The Government of India on December 28, 2021 notified the Consumer Protection (Direct Selling) Rules, 2021 where existing direct selling entities have to comply these rules within 90 days.
Salient Features of rules
- These Rules shall apply to all goods and services bought or sold through direct selling, all models of direct selling, all direct selling entities offering goods and services to consumers in India, all forms of unfair trade practices across all models of direct selling.
- These Rules shall also apply to a direct selling entity which is not established in India, but offers goods or services to consumers in India.
- Existing direct selling entities need to comply of these rules within ninety days from the date of publication of these rules in the Official Gazette.
- The direct sellers as well as the direct selling entities using e-commerce platforms for sale shall comply with the requirements of the Consumer Protection (e-Commerce) Rules, 2020.
- Both direct selling entity and direct sellers are prohibited from promoting Pyramid Scheme or money circulation scheme.
- State Government must set up a mechanism to monitor or supervise the activities of direct sellers and direct selling entities. Direct selling entities will be liable for the grievances arising out of the sale of goods or services by its direct sellers.
What is pyramid scheme?
In the “pyramid scheme”, participants attempt to make money solely by recruiting new participants, usually where:
- The promoter promises a high return in a short period of time;
- No genuine product or service is actually sold; and
- The primary emphasis is on recruiting new participants.
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