Consumer Affairs Ministry issues draft rules for direct selling companies

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The Union Ministry of Consumer Affairs, Food and Public Distribution has issued draft rules for companies engaged in direct selling. The new draft rules have called for their mandatory registration along with proposed mechanisms to protect the direct sellers or agents and make the companies accountable to their consumers. Direct selling companies like Amway, Oriflame, Tupperware and others will now have to comply with these regulatory norms.

The government has given a time period of 90 days for all firms operating across the country to comply with the norms.

Framed for the first time in India, these draft rules have specified that direct selling companies will be barred from charging any entry or registration fee from agents.  Apart from that, they won’t be allowed to charge the agents for the cost of equipment and materials needed for sales demonstrations as well.

The Ministry earlier in 2016 had come out with a set of guidelines for this particular sector, but they were advisory in nature and had no legal backing. Compared to that, the newly proposed rules are legally backed and violators will attract serious legal action including penalties.

New draft rules

The new draft rules state that every direct selling company operating in India will have to get themselves registered with the Department for Promotion of Industry and Internal Trade and should have at least one office in India. The registration number which will be given to them must be displayed clearly on its website and all the invoices. In addition to these, there have to be designated executives to address grievances and to comply with directives given by the government, along with a 24×7 customer care helpline for resolution of all issues. The new rules also prohibit these companies from indulging and promoting ‘Pyramid Scheme’ and to become a part of ‘Money Circulation Scheme’.

The new rules have also made provisions for refunds in case of dissatisfactory services and bogus or fake goods. In case a company sells goods those are fake or renders services which are not up to the mark, they will have to refund the money paid to them. Another provision includes giving a “cooling off period” to the agents and sellers in which they can reconsider the agreement they made with the companies and it will neither be a breach of contract nor will it attract any legal action. There is also a provision added for repurchase policy designed for the buyback of marketable goods, which are still packed.