Centre issues model guidelines on direct selling

The government on Monday issued model guidelines for State governments to regulate the business of direct selling and multi-level marketing with an aim to protect consumers from Ponzi schemes.

The ‘Direct Selling Guidelines 2016’ framework, released by Food and Consumer Affairs Minister Ram Vilas Paswan, prohibits pyramid as well as money circulation schemes. The framework defines legitimate direct selling and differentiates it from pyramid and money circulation schemes to help investigating agencies identify fraudulent players.

“Direct selling means marketing, distribution and sale of goods or providing of services as a part of network of direct selling other than under a pyramid scheme,” according to the guidelines.

The guidelines list out conditions for the set up of a direct selling business, including that such a firm should be a registered legal entity. They also bar direct selling companies from charging any entry fee from agents or compelling them to buy back unsold stocks.

Full refunds

These entities will have to enter into an agreement with direct sellers or agents, and give full refund or buy-back guarantee for goods and services sold to them. The guidelines also mandate direct sellers to constitute a grievance redressal committee to protect consumers’ rights.

The guidelines have also made provision for appointment of monitoring authority at both the Centre and State levels to deal with the issues related to direct selling.

The guidelines also place conditions on the contract between direct sellers and the direct selling entity, saying that all such agreements should be in writing describing the material impact of the participation.

Dr. A. Didar Singh, Secretary General at FICCI said the industry had the potential to reach Rs.64,500 crore by 2025 and that these guidelines would certainly help in bringing in regulatory clarity for the sector.

Separately, in a statement, Amway India said the move would spur the growth of direct selling in India and drive entrepreneurship. “Amway India does not charge any entry fee to the distributors. Further, distributors are free to exit anytime. All of Amway’s products are backed by a refund policy. The guidelines reinforce our faith in India where we have invested more than Rs. 600 crore to set up a world-class manufacturing facility employing, directly and indirectly, close to 1,000 people,” the company said.

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Printable version | Sep 14, 2021 5:55:07 AM |

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