The Consumer Affairs Ministry of the Union government has come out with draft rules for direct selling companies such as Amway, Tupperware, Oriflame, which require mandatory registration, as per a report in the Economic Times. The rules also propose mechanisms to safeguard the direct sellers and make the companies accountable to the customers. As part of the draft rules, direct selling firms will not be allowed to charge any entry or registration fee from agents, or cost of equipment and materials for sales demonstrations.
A direct selling company is one that sells products and services directly to consumers, away from fixed retail locations. Such companies usually market their products via independent sales representatives person to person.
This is the first time that such draft rules have been framed after the ministry had devised a set of guidelines for the sector in 2016, which were advisory in nature. The draft norms under the Consumer Protection Act will have legal standing and any violations will lead to penalties, the report states. Further, all direct selling companies operating in the country will have to comply with the norms within 90 days.
As per the proposed rules, every direct selling entity engaged in business in the country will have to be registered with the Department for Promotion of Industry & Internal Trade (DPIIT) and will be required to have at least one office in India. The website and all invoices of such entities will need to have the registration number displayed prominently. Dedicated executives need to be deputed for grievance redressal and for compliance with government directives. These entities will also be required to have a 24x7 customer care number to resolve issues.
The draft rules further state that no direct selling entity will be permitted to promote ‘Pyramid Scheme’ or take part in ‘Money Circulation Scheme’ under the guise of direct selling business. A pyramid scheme is a business model where members are added through the promise of payments or services for enrolling others into the scheme, rather than the sale of products or services.
As per the proposed norms, a direct selling entity will be required to take back defective goods and will have to refund the amount paid for goods and services provided by it. The agent or seller will also be given a ‘cooling off’ period during which they can change an agreement. A buyback or repurchase policy for ‘currently marketable’ goods, which are not unpacked, has also been proposed.