20 January 2022
The Central Government vide a notification on 28 December 2021, in exercise of the powers conferred under the Consumer Protection Act, 2019 has notified the Consumer Protection (Direct Selling) Rules, 2021 (“Rules”). 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 to direct selling entities which are not established in India but offer goods or services to consumers in India.
Existing direct selling entities shall need to comply with these Rules within 90 (ninety) days from the date of publication of the Rules in the official gazette.
The following are some of the key provisions that must be complied with by the direct sellers and direct selling entities:
a) Prohibition of promotion of pyramid schemes or participation in money circulation schemes. Direct sellers and direct selling entities shall have to provide a self-declaration to the effect that they have complied with the Rules and are not involved in any pyramid or money circulation scheme.
b) Direct selling entities shall have to establish an adequate grievance redressal mechanism and bear the liability in any action related to the authenticity of such goods or services.
c) Direct selling entities shall have to appoint a nodal officer who shall be responsible for ensuring compliance with the provisions of the Consumer Protection Act and the rules thereunder. The Direct selling entities cannot persuade consumers to make a purchase based upon the representation that they can reduce or recover the price by referring prospective customers to the direct sellers for similar purchases.
d) Direct selling entities must be incorporated under the Companies Act 2013, or be registered under the Partnership Act, 1932, or the Limited Liability Partnership Act, 2008 and must have a minimum of one physical location in India.
