Draft Consumer Protection Rules (Direct Selling) 2021 – Brief Overview
Much awaited, draft Consumer Protection Rules (Direct Selling) 2021 has been issued by Ministry of Consumer Affairs and the Ministry has sought views/ comments/ suggestions from the public and stakeholders on these rules by July 21, 2021. It’s a welcome step by the Government to regulate the direct selling industry; yes, of course, better late than never.
Notably, earlier in 2016, the ministry had come out with a set of Model Guidelines on Direct Selling which were advisory in nature. But, now the proposed rules under the Consumer Protection Act will have legal backing and violation will attract penalties.
A brief summary of additional provisions/steps provided in the draft Consumer Protection Rules (Direct Selling) 2021 vis- a- vis Model Guidelines on Direct Selling, 2016 is being given hereunder:
Requirements for Direct Selling Entity (DSE):
- To have a minimum of one physical location as registered office within India.
- To appoint a nodal person of contact who is citizen & resident of India, to ensure compliance with the provisions.
- The following information to be provided on the website: Address of Headquarter and all branches, Contact details of grievance officer and Information on available payment methods, the security of those payment methods, any fees or charges payable by users, the procedure to cancel regular payments under those methods, charge-back options, if any, and the contact information of the relevant payment service provider.
- To take appropriate steps to ensure the protection of all personal information provided by a consumer and to store such data within the jurisdiction of India.
- To appoint Chief Compliance Officer who shall be Managerial Person or Senior Employee of the company who is resident in India.
- To appoint a Nodal Contact Person for coordination with law enforcement agencies. “Nodal Contact Person” means Employee of the direct selling entity, other than the Chief Compliance Officer, who is resident in India.
[Here, somehow, I have different personal opinion and my suggestion to Ministry of Consumer Affairs on these draft rules would be to allow a single official to hold the position of Chief Compliance Officer and Nodal Contact Person as the both the roles can be easily handled by single official of the company. It will be a unnecessary burden on the small and mid-sized companies to appoint two persons for the sake of compliance only. Yes, voluntarily, companies can go for appointing two different officials for these positions.]
- Details of direct sellers, who have repeatedly offered defective or spurious goods or deficient services, to be displayed on the website and office premises.
- To become a partner in the convergence process of the National Consumer Helpline of the Central Government.
- Direct Selling Entity and a Direct Seller shall ensure that the remedial action open to the consumer should be clearly set out in the order form or other accompanying literature or provided with the product;
- In case of undue delay in delivery of goods/services, any request for cancellation of the order by the consumer shall be at cost of the direct selling company’s or the direct seller.
Registration of Direct Selling Entities
- Every direct selling entity which intends to operate in India and every direct seller operating in the network of direct selling entity shall register itself/themselves with Department for Promotion of Industry and Internal Trade (DPIIT) for allotment of registration number.
- The time frame for registration shall be as notified by DPIIT.
- Every direct selling entity shall ensure that such registration number is displayed prominently on its website and on each invoice issued for each transaction.
Mandatory maintenance of records at the Registered Office
To maintain the following documents/ records either manually or electronically:
a. Certificate of Incorporation
b. MOA & AOA
c. Copy of PAN & TAN
d. Copy of GST
e. GST Returns
f. Income Tax Returns
g. Copy Balance Sheet, Audit Report etc.
h. Record of Customers and Direct Sellers
i. Register of Direct Sellers
Sale through e-commerce platform
Any person who sells, displays or offers for sale, including an e-commerce platform / marketplace, any product or service of a Direct Selling Entity must have prior written consent from the respective Direct Selling Entity.
Contraventions
Any contravention of these Rules shall be construed as “Unfair Trade Practice” as per Consumer Protection Act, 2019 and penal provisions shall apply.
Timeline for implementation
The existing direct selling entities shall comply with the said Direct Selling Rules within 90 days of its publication in the official government gazette.
Conclusion
Overall, the above stated draft rules for direct selling aims to regulate the direct selling industry in a better and transparent way. With the implementation of rules, India would join the list of countries that have clear regulations for the direct selling business.
Draft Consumer Protection Rules (Direct Selling) 2021 can be accessed from the website of Ministry of Consumer Affairs at