Consumer Protection

Direct Selling Rules

The Ministry of consumer affairs, India has published rules for Direct Selling (MLM) on 28th December,2021. These rules are named as Consumer Protection (Direct Selling) Rules 2021. Before 2019, there was no law in India which had identified MLM or Direct Selling but Consumer Protection Act 2019 defined Direct Selling or MLM as ‘marketing, distribution & sale of goods or provision of services through a network of sellers, other than through a permanent retail location’ From this Consumer protection act, Direct Selling Rules were created by taking power from clause (zg) of sub-section (2) of section 101 read with section 94 of the Consumer Protection Act, 2019.

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Here are key takeaways & our recommendations for your Direct Selling Company

Direct Selling means marketing, distribution & sale of goods or provision of services through a network of sales, other than through a permanent retail location
For this document, the company which are fulfilling above definition will be the companies considered as MLM Company
Direct Seller Means a person authorized by a direct selling entity through a legally enforceable written contract to undertake direct selling business on principal to principal basis
Customer is the one who is purchasing the product
Invoice must be in the name of customer who is paying for the product/service
GST number is compulsory for Direct Seller & Direct Selling Entity
GST must be paid on commission amount by Direct Seller
GST must be paid on every sale done by direct seller or direct selling entity
There must be no activation criteria or any other compulsory product purchase criteria in order to receive any commission for the sales done by network of direct sellers
The reason for purchasing any product by any customer must not be connected to business directly or indirectly
All the products related licenses & company registration in MCA must be completed

All the products must have trademark, service mark or any other identification mark of MLM Company
Products rates must be reasonable as per market standards
Products rates must not be inflated for giving more commission/incentive/remuneration/rewards
Website of MLM Company must have all the information mentioned in Clause 4, Clause 5.1.d & Clause 5.2 of Consumer Protection Direct Selling Rules 2021
Your MLM Company must not do any unfair trade practice & must provide all the information about products & related policies like return-refund policy, exchange policy, guarantees/warranties, payment policy etc before product sale
Your MLM Company must not use any Hypothetical model to show potential of business plan
All income qualification criterias must be based on sales of product. (Not based on joinings, placements, activation, headcounts, position in network etc)
It is compulsory to become partner in the convergence process of the National Consumer Helpline of Central Government
It is mandatory to resolve any grievance in one month by Grievance Redressal Officer & Management of company

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Direct Selling Rules 2021

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Watch This Video About Direct Selling Rules 2021 FAQs

It is compulsory for Every new Direct Selling (MLM) Company to follow Direct Selling Rules from the first day & For existing Direct Selling (MLM) Companies, 90 days’ time were given to follow these rules which were completed on 28th March 2022.

Live Discussion About 1 Most Important Thing Which Everyone Missed In Direct Selling Rules 2021

Now here are the important aspect for MLM Companies which every MLM Company owner must know

Government is not providing any specific certificate to MLM Companies which certifies that this MLM Company or that MLM Company is legal. Every MLM Company must follow the Direct Selling Rules 2021 every day in their whole business operations in order to be Legal.
Every product which has a label must follow the Legal Metrology Packaged Commodities Rules 2011 along with all necessary product related certifications.
Direct Selling Companies won’t be able to sell or provide commission on products which do not have the trademark, service mark or any other identification mark of Direct Selling Company on it.

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