Recently, the Indian government announced the Consumer Protection (Direct Selling) Rules, 2021, bringing in a new phase of consumer rights protection. The rules aim at safeguarding consumers’ interests and mitigating malpractices in the direct selling industry. In addition to this, the government previously implemented the Consumer Protection (E-Commerce) Rules, 2020 under the Consumer Protection Act, 2019. The primary objective is prohibiting pyramid and money circulation schemes from exploiting consumers.
Duties and Obligations Under the New Rules
Both direct selling entities and their sellers have to ensure strict adherence to these rules within a 90 day period. Entities using e-commerce platforms must also comply with the Consumer Protection (e-Commerce) Rules, 2020. Moreover, these rules apply to all goods and services sold through direct selling, and various models of direct selling offering goods and services to consumers in India. They also cover all forms of unfair trade practices across all models of direct selling and direct selling entities not based in India but selling goods or services to Indian consumers.
Major Provisions of the New Rules
The new rules call for state governments to establish a mechanism to monitor or supervise the activities of direct sellers and direct selling entities. Direct selling companies are required to create an effective grievance redressal mechanism and ensure liability for any disputes over the authenticity of goods or services. Each entity must also appoint a nodal officer responsible for ensuring compliance with the law.
Moreover, direct selling companies or their sellers aren’t allowed to coax consumers into purchasing products under the impression that they can reduce or recover the purchase cost via customer referrals.
Obligation upon Direct Selling Entities
Under the new rules, direct selling entities must have a specific type of incorporation, either by the Companies Act 2013, the Partnership Act, 1932, or the Limited Liability Partnership Act, 2008. These entities should also have at least one physical location registered as an office within India.
Additionally, to comply with the rules, entities must make a self-declaration affirming their adherence to the Direct Selling Rules and non-involvement in any Pyramid Scheme or money circulation scheme.
Significance of the New Rules
The Consumer Protection (Direct Selling) Rules, 2021, are set to provide much-needed clarity in the marketplace, boosting the direct selling industry, which already supports over 70 lakh Indians’ livelihoods, more than half of whom are women.
The Consumer Protection (e-Commerce) Rules, 2020
These obligatory rules apply to all e-commerce retailers, regardless of whether they are registered in India or abroad, if they offer goods and services to Indian consumers. E-commerce entities are required to appoint a resident nodal officer in India to ensure compliance with the act and rules.
The rules also mandate that sellers display the total price of goods and services offered for sale, including other charges, and the expiry date of the products.
Last Modified: February 14, 2024