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Consumer Protection Direct Selling Rules, 2021

December 31, 2021
Consumer Protection Direct Selling

By Lucy Rana and Rupin Chopra

On December 28, 2021, the Department of Consumer Affairs under the Ministry of Consumer Affairs, Food and Public Distribution has notified the Consumer Protection (Direct Selling) Rules, 2021[1] in accordance with Clause (zg) of Sub-Section (2) of Section 101 read with Section 94 of the Consumer Protection Act, 2019. The Central Government has notified that the Existing Direct Selling firms must conform with these requirements within 90 days from the date of publication of these rules in the Official Gazette.

To whom the Rules apply?

These Rules shall apply to 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 and also to also to a direct selling entity which is not established in India, but offers goods or services to consumers in India.[2]

For the first time in India, the Central Government examined direct selling in 2016 and issued the Direct Selling Guidelines. Now, all network marketing organisations and their active members will be subject to the new Consumer Protection Direct Selling Rules, 2021.

The new rules hold direct selling entities accountable for any complaints stemming from the sale of products or services by its direct sellers.

COMPARATIVE ANALYSIS OF THE CONSUMER PROTECTION DIRECT SELLING RULES, 2021 AND THE DIRECT SELLING GUIDELINES, 2016

Consumer Protection Direct Selling Rules, 2021 Direct Selling Guidelines, 2016
Both direct selling businesses and direct sellers utilising e-commerce platforms for sale must comply with the new Consumer Protection (Direct Selling) Rules, 2021. Under this, only the Direct Selling Entity intending to carry out direct selling business were required to comply with the comply with the guidelines.

 

Every direct selling business must develop a system for consumers to file complaints with its offices, branches, or direct salespeople, either in person, by mail, telephone, e-mail, or through a website. No such requirement was provided under the guidelines.
Such entities must 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. No such requirement was provided under the guidelines.
A direct selling company that openly or implicitly vouchs 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. No such requirement was provided under the guidelines.
Every direct selling company must become a partner in the Central Government’s National Consumer Helpline’s convergence process. No such requirement was provided under the guidelines.

In addition to the above, the Rules in consonance with the Guidelines, provide following requirements are to be complied with:

  • State governments will be required to establish a system to monitor or regulate the operations of direct sellers and direct selling firms under the new laws. Direct selling companies 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 working 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 business must nominate a nodal person who is responsible for ensuring compliance with the Act and its regulations, as well as any order or demand issued under the terms of any other legislation now in effect or its rules.
  • Every direct selling company must keep track of all of its direct sellers, including evidence of identification, address, e-mail, and other contact information.
  • Direct selling entities shall, upon a consumer’s written request 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, e-mail, contact number, and any other information essential for appropriate dispute resolution communication with such direct seller.
  • No direct selling business will, directly or indirectly, misrepresent the quality or characteristics of any of its goods or services by posing as a consumer and posting reviews about its goods or services.
  • A direct selling organisation must oversee the conduct of its direct sellers, regardless of the distribution mechanism it uses, and assure compliance with these regulations through a legally enforceable contract with such direct sellers.
  • Every direct selling entity must keep a record of relevant information that allows all 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.

Also read:

Direct Selling in India

Direct selling companies to ensure compliance under Legal Metrology Act and Rules

[1] https://pib.gov.in/PressReleasePage.aspx?PRID=1785873

[2] ibid

Anushka Choudhary, Intern at S.S. Rana & Co. has assisted in the research of this article.

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