Consumer Protection (Direct Selling) Rules, 2021

• 29 Dec 2021

For Prelims: Provisions of the Consumer Protection (Direct Selling) Rules, 2021, Companies Act, Limited Liability Partnership Act, 2008

For Mains: Provisions of Consumer Protection (Direct Selling) Rules, Role of the Consumer Protection (Direct Selling) Rules, 2021 in protecting the consumers rights

Why in News

Recently, the Centre has notified Consumer Protection (Direct Selling) Rules, 2021 for the direct selling industry.

• It prohibits promotion of pyramid schemes and participation in money circulation schemes.
• It has been notified in exercise of the powers conferred by the Consumer Protection Act, 2019.
• Earlier, the government notified and made effective the provisions of the Consumer Protection (E-Commerce) Rules, 2020 under the Consumer Protection Act, 2019.

Key Points

• About:
  • The rules lay down duties and obligations of both direct selling entities and their direct sellers to “safeguard the interest of consumers’’.
  • The existing direct selling companies will need to ensure they comply with the rules within 90 days.
  • However 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.
• Applicability of the Rules: It will 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 practises across all models of direct selling.
  • To direct selling entities which are not established in India, but offers goods or services to consumers in India.
• Major Provisions of the New Rules:
  • Mechanism to Monitor Activities:
    • It directed State governments to set up a mechanism to monitor or supervise the activities of direct sellers and direct selling entities.
  • Grievance Redressal Mechanism:
    • Direct selling companies will need to establish an adequate grievance redressal mechanism.
      • Direct selling entities will have to bear the liability in any action related to the authenticity of such goods or services.
      • Every direct selling entity will have to appoint a nodal officer who shall be responsible for ensuring compliance with the provisions of the Act and the rules.
  • Cannot Induce Consumers:
    • Direct selling companies or their direct sellers cannot persuade consumers to make a purchase based upon the representation that they can reduce or recover the price by referring prospective customers to the direct sellers for similar purchases.
  • Obligation upon Direct Selling Entities:
    • Incorporation Under Some Act:
      • Incorporation under the Companies Act 2013 or if a partnership firm, be registered under the Partnership Act, 1932, or if a limited liability partnership, be registered under the Limited Liability Partnership Act, 2008.
    • Have a Physical Location:
      • A minimum of one physical location as its registered office within India will be necessary.
    • Self-declaration:
      • Entities will have to make self-declaration to the effect that Direct Selling Entity has complied with the provisions of the Direct Selling rules and is not involved in any Pyramid Scheme or money circulation scheme.
• Significance:
  • These new rules would also bring clarity in the marketplace and would give impetus to the direct selling industry, which is already providing livelihood to over 70 lakh Indians, in which more than 50% are women.

Consumer Protection (e-Commerce) Rules, 2020

• About:
  • The Consumer Protection (E-commerce) Rules, 2020 are mandatory and are not advisories.
• Applicability:
  • Apply to all e-commerce retailers, whether registered in India or abroad, offering goods and services to Indian consumers.
• Nodal officer:
  • E-commerce entities need to appoint a nodal person, resident in India to ensure compliance with the provisions of the act or rules.
  • Prices and Expiry Dates:
  • The sellers through the e-commerce entities will have to display the total price of goods and services offered for sale along with the break-up of other charges.
  • Expiry date of the good needs to be separately displayed.

Source: PIB