Making direct sellingconsumer-friendly

IN PERSPECTIVE

For years, the direct selling industry (DSI) has been in the news for all wrong reasons. Instances have surfaced where consumers are taken for a ride by the multi-level marketing companies and pyramid schemes wrongly understood as direct selling by the consumers. The DSI association, apart from having a voluntary code of conduct, has been demanding regulations so that they gain the confidence of the consumers.

The recent Consumer Protection [Direct Selling] Rules framed by the Department of Consumer Affairs, prohibits DSE and direct sellers from promoting pyramid schemes. They cannot enrol any person to such a scheme or participate in such arrangement in the garb of doing direct selling business.

Under the Rules, every direct selling entity [DSE] is under the obligation to get it registered either as a company, partnership or a limited liability partnership under relevant laws. They have to have a physical location and give a declaration that they have complied with all the provisions of the rules like maintenance of records in their registered office. With a view to promoting transparency, the Rules require the DSE to maintain and update a website and provide information to the public. Besides, the information on the website is to be got certified by a Chartered Secretary.

The DSEs are liable for all the actions of the direct sellers, including grievances that may arise out of their omission or commission. It is the responsibility of the DSE to verify the credibility of direct sellers and should have their physical addresses and issue them proper identity cards. On the other hand, the participants in direct selling should be given a ‘cooling-off period’ to cancel the agreement without levying any penalty.

The Rules gives importance to the consumers’ grievance redressal system. The DSEs are required to nominate Grievance Redressal Officers to deal with consumer complaints. Each of the complaints is to be acknowledged within 48 hours of receipt of such a complaint and the grievance or complaint to be resolved within a period of one month from the date of receipt of the complaint. Any delay on this account is to be informed to the consumers. The DSEs should not indulge in any unfair trade practices. The advertisements issued by the DSE should be consistent with the actual characteristics and usage conditions of the goods or services.

Provide details

The DSE is required to provide information on its website full details like address, branches, name and contact coordinates of the grievance redressal officers. A ticket number is to be given for each complaint lodged by the consumers so that they can track the status of the complaint. The website should also provide information about return, refund, exchange, warranty and guarantee, delivery and shipment and modes of payment. DSE and direct sellers are not allowed to induce consumers to make a purchase based on the representation that they can reduce or recover the price by referring prospective customers to the direct sellers for similar purchases.

The DSEs are required to spell out information about the price of any goods or service in a single figure, along with its break-up price, showing separately charges relating to delivery, postage, handling charges etc. Consumers should be provided with as much information as is required to make informed purchase decisions. The DSEs are required to follow the requirements of the Legal Metrology Act/Rules.

Both the DSE and the direct sellers are liable for any product liability action that may arise. They have to ensure that the terms of the offer are clear and do not contain any product description, claim, illustration that is likely to mislead the consumer. The explanation and demonstration of the goods or services offered should be accurate and complete in all respects. In addition, direct selling is not be represented to the consumer as being a form of market research. If the DSE or direct sellers offer any after-sale services, they have to provide full information and should preferably be stated in the guarantee card or through other means. The rights of the consumers to return the goods should be made clear and it should be in writing.

The state governments have been tasked with the responsibility of monitoring the compliance of the Rules. The Karnataka Department of Food, Civil Supplies and Consumer Affairs had, a few years ago, framed rules relating to direct selling. Nothing is known about its implementation and monitoring. The department has to revisit its rules, amend it in view of the new Rules and ensure its compliance with the DSEs.

The department’s activities, restricted to National/World Consumer Rights Day, school consumer clubs and assisting District Consumer Information Centres, need to look beyond and ensure consumers are protected from unfair trade practices in the name of direct selling.

(The writer is Founder,
Consumer Rights Education and Awareness Trust)