The concept of direct selling has been prevalent around the globe for decades and is considered as one of the oldest modes of selling goods and services to consumers directly. The Indian Direct Selling Association defines direct selling as the "marketing, distribution and sale of goods or providing of services as a part of network of direct selling, other than under a pyramid scheme, to consumers, generally in their houses or at their workplace or through explanation and demonstration of such goods and services at a particular place."1 In order to sell its goods and services, direct selling companies engage a large network of direct sellers who in turn, build their own network of persons to sell the products. These direct sellers are engaged as independent salespersons and not considered employees of the direct selling company. Income is earned through commissions on sales made by themselves and on the sales of the network of direct sellers built by them.
While direct selling companies have been operational in India since the 1980s, the liberalisation of the economy in 1991 enabled numerous global companies to enter the Indian market. Amway was one of the first international direct selling companies to make significant investments in India in 1995. Soon, many more companies such as Avon, Oriflame and Tupperware followed suit. Even Indian companies such as Modicare adopted the direct selling model to sell its goods and services.2 As on January 2022, the Indian direct selling industry is valued at INR 16,000 crores and is expected to reach INR 64,500 crores by 2025.3
However, the regulation of the direct selling industry has not been one without its own set of hurdles. For a long time, there continued to persist lack of regulatory clarity and misapplication of existing laws with respect to the direct selling industry. Multiple rounds of complaints, issues and possible solutions have been debated over years and has finally resulted in the legislature enacting a set of rules to address the plight of the industry. The Department of Consumers Affairs, Ministry of Consumer Affairs, Food and Public Distribution ("DCA") in June 2021 released the Draft Consumer Protection (Direct Selling) Rules, 2021 for inviting views and suggestions from the public.4 Subsequently, on 28 December 2021, the DCA notified the Consumer Protection (Direct Selling) Rules, 2021 ("Direct Selling Rules"). Existing direct selling entities are required to comply with the provisions of the new Direct Selling Rules within a period of ninety days from its publication in the official Gazette.
This article aims to analyse the efficacy of the recently enacted Direct Selling Rules by tracing the evolution of the Indian legal regime governing the direct selling industry and provide a cross-jurisdictional analysis to highlight the gaps in the upcoming regime.
2. TRAJECTORY OF DIRECT SELLING LAWS IN INDIA
2.1. Prize Chits and Money Circulation Schemes (Banning) Act, 1978
Prior to the enactment of the Direct Selling Rules, one of the main complaints of the direct selling industry was with respect to the misapplication of the Prize Chits and Money Circulation Schemes (Banning) Act, 1978 ("PCMCS Act"). The lack of a separate and specific legislation regulating direct selling businesses resulted in an increasing number of criminal proceedings being instituted against direct selling entities under the PCMCS Act.
As per section 2(c) of the PCMCS Act, a money circulation scheme has been defined as "any scheme, by whatever name called, for the making of quick or easy money, or for the receipt of any money or valuable thing as the consideration for a promise to pay money, on any event or contingency relative or applicable to the enrolment of members into the scheme, whether or not such money or thing is derived from the entrance money of the members of such scheme or periodical subscriptions." However, the requirement of "any event or contingency relative or applicable to the enrolment of members into the scheme" resulted in enforcement agencies and the judiciary equating legitimate activities of direct selling entities to that of a money circulation scheme.
With the Courts wrongly booking direct selling entities under the PCMCS Act for running money circulation schemes / ponzi schemes and the continued existence of regulatory uncertainties, decreasing investments into the direct selling industry became apparent. For example, Mary Kay Inc. ("Mary Kay") established itself in India in 2007 with an aggregate investment of USD 2,00,00,000 and engaged approximately 4,500 direct sellers. By 2011, numerous reports suggested that Mary Kay was planning to invest an additional USD 9,000,000 (US Dollar Nine Million) over a period of three to four years in its Indian business.5 However, in 2013, Mary Kay announced its plan to exit the Indian market citing the alarming and inconsistent regulatory landscape that continued to persist.6 Even Hindustan Unilever Network which was established in 2003 and consisted of three major brands namely, Aviance (personal care), Lever Ayush (health care) and Lever Home (detergents, household care and toothpaste) exited the Indian market due to the "ambiguity on acceptable norms for direct selling in India".7 Thus, it became obvious that the lack of regulatory clarity was turning out to be detrimental to the Indian economy as well.
