Direct Selling Guidelines 2021 in India
Direct Selling Guidelines 2021 in India
MLM has always remained in controversy. Probably it is one of the industries having the highest scam rate.
From the last few decades, the direct selling industry has grown rapidly. Meanwhile, the number of scams has grown simultaneously.
Scam companies and fraud MLM leaders are prominent reasons behind the bad reputation of MLM.
While there is one thing that has brought a positive light to this industry is Direct Selling Guidelines 2016, especially for India.
The Indian government considered direct selling and regulations are built for a healthy business environment.
Here we are going to share with you the major highlights of Direct Selling Guidelines 2016 and Direct Selling Rules 2021. Therefore you can understand, what are basic norms for doing direct selling business in India.
Direct Selling Guidelines 2016
The direct Selling Industry comes under the Ministry of consumer affairs, Food & public distribution, and the Department of consumer affairs.
After the year 2000, there was a rapid growth of MLM companies in India. Many local and international companies targeted common Indians for the distribution and marketing of their products using different MLM compensation models.
But till the end of this decade, there were lots of conflicts in the industry.
Pretending as MLM, many fraud pyramid schemes and ponzi schemes fooled people by doing money circulation.
While greedy people promoted these fraud schemes to make quick money. Cheap motivation and show-off become vital marketing tools of MLM leaders and companies. MLM fraud was at its peak.
People as well as the government were confused with the legality of MLM in India.
On 9, September 2016 the government finally launched Direct Selling Guidelines for the first time.
Guidelines are different from laws and consist of rules to be followed. Direct Selling Guidelines 2016 was an advisory for the state government to facilitate and create their own state direct selling guidelines.
Now, most states follow the same advisory with some changes.
Like Maharashtra state direct selling guidelines prohibited the use of online services and digital goods such as hosting, cryptocurrencies, e-wallet as products in the direct selling business.
The Direct Selling entities should not deal with following products or service:-
- Monetary Deposits, Investments, Trading in Commodities, Live Stocks
- Life Insurance Policies (Which are not regulated by IRDA)
- Discount Coupons/Vouchers
- Virtual Currencies (like Bitcoin, Crypto currency)
- Selling of Websites, Webspace, online Education, Online Training
- Get paid for Clicking, Filing online surveys, Online advertisements
- Online schemes of Gifting, Helping, Donations
- Tricky products like Yantras and Tantras should be banned completely
Here are some other major highlights of Direct Selling Guidelines 2016.
For Companies
- Every direct selling company needs to register under MCA (Ministry of Consumer Affairs). In MOA (Memorandum of Association) and AOA (Article of Association), direct selling companies have to specify the nature of their business.
- Every MLM company should have 3 member grievance committee which solves the problems of direct sellers and customers within 45 days. If the company fails to serve complaints within 45 days, they have to provide a valid reason behind it.
- Every MLM company should have a cooling-off period of at least 30 days. In this period, direct sellers can return packed products without any question.
- The direct selling company is not allowed to take joining or any other fees other than the cost of products purchase.
- Direct selling companies can't force direct sellers to purchase products.
- Every MLM company should have a website consist of every detail about the company. Including products details, privacy policy, contact details, legal certificate of products and company.
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For Direct Sellers
- Direct sellers should enter to prospect's premises only after taking proper consent.
- It is important to carry an identity card before visiting prospects.
- Before starting of presentation and promotion, direct sellers should share the nature of the business and products they are promoting.
- Direct sellers are not allowed to make promises which can't be fulfilled and mislead people by spreading wrong or incomplete information.
- Direct sellers should share the complete detail of products they are selling with the product return policy.
- Direct sellers have to maintain a personal record of products they sold, customers and downlines they have.
Direct Selling Rules 2021
After Direct Selling Guidelines 2016, Direct Selling Rules 2021 is another breakthrough in the MLM industry.
Direct Selling Rules 2021 are not issued yet. Ministry of Consumer Affairs published the first draft on 30, June 2021. Direct selling rules gazette will be published in the future.
Department asked citizens to give comments and suggestions on the draft of direct selling rules 2021 before 21, July 2021 by doing mail on ca@nic.in.
To a large extent, new rules are much similar to direct selling guidelines 2016. The major highlight of Direct Selling Rules 2021 is as follows
- Every direct selling company should register under DPIIT (Department of promotion of industry and internal trade) within 90 days of direct selling rules get juridical.
- If the company fails to do so, they have to give justification to the department.
- It is mandatory to do the KYC of each direct seller with legal Indian identity proof. And MLM company should issue an identity card of every member of the company.
- Before every purchase, the company should disclose delivery, tax, handling, and postage charges.
- Direct sellers are not allowed to sell company products on any e-commerce store (Amazon, Flipkart) without consent from the company.
- Bankrupted and declared criminals are not allowed to take part in any direct selling company.
