In order to protect consumers from frauds, the Centre on Monday issued new guidelines mandating direct sellers to put in place a proper mechanism to redress consumer complaints and maintain a record of such cases.
The rules also make it mandatory for e-retailers and online marketplaces to get prior written consent of the direct selling entities like Amway before soliciting sales.
The model guidelines, which have been sent to states, also seek to define direct selling and direct sellers as well as pyramid schemes involving chain of subscribers wherein a buyer enrols one or more subscribers and the chain continues.
The norms provided for direct selling companies for setting up a Grievance Redressal Committee to attend to consumer complaints that will necessarily have to carry a unique number through which they can be tracked.
Also, the guidelines mandate such firms to provide name of purchaser and seller, delivery date, procedure of returning goods and warranty.
The direct selling industry was pitching for a clearcut guidelines for the sector to remove legal ambiguities to differentiate between fraudulent ponzi schemes and genuine businesses run by them.
The process for framing proper guidelines was started in 2013 by the government after the police arrested the then Amway's India Chairman William S Pinckney and two company directors over allegations of fraud in Kerala under the Prize Chits and Money Circulation Schemes (Banning) Act.
The guidelines stipulate that the direct selling entity will be liable for grievances arising out of sale of products, services or business opportunity by its direct sellers. The new guidelines mandate a seller to provide information about the name of the purchaser and seller, delivery date of goods, procedure of its return and its warranty.
The Ministry of Consumer Affairs issued the guidelines for states to regulate direct selling and multi-level marketing (MLM), that prohibited pyramid scheme as well as money circulation schemes under the garb of direct selling business.
The 'Direct Selling Guidelines 2016' framework was released by the Consumer Affairs Minister Ram Vilas Paswan and has been sent to the states/Union Territories for adoption.
The industry welcomed the move saying that it will bring clarity in the Rs 7,500 crore-sector and end regulatory conflicts, leading to future growth in direct selling segment.
The government has defined legitimate direct selling and differentiates it from pyramid and money circulation schemes to help investigating agencies identify fraudulent players.
We are sending the model guidelines to all state governments. States can make some changes as per their localised requirements. The guidelines were necessary for better growth in the direct selling business, Consumer Affairs Secretary Hem Pande told reporters here.
Guidelines are always optional, he said when asked whether it would be mandatory for states to adopt these norms.
Indian Direct Selling Association (IDSA) President Jitendra Jagota said: In the absence of proper policy or guidelines, numerous fraudulent players have been taking advantage of the situation. Now that the guidelines are out, it shall address the current concerns of the industry and provide much needed impetus.