2.2. Judicial Trend
In 1982, the Supreme Court in State of West Bengal v. Swapan Kumar Guha8 analysed the provisions of the PCMCS Act and laid down, for the first time, the test for determining a money circulation scheme. The apex Court noted that "any and every activity for the making of quick or easy money by itself would not attract the provisions of the PCMCS Act and that making of such quick or easy money must depend upon any event or contingency relative or applicable to the enrolment of members into the scheme." However, it took many more years to realise that the application of the PCMCS Act by the Courts was bringing in its ambit both, legitimate and illegitimate direct selling businesses.
The first instance of the PCMCS Act being used against legitimate direct selling companies was addressed in 2008 by the Andhra Pradesh High Court in Amway India Enterprise v. Union of India9("Amway case") In the Amway case, the police had registered a case against Amway India Enterprises ("Amway") under various sections of the Indian Penal Code, 1860 and the PCMCS Act alleging that Amway was running a money circulation scheme. The Hon'ble High Court found that the scheme run by Amway fell within the definition of 'money circulation scheme' under the PCMCS Act. However, the case threw light on the bigger issue faced by direct selling entities in India i.e., whether policymakers, Courts and enforcement agencies did, in fact, possess a correct and clear understanding of the concept of direct selling?
Over the years, discussions and complaints raised by various stakeholders led to some change in the attitude towards direct selling and a better understanding of its related activities. The holding of the Karnataka High Court in Naresh Balasubramanian v. State of Karnataka10 depicts the evolving stance taken by the judiciary to address some of the concerns raised. The Court observed that a direct selling scheme may consist of "multi-layered network of subscribers, which consists of subscribers enrolling one or more further subscribers in order to receive any benefit, directly or indirectly, where the benefits is, as a result of sale of goods or services for such subscribers and is not illegal". The Court rightly held that the activities of a direct selling company do not fall under the definition of 'money circulation scheme' or 'prize chit' as mentioned under the PCMCS Act and noted that the PCMCS Act may not be applicable to the activities of such direct selling companies. The Court also explicitly pointed out that the case was a distinct example of a criminal legislation being applied to a case it was not remotely applicable to.
2.3. Past Efforts and Reforms
Issues related to the regulation of direct selling businesses became apparent as early as the year 2000. Varying stances taken by the Courts coupled with complaints raised by numerous stakeholders initiated the following efforts by the Government to regulate direct selling businesses in India:
Findings of select regulators
Over the years, various regulators have analysed and addressed the role they play in the regulation of direct selling entities. For instance, the Reserve Bank of India ("RBI"), strongly opined that the registration fees charged by direct selling companies may be equivalent to collecting deposits from the public. However, upon investigating further, it was found that such registration fees could not be considered as deposits and since the RBI "did not regulate non-banking/financial companies selling products and services", it did not have the power to regulate direct selling. Even the Securities Exchange Board of India maintained that only capital markets and collective investment schemes fell within its regulatory purview and direct selling entities not falling within these categories could not be regulated by it. Therefore, it was concluded that the best approach to regulating direct selling entities would be enacting a separate legislation altogether.
