Volume 2 Issue 7

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New direct selling rules introduced by the government to curb pyramid schemes

Date of News: 


Date of Publication: 


Unique ID:


Name of the Author: 

Mansi Tekam

Field of Law: 

Banking and Consumer Law

Content of News:

The rules on direct selling have been much needed and awaited since being introduced in late December 2021. The Consumer Protection Act, 2019, was first introduced in 1986 and amended to keep up with the changing times and needs of the market. Consequently, when the Act entered into force, regulations were required to handle particular offences and procedural issues, and they have been continually notified since then. The restriction on pyramid and money circulation schemes is the most significant component of the Rules. According to the guidelines, businesses engaging in pyramid or money circulation schemes are not members of the direct selling outfit. Rule 10 forbids direct selling organisations from engaging in actions that encourage pyramid or money circulation schemes. Financial institution agents are also excluded from the definition. To ensure uniformity among the various standards, it further states that direct selling firms must implement the Consumer Protection (eCommerce) Rules, 2020. The regulations have become increasingly prescriptive on a broad level, with numerous requirements imposed on both direct sellers and direct selling corporations. For example, depending on the type of entity, incorporation under any of the laws, having a registered office somewhere in India and providing self-declarations of compliance with the Rules. Within 90 days, all direct selling firms must comply with these Rules. The job of monitoring and controlling the actions of such direct selling firms have been delegated to state governments. It also holds the direct selling company liable for any complaints that arise due to the conduct of any of the direct sellers.