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Home >Politics >Policy >Govt draft norms ban direct selling companies from offering pyramid, money circulation scheme

NEW DELHI : Direct selling companies like Amway and Tupperware will not be allowed to offer the pyramid and money circulation scheme, as the government has come out with a draft norms to regulate such firms and protect the interest of consumers in the country.

For the first time, the Union consumer affairs ministry has framed the Consumer Protection (Direct Selling) Rules, 2021, and sought public comments by July 21.

Earlier, in 2016, the ministry had come out with a set of guidelines for these companies which were advisory in nature. The draft rules now propose penalties for violations.

As per the draft rules, direct selling companies are banned from promoting a pyramid scheme and money circulation scheme.

A pyramid is a multi-layered network of subscribers to a scheme formed by subscribers enrolling one or more subscribers in order to receive any benefit, directly or indirectly, for enrolment of additional subscribers to the scheme.

Direct selling companies have to register themselves under relevant Indian laws and also with the Department of Promotion of Industry and Internal Trade (DPIIT) for allotment of registration number. They should have minimum one physical location as registered office in India.

The companies are required to appoint chief compliance officer, grievance redressal officer and a nodal contact person for coordination with law enforcement agencies.

The companies are required to maintain proper and updated website with all relevant details of the entity, contact information, product information, price and grievance redressal mechanism for consumers.

The companies should issue proper identity cards and documents to its direct sellers fulfilling KYC verification requirements. They should maintain a record of all direct sellers who have repeatedly offered defective or spurious goods.

"A direct selling entity and a direct seller shall not induce 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, if such reductions or recovery are contingent upon some uncertain, future event," the draft rules said.

To regulate direct sellers, the government has proposed that they will not visit a consumer's premises without identity card and prior appointment or approval.

Direct sellers should not provide any literature to a prospect, which has not been approved by the parent direct selling entity.

Also, any person who sells any product or service of a direct selling entity through an e-commerce platform must have a prior written consent from direct selling entity.

A convicted person or bankrupt should not be engaged in the business of direct selling, the draft rules said. PTI LUX HRS hrs

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