
WHAT IS PYRAMID SCHEME
“Pyramid Scheme” means a multi layered network of subscribers to a scheme formed by subscribers enrolling one or more subscribers in order to receive any benefit, directly or indirectly, as a result of enrolment or action or performance of additional subscribers to the scheme, in which the subscribers enrolling further subscribers occupy a higher position and the enrolled subscribers a lower position, resulting in a multi-layered network of subscribers with successive enrolments.
KEY HIGHLIGHTS OF NEW CONSUMER PROTECTION (DIRECT SELLING) RULES, 2021:
- Central Government has made mandatory to maintenance of records. Every Direct Seller shall maintain records at its registered office either manually or electronically. Some of the Documents are Certificate of Incorporation, Memorandum of Association and Articles of Association, Permanent Account Number and Tax Deduction and Collection Account Number, Goods and Services Tax registration, Goods and Services Tax Returns, Income Tax Returns etc.
- Direct Selling Entity shall be either Company or Limited Liability Partnership or Registered Partnership.
- Direct Selling Entity shall maintain proper and updated website with all relevant details.
- All information which is provided on website shall be duly certified by a Company Secretary.
- Direct Selling Entity shall have a minimum of one physical location as its registered office within India.
- Direct Selling Entity shall 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.
- All products of a direct selling entity shall comply with the declarations to be made under the Legal Metrology Act, 2009.
- Direct Selling Entity shall create adequate safeguards to ensure that goods and services offered by its direct sellers conform to applicable laws.
- 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 thereunder
- Every Direct Selling Entity shall have Grievance Redressal Mechanism.
- 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 become a partner in the convergence process of the National Consumer Helpline of the Central Government.
- 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 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.
- Direct Seller shall provide an order form to the consumer at or prior to the time of the initial sale.
- Direct Selling Entity or Direct Seller shall not charge any entry fee or subscription fee.
- The Direct Sellers as well as the Direct Selling Entities using e-commerce platforms for sale shall comply with the requirements of the Consumer Protection (e- Commerce) Rules, 2020.
- No direct selling entity or direct seller shall promote a Pyramid Scheme or enroll any person to such scheme or participate in such arrangement in any manner whatsoever or participate in money circulation scheme in the garb of doing Direct Selling Business.
- Every State Government shall set up a mechanism to monitor or supervise the activities of Direct Sellers and Direct Selling Entity.
CONTRAVENTION OF CONSUMER PROTECTION (DIRECT SELLING) RULES, 2021
Any Direct Selling Entity or Direct Seller Contravene of this rules in that case they will be punished as per Consumer Protection Act, 2019.
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