The Ministry of Consumer Affairs notifies the Consumer Protection (Direct Selling) Rules 2021; casts compliance obligations on direct selling entities and direct selling practices

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

Key Highlights:

The Rules apply to the following:

a. All goods and services brought or sold through direct selling;

b. All models of direct selling;

c. All direct selling entities offering goods and services to consumers in India;

d. Any direct selling entity which is not established in India but offers goods or services to consumers in India

Key Compliance Obligations:

Direct selling entities shall:

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

• have at least one physical location as a registered office within India;

• make a self-declaration that the provisions of Consumer Protection (Direct Selling) Rules have been complied with and there is no involvement in any Pyramid Scheme or money circulation scheme;

• ensure that such registration number is displayed prominently to its users in a clear and accessible manner on its website and each invoice issued for each transaction;

• maintain the following documents/ records either manually or electronically at the registered office:
a. Certificate of Incorporation
b. Memorandum of Association and Articles of Association
c. Copy of Permanent Account Number and Tax Deduction and Collection Account Number
d. Goods and Services Tax registration
e. Goods and Services Tax Returns
f. Income Tax Returns
g. Balance Sheet, Audit Report and such other relevant reports etc.
h. Register of Direct Sellers
i. Certificate of Importer-Exporter code (in case of imported goods)
j. License issued under the Food Safety and Standards Authority of India Act, 2006 (34 of 2006) for the purposes of manufacture or sale of food items
k. License and Registration Certificate issued under the Drugs and Cosmetics Act, 1940 (23 of 1940) for the purposes of manufacture or sale of drugs, including Ayurvedic, Siddha and Unani drugs and Homoeopathic Medicines
l. Certificate of Registration of Trademark

• appoint a nodal officer to ensure compliance with the provisions of the Act or the Rules;

• maintain proper and updated website with all relevant details of the entity, contact information, its management, products, product information, price, and grievance redressal mechanism for consumers; and also be liable for grievances arising out of sale of products, services or business opportunities by its direct sellers; issue proper identity cards and documents to its direct sellers fulfilling KYC verification requirements;

• 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 shall be publicly shared on its website;

• get all the information provided by it on the website duly certified by a Company Secretary;

• have a prior written contract with direct sellers in order to authorize them to sell or offer to sell its goods and services and ensure that the terms of the agreement are 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 in a clear and accessible manner on the website, displayed prominently for users:

a. registered name of the direct selling entity;
b. registered address of the direct selling entity and of its branches;
c. contact details like e-mail address, fax, landline and mobile numbers of customer care as well as of grievance officer;
d. a ticket number for each complaint lodged through which the consumer can track the status of the complaint;
e. information relating to return, refund, exchange, warranty and guarantee, delivery and shipment, modes of payment, and grievance redressal mechanism, and any other similar information which may be required by consumers to make informed decisions;
f. 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, chargeback options, if any, and the contact information of the relevant payment service provider;
g. total price of any goods or service in single figure, along with its break-up price showing all compulsory and voluntary charges, including delivery charges, postage and handling charges, conveyance charges and applicable tax;

• establish an adequate grievance redressal mechanism with regard to the number of grievances ordinarily received by such entity from India and appoint a grievance officer for consumer grievance redressal, and display the current and updated name, contact details including telephone number, and designation of such officer on its website and the URL of the website shall be printed on 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;

• All products are in compliance with the declarations to be made under the Legal Metrology Act, 2009;

• store sensitive personal data within the jurisdiction of India, in accordance with the applicable law for the time being in force and shall 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;

• maintain a record of all 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 shall 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;

• appoint a nodal officer who shall 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;

• maintain a record of relevant information allowing for the identification of all direct sellers who have repeatedly offered defective or spurious goods or deficient services and shall publicly display the details of such direct sellers on their website and office premises. Every direct selling entity shall maintain a record of all direct sellers under the direct selling entity including ID proof, address proof, email and other contact information;

A direct seller shall 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 shall 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.

For a detailed read, please refer to the hyperlink provided below.

 

Source: Ministry of Consumer Affairs