JOIN USIt appears that the Indian consumer is at last becoming a king. For, the government has opened its eyes to the various types of business tactics used by the trade and industry to take the consumers for a ride.
After amending the Consumer Protection Act (CPA), the Department of Consumer Affairs has now finalised a set of guidelines to regulate the business of Direct Selling and Multi-Level Marketing (MLM). The September 9, 2016 guidelines sent to the state governments on the issue, try to protect the consumers from the fraud committed in the name of direct selling. It also recognises genuine direct selling agents.
Ever since the famous Ponzi scheme came to light, efforts have been made to regulate MLMs. But successive laws have failed due to different forms in which the MLMs are being operated. Though all direct selling techniques cannot be bracketed as fraud on consumers, the hairline difference between MLMs and what is known as ‘Pyramid Schemes’ have put consumers at a loss. Consumers have lost lakhs of rupees in chit funds, Imu schemes, investment on teak plantations, etc.
The guidelines brings all Direct Selling under the ambit of CPA and has cleared what is a Pyramid Scheme. Henceforth, those intending to take up direct selling are required to be necessarily registered under the laws of India. The promoter should provide training and orientation to prospective direct sellers. The guidelines make it mandatory for full refund or buy-back guarantee to every direct seller and provide for a cooling-off period, entitling the direct seller to return any goods or services.
To put an end to the evil of unfair practices of direct selling, the guidelines prescribe certain ‘don’ts’. Direct selling entity shall not use misleading, deceptive or unfair recruiting practices. Misrepresentation of actual or potential sales or earnings has been prohibited. The direct selling entity cannot compel or require the agents to provide any benefit, entry fee, renewal fee or purchase any sales demonstration equipment. Direct selling agents are also not required to pay any monthly subscription or renewal charges. It is now mandatory for the direct selling entity and agents to enter into a contract consistent with the provisions of the Indian Contract Act, 1872. The entities cannot compel agents to purchase goods or services that exceed the expected quantity to be sold.
On the other hand, the direct selling agents are required to be transparent with the consumers. They should carry identity cards and not visit the consumers’ premises without prior appointment. They should provide complete and truthful information about goods, services, terms of payment, prices, credit terms, guarantee, after sales service etc. Policy relating to returning of goods and cooling-off period are to be explained to consumers. They have to provide proper bills and details about complaint redressal mechanism. Almost all guidelines are to be followed by direct selling entities in relation to the agents, and they have to observe them while dealing with the consumers.
Consumer protection
In a separate clause, the guidelines outline the requirements relating to consumer protection. Both the direct selling entity and agents are bound by the provisions of the CPA. It speaks of the procedure for dealing with consumer complaints. The direct selling entity is required to receive complaints through all modes — letters, emails, website and walk-in. Each complaint should be acknowledged, given a number and the time within which it will be resolved.
Every direct selling entity is required to constitute a Grievance Redressal Committee consisting of three officers of the entity. It is important to note that a complaint can be lodged by anybody, not necessarily a buyer of goods or services of that entity. With increasing number of frauds and complaints with regard to e-commerce transactions, the guidelines say that the e-commerce platform should have prior written consent from the direct selling entity.
Pyramid Schemes and Money Circulation Schemes, as defined in the guidelines, have been banned. The nodal department dealing with consumer affairs in the state has been given the responsibility of monitoring the implementation of the guidelines. A monitoring authority is to be set up and the direct selling entity and sellers are required to submit a undertaking about the compliance of the guidelines. Two years ago the Kerala Government had drafted the Multi-Level Marketing (Control and Regulation) Bill. The guidelines should be followed up with a similar bill at the Centre.
(The writer is Member, Central Consumer Protection Council and Task Force on Misleading Advertisements, Govt of India)