Government of Andhra Pradesh notifies the Consumer Protection (Direct Selling) Rules 2021; casts compliance obligations on direct selling entities and direct selling practices

The Consumer Affairs Department of Andhra Pradesh has notified Consumer Protection (Direct Selling) Rules 2021 (“Rules”) with a view to regulate direct selling activities.

The Direct Selling Entities are required to comply with the provisions of the Rules within 13th October, 2022.

Key Highlights:

The Rules apply to the following:

1. All goods and services brought or sold through direct selling;
2. All models of direct selling;
3. All direct selling entities offering goods and services to consumers in India;
4. All forms of unfair trade practices across all models of direct selling

Key Compliance Obligations:

Direct selling entities should: 

• be appropriately incorporated under Companies Act, 2013 or under Partnership Act, 1932 or under Limited Liability Partnership Act, 2008 (as the case may be);

• maintain (either electronically or manually) all the documents required under any law including the following as may be applicable-
  • 1. Register of direct sellers;
    2. Certificate of Incorporation;
    3. Memorandum of Association and Articles of Association;
    4. Permanent Account Number and Tax Deduction and Collection Account Number;
    5. Goods and Services Tax registration;
    6. Goods and Services Tax Returns;
    7. Income Tax Returns;
    8. Balance Sheet, Audit Report and such other relevant reports;
    9. Certificate of Importer-Exporter code (in case of imported goods);
• have a minimum of one physical location as its registered office within India;
• make self-declaration to the effect that it has complied with the provisions of these rules and is not involved in any Pyramid Scheme or money circulation scheme;
• maintain proper and updated website with all relevant details of that entity, including the documents or records, the self-declaration, contact information which is current and updated, details of its nodal officer, grievance redressal officer, its management, products, product information, price and grievance redressal mechanism for consumers;
• get all information provided by it on its website duly certified by a Company Secretary.
• have a prior written contract with its direct sellers in order to authorize them to sell or offer to sell its goods or services, and the terms of such agreement should be just, fair and equitable;
• ensure that all its direct sellers have verified identities and physical addresses and issue identity cards and documents only to such direct sellers;
• create adequate safeguards to ensure that goods and services offered by its direct sellers conform to applicable laws;
• be liable for the grievances arising out of the sale of goods or services by its direct sellers.
• provide the following information on its website in a clear and accessible manner, which should be displayed prominently to its users, namely-

1. registered name of the direct selling entity;
2. registered address of the direct selling entity and of its branches;
3. contact details, including e-mail address, fax, land line and mobile numbers of its customer care and grievance redressal officers;
4. a ticket number for each complaint lodged through which the complainant can track the status of the complaint;
5. information relating to return, refund, exchange, warranty and guarantee, delivery and shipment, modes of payment, grievance redressal mechanism and such other information which may be required by the consumers to make informed decisions;information on available payment methods, the security of those payment methods, the 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;
6. total price of any goods or service in single figure, along with its breakup price showing all compulsory and voluntary charges, including delivery charges, postage and handling charges, conveyance charges and the applicable tax;
7. provide correct and complete information at pre-purchase stage to enable buyers to make informed purchase decisions in addition to the mandatory declarations to be provided under the Legal Metrology (Packaged Commodities) Rules, 2011.

• store sensitive personal data within the jurisdiction of India, in accordance with the applicable law for the time being in force and should take appropriate steps to ensure protection of such data provided by a consumer and also ensure adequate safeguards to prevent access or misuse of such data by any unauthorized person.
• establish an adequate grievance redressal mechanism and appoint one or more grievance redressal officers for redressal of consumers’ grievances and display the current and updated name, contact details including telephone number, email address and designation of such officer on its website, and the details of its website should also be prominently printed on the product information sheet or pamphlet.
• ensure that the grievance redressal officer acknowledges the receipt of any consumer complaint within forty-eight working hours of receipt of such complaint and redresses the complaint normally within a period of one month from the date of receipt of the complaint and in case of delay of more than a month, reasons for the delay, and the actions taken on the complaint, are informed to the complainant in writing.
• appoint a nodal officer who should be responsible for ensuring compliance with the provisions of the Act and the rules made thereunder, and to ensure compliance with any order, or requisition, made in accordance with the provisions of any other law for the time being in force or the rules made thereunder.
• establish a mechanism for filing of complaints by consumers through its offices or branches or direct sellers, either in person or through post, telephone, e-mail or website.
• maintain a record of all its direct sellers, including their identity proof, address proof, e-mail and such other contact information.
• on the request in writing made by a consumer after the purchase of any goods or services, provide him with the information regarding any direct seller from whom such consumer has made a purchase, and such information should include the name, address, e-mail, contact number and any other information which is necessary for making communication with such direct seller for effective dispute resolution.
• maintain a record of relevant information allowing for the identification of all direct sellers who have been delisted by the direct selling entity and such list should be publicly shared on its website.

A direct seller should not –

• visit a consumer’s premises without identity card and prior appointment or approval;

• provide any literature to a prospect, which has not been approved by the direct selling entity;

• require a prospect to purchase any literature or sales demonstration equipment;

• make any claim that is not consistent with claims authorized by the direct selling entity;

Every direct selling entity and every direct seller should ensure that: 

• the terms of the offer are clear, so as to enable the consumer to know the exact nature of offer being made and the commitment involved in placing any order;

• the presentations and other representations used in direct selling do not contain any product description, claim, illustration or other element which, directly or by implication, is likely to mislead the consumer;

• any misleading, deceptive or unfair trade practices are not used;

• direct selling is not represented to the consumer as being a form of market research;

• products, including, where applicable, samples, are suitably packaged for delivery to the consumer and for possible return, in compliance with the appropriate health and safety standards.

Source: Government of Andhra Pradesh