Consumer Protection (Direct Selling) Rules, 2021

DEC 30

Preliminary   > Economic Development   >   Miscellaneous   >   Economic growth

Why in news?

  • The Government on December 28 notified the Consumer Protection (Direct Selling) Rules, 2021, that prohibits all direct selling entities such as Amway, Tupperware, Oriflame and Modicare, from promoting pyramid schemes or money circulation schemes.
  • The rules are notified under Consumer Protection Act, 2019

Applicability of the rules:

  • 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 practices 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:

  • Monitoring mechanism:
    • 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
      • The entities will need to make a self-declaration that it is in compliance with these Rules and is not involved in any pyramid scheme or money circulation scheme.
    • Localization of data
      • Additionally, such entities are required to store sensitive personal data within India and take steps to ensure the protection of such data.

PRELIMS QUESTION

Which of the following statements is/are correct regarding retail sector in India?

1. Direct selling entities in India are prohibited from promoting a pyramid scheme

2. Direct selling entities are mandated to have a minimum of one physical location as its registered office within India

Select the correct answer using the codes given below:

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Answer