Government Notifies New Norms For Direct Selling Companies

The government on Tuesday notified the Consumer Protection (Direct Selling) Rules, paving the way for formalisation of direct selling industry while also intending to keep a check on this so-far unregulated segment.The new rules, notified by the nodal Consumer Affairs Ministry, has barred direct selling companies like Oriflame, Amway, Tupperware, Modicare, among others, from pyramid and money circulation schemes. Besides, such firms using e-commerce platforms for sales will also have to comply with the Consumer Protection (e-Commerce) Rules, 2020.These rules shall apply to all India-based direct selling companies as well as those that aren't established in India but are selling goods and services in the country, according to the notification.Industry experts BloombergQuint spoke with said the norms are expected to make the direct selling industry more accountable and transparent. “It’s a progessive step and it will provide legitimacy to direct selling business in India,” Vivek Katoch, corporate affairs and public policy director-Asia at Oriflame Cosmetics, told BloombergQuint. Katoch, who is also the vice-chairman of Indian Direct Selling Association, said the country will now see inflow of foreign direct investments as companies would be keen to invest in manufacturing and new technology with the direct selling industry being 'given a proper definition'. He also said clarity on the business model will further help instill consumers’ belief in the direct selling channel. On compliance, however, there would be now an additional burden as entities will also have to comply with e-commerce rules, said Katoch.Amway India Chief Executive Officer Anshu Budhraja, too, hailed the move. 'Clarity and consistency of policies are imperative for the growth of the direct selling industry. This is a significant milestone for the entire industry... the new rules to protect the best interest of consumers and the direct sellers at large,' he said. Amway employs over 5.5 lakh direct sellers in the country.Tupperware declined to comment for the story saying it's 'awaiting the official gazette'.Under the new rules, the state governments will have to set up a mechanism to monitor and supervise the activities of direct sellers and direct selling entities, the notification said. All direct selling goods must comply with the declarations to be made under the Legal Metrology Act, 2009.Direct selling companies market products ranging from skin care, beauty and cosmetics to wellness, nutritional supplements and immunity boosters. These entities recruit agents who buy products from the company and then directly reach out to consumers at their homes or other places instead of a retail format like a store. These agents are also promised a payment for enrolling others into the business. In a few cases, the early paying participants are given returns from the money contributed by ones enrolled later—also called a pyramid scheme.“A direct selling entity and direct sellers are prohibited from promoting a pyramid scheme or enroll any person to such scheme or participate in such arrangement in any manner whatsoever in the garb of doing direct selling business,” the notification said. Direct sellers are also prohibited from participating in money circulation schemes in the garb of doing direct selling business.A direct seller shall not:Visit a consumer's premises without identity card.Require a prospect to purchase any literature or sales demonstration equipment.In pursuance of a sale, make any claim that isn't consistent with claims authorised by the direct selling entity.Use, or cause or permit to be used, any fraudulent, coercive, unconscionable or unlawful means, or cause harassment, for promoting its direct selling business, or for sale of its goods or services.Charge any entry fee or subscription fee.Induce consumers to make a purchase based upon the representation that they can reduce or recover the price by referring prospective customers to the direct sellers for similar purchases.Every direct selling entity shall have to establish a mechanism for filing of complaints by consumers through its offices or direct sellers, either in person or through post, telephone, e-mail or website. This would address a decade-long snag when consumers have been duped by fake sellers hawking defective products and services in the garb of direct sellers.Direct selling entities must ensure compliance with the rules within the next 90 days.

Government Notifies New Norms For Direct Selling Companies

The norms pave the way for formalisation of direct selling industry while keeping a check on this so-far unregulated segment.

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Government Notifies New Norms For Direct Selling Companies

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