By Rupin chopra and Apalka Bareja
Introduction
The direct selling industry in India has seen significant growth over the past few decades, thereby becoming an essential part of the country’s retail landscape. In India, direct selling industry started gaining momentum in 1980s. As of recent estimates, it has been reported that the direct selling industry in India is valued at over INR 21,282 crore[1] and continues to grow annually.[2] Prominent players in the Indian direct selling market include both international giants and homegrown companies. Companies like Amway, Tupperware, Avon, and Oriflame have a strong presence, alongside Indian companies such as Vestige, Modicare, and Mi Lifestyle Marketing.
As per media reports, amid receiving various complaints by consumers, earlier in May, Department of Consumer Affairs (DoCA) notified that it is planning to interfere within the industry to examine the compliance by direct selling companies in India.
Evolution of Direct Selling in India
Due to the lack of a specific legislation before 2016 governing direct selling, direct sellers were previously covered by the Prize Chits and Money Circulation (Schemes) Banning Act of 1978. In 2016, the Department of Consumer Affairs issued “Model Guidelines on Direct Selling” as a guideline to State Governments and Union Territories on direct selling.[3]
Ultimately in the year 2021, The Consumer Protection and Direct Selling Rules, 2021 was released to govern the direct selling industry countrywide. The Rules ensures that direct selling is regulated uniformly across the country. According to the Consumer Protection and Direct Selling Rules, 2021, these rules apply to all goods and services purchased or offered through direct selling, all types of direct selling, and all direct selling businesses offering goods and services in India, among other things. Thus, these criteria apply to all one-on-one sales, multi-level marketing, and so on. However, pyramid schemes are severely prohibited. The Rules specifically indicate that a firm participating in a Pyramid scheme or money circulation plan does not qualify as a direct selling entity.
Why is Government Planning to intervene in the Industry?
As per media reports, the Consumer Protection Authority has recently received numerous complaints against prominent direct selling companies doing unscrupulous acts to promote their product among consumers.[4] The Department of Consumer Affairs (DoCA) plans to scrutinize complaints filed against such reputed companies to analyze the type of violation. Unethical practices that are prohibited and are still being done by direct selling companies in India are pyramid schemes, misrepresentation of products, high-pressure sale tactics and exaggerated income.
Based on the assessment of the complaints, an action plan will be devised to ensure the errant companies comply in future. If required, the government will make necessary implications to make laws more stringent to prevent consumers from being exploited by such acts.[5]
Conclusion
While the regulatory framework provides a solid foundation for the direct selling industry, challenges remain as ensuring consistent compliance, combating fraudulent schemes, and maintaining consumer trust are ongoing concerns. However, with continued government support and industry cooperation, the direct selling sector in India is poised for sustained growth and greater transparency.
In conclusion, the rules and regulations for direct selling in India are designed to protect consumers, ensure fair business practices, and promote the sustainable growth of the industry. By adhering to these guidelines, direct selling entities and direct sellers can build trust, enhance their reputation, and contribute positively to the Indian economy.
Aishwarya Rajput, Assessment Intern at S.S. Rana & Co. has assisted in the reasearch of this article.
[1] Available at https://www.thehindubusinessline.com/economy/indias-direct-selling-industry-has-crossed-21000-crore-mark/article67972937.ece
[2] Ibid.
[3] Available at https://consumeraffairs.nic.in/sites/default/files/file-uploads/direct-selling/Gazette_172443_0.pdf
[5] Available at https://www.pressreader.com/india/mint-hyderabad/20240510/281947432941481
Consumer Protection (Direct Selling) Rules, 2021- India
Direct Selling Companies to ensure compliance under Legal Metrology Act and Rules