Direct Selling / Multi Level Marketing (MLM) / Network Marketing Guidelines For The State of Tamilnadu

Every Direct selling entity intending to carry out direct selling business shall within ninety days after publication of the notification in the Gazette of Tamil Nadu comply the conditions for the conduct of direct selling business.

Every Direct selling entity shall be registered legal entity in India. Every Direct Selling Entity shall provide a mandatory orientation session to all prospective direct sellers and pay all dues and make withholdings from direct sellers in a commercially reasonable manner. Entity shall notify and provide to every direct seller a cooling-off period.

Any trading or marketing or sale activity not adhering the condition/clause of guideline shall not be considered as Direct Selling and would be dealt appropriately under relevant laws.

Some important points which should be done by Direct Selling Entities:

  • Every Direct Selling entity shall maintain proper records either manual or electronic of their business dealings. The details of Direct Sellers shall include and not be limited to verified proof of address, proof of identity and Permanent Account Number (PAN).
  • Every Direct Selling Entity shall maintain proper and updated website with all relevant details of the entity. Entity shall monitor the value of the purchases of all its Direct Sellers / Distributors on a monthly basis.
  • It shall provide training or demonstration materials, catalogues, brochure etc. to the direct sellers generally free or only at cost if at all.

Some important points which should not be done by Direct Selling Entities:

  • Direct Selling entity shall not use misleading, deceptive or unfair recruiting practices, including misrepresentation of actual or potential sales or earnings, in their interaction with prospective or existing direct sellers.
  • Entity shall not provide any benefit to any person for the introduction or recruitment of one or more persons as direct sellers. Entity shall not require the direct sellers to pay any money by way of minimum monthly subscription or renewal charges.
  • Entity shall not use or cause or permit to be used fraud, coercion, harassment, or unconscionable or unlawful means in promoting its direct selling practice including remuneration system and agreement between itself and the direct seller.

Every Direct Selling entity shall execute a contract agreement whether directly or indirectly with Direct Sellers before enrolment. The agreement shall be made in writing, describing the material terms of participation and shall not compel or induce the direct seller to purchase goods or services in an amount that unreasonably exceeds an amount that can be expected to be sold to consumers or consumed within a reasonable period of time.

PROHIBITION OF PYRAMID SCHEME & MONEY CIRCULATION SCHEME

  • No person or entity shall promote a Pyramid Scheme, as defined in sub-clause (11) of clause1 or enroll any person to such scheme or participate in such arrangement in any manner whatsoever in the garb of doing Direct Selling business.
  • No person or entity will participate in Money Circulation Scheme, as defined in sub-clause (12) of clause1 in the garb of Direct Selling of Business Opportunities.

All complaints received over phone, email, website, post and walk-in shall have a complaint number for tracing and tracking the complaint and record time taken for redressal by Direct Selling Company/Entities.

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