Govt. bans pyramid schemes, introduces guidelines for direct selling industry

admin December 29, 2021
Updated 2021/12/29 at 2:09 PM

To safeguard customers, the centre on Tuesday prohibited direct selling businesses such as Tupperware, Amway, and Oriflame from promoting pyramid or money circulation schemes, while also announcing new industry guidelines that must be followed within 90 days.

Such businesses will now be accountable for any complaints stemming from the sale of products or services by their direct sellers.

Both direct selling businesses and direct sellers using e-commerce platforms for sales must comply with the Consumer Protection (Direct Selling) Rules, 2021, as announced by the nodal consumer affairs ministry.

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.

A senior official from the Ministry of Consumer Affairs said, “The guidelines for the direct selling business are being published for the first time under the Consumer Protection Act.” If these requirements are not followed, they shall be subject to the Act’s criminal penalties. ” According to the guidelines, direct selling businesses and direct sellers are forbidden from advertising a pyramid scheme, enrolling anybody in such a scheme, or engaging in such an arrangement in any way under the guise of doing a direct selling business.

They are also prohibited from participating in money circulation schemes while purporting to be in the direct selling business, according to the new guidelines.

These laws will apply to all products and services purchased or supplied to Indian customers via direct selling, as well as all direct selling models and businesses. These laws also apply to direct-sale companies that are not based in India but provide products or services to Indian clients.

According to the new laws, a direct salesperson should not visit a consumer’s home without an identification card and a previous appointment or authorisation.

A seller should not provide a prospect with any literature that has not been authorised by the direct selling company. A seller should not make any statements in the course of a transaction that are inconsistent with claims authorised by the direct selling entity.

Furthermore, the direct seller must have a previous written contract with the direct selling company before selling or offering to sell any of the organization’s products or services.

The seller should also inform the prospect of the identification of the direct selling company, the place of business, the nature of the products or services supplied, and the purpose of the solicitation.

The seller should present an offer to the prospect that includes correct and comprehensive information, product demonstrations, pricing, credit terms, payment terms, return, exchange, refund policy, return policy, guarantee conditions, and after-sale support.

The seller shall guarantee that the actual goods supplied to the customer match the product description offered and take reasonable precautions to secure any sensitive personal information provided by the consumer in line with the laws in effect at the time.

Direct selling businesses should be formed under the Companies Act of 2013, or registered as a partnership under the Partnership Act of 1932, or as a limited liability partnership under the Limited Liability Partnership Act of 2008.

Such companies must have at least one physical location in India as their registered office and submit a self-declaration stating that the direct selling business has followed the direct selling guidelines and is not participating in any pyramid or money circulation scheme.

They should guarantee that all of their direct sellers have verified identities and physical addresses, and only such direct sellers should be issued identification cards and documentation.

Direct selling organisations will have to put in place necessary measures to guarantee that their direct sellers’ products and services comply with relevant laws, as well as be “liable for complaints arising out of the sale of goods or services by their direct sellers.”

The firms have been instructed to develop an acceptable grievance redressal process and to post on their websites the current and updated names, contact information, including phone numbers, e-mail addresses, and designations of such officers.

Information about the company’s website should be clearly included on the product information sheet or pamphlet.

Any consumer complaint shall be acknowledged by a grievance redressal official within 48 working hours of receipt, and the complaint should be resolved within one month of receipt.

In the event of a delay of more than a month, the complainant shall be notified in writing of the reasons for the delay as well as the steps taken in response to the complaint.

Furthermore, direct-selling companies must select a nodal person who will be responsible for ensuring that the Act’s and regulations’ requirements are followed.

Consumers should be able to file complaints with such businesses.

They should keep track of all of their direct sellers, providing evidence of identification, address, e-mail, and other contact information.

Both direct-selling businesses and direct sellers must guarantee that the conditions of the offer provided to customers are transparent under the new laws.


Source: The Hindu

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