Consumer Protection (Direct Selling) Rules, 2021- India

May 10, 2022
consumer protection

The Department of Consumer Affairs, Ministry of Consumer Affairs, Food and Public Distribution formulated a set of guidelines titled Direct Selling Guidelines, 2016 with the intention to curb the menace of illegal multi-level marketing and pyramid schemes that were masquerading as legitimate businesses in 2016.

Direct Selling Rules, 2021

In order to bring stability in the market, they further introduced the Consumer Protection Direct Selling Rules, 2021 on December 28, 2021 and the recent notification dated April 4, 2022 in order to provide more clarity regarding the compliance of the provisions of the Rules.

The Consumer Protection Direct Selling Rules, 2021 came into force on December 28, 2021. The Rules prohibit participation and/or promotion of pyramid schemes and money circulation schemes. The Direct Selling Rules are applicable to any entity offering goods and services in India, whether or not such entity is established in India. The Direct Selling Rules applies to both Direct Sellers and Direct Selling Entities. Further such entities must comply with the provisions within ninety (90) days from the date of its publication.

Key highlights of Direct Selling Rules, 2021

  • Both direct selling entity and direct sellers utilizing e-commerce platforms for sale must comply with the new rules.
  • Every direct selling entity must develop a system for consumers to file complaints with its offices, branches or direct salespeople, either in person by mail, telephone, email or through a website.
  • Such entities guarantee that ads for the marketing of products or services are accurate in terms of the items or services’ real qualities, access and usage circumstances.
  • A direct selling entity that openly or implicitly vouches for the authenticity of the products or services offered, or assures that such goods or services are legitimate, is liable in any action involving the authenticity of such goods or services.
  • Every direct selling entity must become a partner in the Central Govt’s National Consumer Helpline’s convergence process.
  • State govts. will be required to establish a system to monitor or regulate the operations of direct sellers and direct selling entities under the new laws. Direct selling entities are also responsible for any complaints that arise from the sale of goods or services by its direct sellers.
  • Each direct selling entity must establish an appropriate grievance redress framework and post the existing and updated name, contact information including phone number, email address and designation of such officer on its website as well as notably print the website’s specifics on the product information sheet or pamphlet.
  • The grievance redressal officer must accept receipt of any consumer complaint within 48 hours of receiving and recourse the complaint normally within one month of receiving, in the event of a wait time of more than a month, the explanations for the delay as well as the measures taken on the complaint must be informed to the complainant in written form.
  • Every direct selling entity must nominate a nodal person who is responsible for ensuring compliance with the Act and its regulations, as well as any order on demand issued under the terms of any other legislation now in effect or its rules.
  • Every direct selling entity must keep track of all its direct sellers including evidence of identification, address, email and other contact information.
  • Direct selling entities shall upon the written request of the consumer following the purchase of any goods or services provide him with data about any direct seller from whom such consumer has made a purchase, including the name, address, email, contact number, or any other information essential for appropriate dispute resolution communication with such direct seller.
  • No direct selling entity will, directly or indirectly, misrepresent the quality or characteristics of any of its goods or services by posing as a consume and posting reviews about its goods or services.
  • A direct selling entity must oversee the conduct of its direct sellers regardless of the distribution mechanism it uses, and assure compliance with these regulations.
  • Every direct selling entity must keep a record of relevant information that allows direct sellers who have been delisted by the direct selling entity to be identified and this list must be publicly disclosed on the direct selling company’s website.

New Compliances under the Direct Selling Rules, 2021

  • The Ministry of Consumer Affairs in furtherance of its earlier proposed rules to ensure the compliance of the rules vide letter (No. L-21/1/2022-ICDS [E-27421]) dated April 4, 2022, stated that every direct selling entity shall become a partner in the convergence process of the National Consumer Helpline of the Central Government in order to facilitate the redressal of consumer grievances as per Rule 5 (17) of the CP (DS) Rules, 2021
  • These Rules do not provide for distinct registration in respect of a direct selling entity except as mandated in Rule 5 (1) (a) of the CP (DS) Rules, 2021.The declarations/undertakings that have so far been received by the direct selling entities under the CP (DS) Rules, 2021 are deemed to have been withdrawn as they are not mandated by the Rules.

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