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New Consumer Protection Rules: Govt Bans Direct Selling Firms To Promote Pyramid Schemes

NEW DELHI: To protect customers, the Centre on Tuesday prohibited direct selling companies such as Tupperware, Amway, and Oriflame from promoting pyramid or money circulation schemes, as it warned the industry of new guidelines that must be followed within 90 days.

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

The Consumer Protection (Direct Selling) Rules, 2021, as notified by the nodal consumer affairs ministry, must be followed by both direct selling businesses and direct sellers selling through e-commerce platforms.

State governments will be required to establish a mechanism to monitor or regulate the operations of direct sellers and direct selling firms under the new laws.

A senior consumer affairs ministry official said,”The guidelines for the direct selling industry are being issued under the Consumer Protection Act for the first time. If these requirements are not followed, the criminal provisions of the Act will apply to them.” According to the guidelines, direct selling businesses and direct sellers are forbidden from advertising a pyramid scheme, enrolling anyone in such a scheme, or participating in such an arrangement in any way under the guise of doing direct selling business.

They are also prohibited from participating in money-laundering schemes disguised as direct selling businesses, according to the new laws.

These guidelines will apply to all goods and services purchased or sold through direct selling, all direct selling methods, and all direct selling businesses in India. These restrictions also apply to direct selling businesses that are not based in India but provide goods or services to Indian consumers.

A direct salesperson should not visit a consumer’s home without an identity card and a prior appointment or authorisation, according to the new laws.

The salesperson should not give a prospect any literature that has not been approved by the direct selling business. In the course of a sale, the seller should not make any statements that are inconsistent with the representations authorised by the direct selling company.

Furthermore, the direct seller must have a prior written contract with the direct selling company before selling or offering to sell any of such entity’s goods or services.

The seller must also reveal to the prospect the identify of the direct selling firm, the address of the place of business, the nature of the goods or services supplied, and the purpose of the solicitation.

The seller should present an offer to the prospect that includes correct and comprehensive information, a demonstration of goods and services, prices, credit terms, payment terms, return, exchange, refund policy, return policy, guarantee conditions, and after-sale service.

The seller must guarantee that the actual goods delivered to the customer fits the product description and take reasonable efforts to protect all sensitive personal information provided by the consumer in line with the existing legislation at the time.

Direct selling firms would have to put in place necessary safeguards to ensure that the goods and services sold by their direct sellers comply with applicable laws, and they will be “liable for grievances arising out of the sale of goods or services by its direct sellers.”

The companies have been requested to establish an acceptable grievance redressal process and to post on their website the current and updated name, contact information, including phone number, e-mail address, and designation of such officer.

The internet address should be prominently displayed on the product information sheet or pamphlet.

The grievance redressal officer should acknowledge receipt of any consumer complaint within 48 working hours of receipt of such complaint and redress the complaint within one month of receipt of the complaint.

In the event of a delay of more than a month, the complainant should be informed in writing of the reasons for the delay and the steps taken on the complaint.

Furthermore, direct selling companies must select a nodal person who will be in charge of ensuring compliance with the terms of the Act and the rules. A system for filing complaints should be established.

They must keep a record of all direct sellers, including their identity proof, address proof, e-mail address, and any other contact information.

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