Govt Won’t Allow Amway & Other Direct Selling Firms To Indulge In Pyramid Schemes!

Govt Won't Allow Amway & Other Direct Selling Firms To Indulge In Pyramid Schemes!
Govt Won’t Allow Amway & Other Direct Selling Firms To Indulge In Pyramid Schemes!

To protect the interest of consumers in the country, the government has come out with draft norms to regulate Direct selling companies like Amway and Tupperware.

New Draft To Regulate Direct Selling Firms

Under this draft, now these firms will not be allowed to offer the pyramid and money circulation scheme.

Now, direct selling companies have to register themselves under relevant Indian laws.

They will also have to register with the Department of Promotion of Industry and Internal Trade (DPIIT) for allotment of the registration numbers. 

Apart from that, they will have a minimum of one physical location as a registered office in India.

Penalties For Violations

For the first time, the Union consumer affairs ministry has framed the Consumer Protection (Direct Selling) Rules, 2021, and sought public comments by July 21.

Prior to this, the ministry had come out with a set of guidelines for these companies which were advisory in nature in 2016. 

But now, these draft rules propose penalties for violations.

Ban On Pyramid Scheme and Money Circulation Scheme

The direct selling companies are banned from promoting a pyramid scheme and money circulation scheme, under these draft rules.

For unaware, a pyramid is a multi-layered network of subscribers to a scheme formed by subscribers enrolling one or more subscribers in order to receive any benefit, directly or indirectly, for enrolment of additional subscribers to the scheme.

Under this draft, now direct selling companies are required to appoint a chief compliance officer, grievance redressal officer and a nodal contact person for coordination with law enforcement agencies.

Apart from this, the firms are required to maintain a proper and updated website with all relevant details of the entity, contact information, product information, price and grievance redressal mechanism for consumers.

Maintaining Seller Identity

In addition to that these companies need to issue proper identity cards and documents to their direct sellers fulfilling KYC verification requirements. 

They need to maintain a record of all direct sellers who have repeatedly offered defective or spurious goods.

The draft rules said, “A direct selling entity and a direct seller shall not induce consumers to make a purchase based upon the representation that they can reduce or recover the price by referring prospective customers to the direct sellers for similar purchases if such reductions or recovery are contingent upon some uncertain, future event,”.

Now, the government has proposed that they will not visit a consumer’s premises without an identity card and prior appointment or approval to regulate direct sellers.

The other rules mention that Direct sellers should not provide any literature to a prospect, which has not been approved by the parent direct selling entity.

The individuals, who sell any product or service of a direct selling entity through an e-commerce platform must have prior written consent from the direct selling entity.

Also, note that a convicted person or bankrupt should not be engaged in the business of direct selling according to the draft rules.

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