Inter-Ministerial Group under the Central Economic Intelligence Bureau ("CEIB")
In 2009-10, the CEIB attempted to address the issues related to direct selling entities by setting up an Inter-Ministerial Group comprising of members from the Department of Consumer Affairs ("DCA"), Ministry of Corporate Affairs ("MCA"), RBI and the Financial Intelligence Unit. The Inter-Ministerial Group found that the PCMCS Act was applicable to all illegal multi-level marketing schemes and that the DCA should be made the repository for all complaints made by individuals.11
Inter-Ministerial Committee under the DCA
In 2012, an inter-ministerial committee12 was headed by the DCA comprising of representatives from inter alia, the Department of Financial Services ("DFS"), MCA and RBI to consider and address issues relating to companies engaged in direct selling activities. However, the committee recommended that the PCMCS Act should be amended to provide for a clear distinction between direct selling/multi-level marketing activities and pyramid/ponzi schemes and found that there was no need to enact a legislation to specifically regulate direct selling business.13
Inter-Ministerial Committee under the DFS
In 2013, a high-level inter-ministerial group constituted under the DFS found that simply amending the PCMCS Act would not solve the regulatory issues related to direct selling entities. It found that even if an exception clause was to be carved out in the existing PCMCS Act, such exception would not be advisable unless a robust framework was also enacted for registering, regulating and providing penalties for violating laws on direct selling. Therefore, the high-level committee recommended enacting new legislation on direct selling.14
Whitepaper by the Indian Institute of Corporate Affairs ("IICA")
In 2015, the IICA, an autonomous think tank of the MCA, published a whitepaper on regulating direct selling in India. This whitepaper was the first attempt to provide a comprehensive framework to distinguish legitimate direct selling activities from pyramid/ponzi schemes.15
Standing Committee on Finance and Consumer Affairs
Noting the framework proposed by the IICA, the Parliamentary Standing Committee also found merit in the findings and recommendations of the whitepaper. The Committee therefore proposed that the Ministry of Finance, MCA and Ministry of Consumer Affairs collaborate to draft a framework that provides for a compulsory registration requirement in order to be able to assess whether such businesses are legitimate direct selling entities or not. The Standing Committee on Consumer Affairs was of the same view.16
Model Framework for Guidelines on Direct Selling, 2016 ("2016 Guidelines")
In September 2016, pursuant to the observations and recommendations set out above, the DCA issued the 2016 Guidelines.17 The 2016 Guidelines provided a framework which allowed State Governments to monitor the activities of direct selling entities and ensure compliance under it. One of the most notable features of the 2016 Guidelines is that it clearly laid down an objective test to demarcate legitimate direct selling businesses from pyramid/ponzi schemes. Amongst other things, the 2016 Guidelines also listed provisions related to obligations of direct selling entities and direct sellers, rights of customers against such entities/sellers and prohibition on unfair practices such as fraudulent recruitment and misrepresentations made by such entities/sellers.
However, it is pertinent to note that the 2016 Guidelines were issued only as an advisory and thus their efficacy was largely dependent on implementation by the State Governments and Union Territories. The advisory nature of the 2016 Guidelines resulted in non-uniform application of the guidelines with only 12 states (Chhattisgarh, Sikkim, Telangana, Andhra Pradesh, Odisha, West Bengal, Goa, Rajasthan, Tamil Nadu, Kerala and Mizoram) implementing the same.18 As a result, the lack of implementation by various States and Union Territories led to an atmosphere of mistrust among consumers.
3. THE CONSUMER PROTECTION (DIRECT SELLING) RULES, 2021
The new Direct Selling Rules came into force with an aim to prohibit participation/promotion of pyramid schemes and money circulation schemes. The Direct Selling Rules has a specific provision that prohibits pyramid and money circulation schemes. The Direct Selling Rules aim to bring under its ambit all goods and services bought or sold through all models of direct selling by direct selling entities to consumers in India. It also aims to regulate any and all forms of unfair trade practices used across all such models of direct selling. It must be noted that the Direct Selling Rules goes one step further and brings under its purview direct selling entities that may not be established in India but provide goods and services to consumers in India. Such a provision will ensure that direct selling businesses shall be required to comply with the provisions of the Direct Selling Rules as long as it has direct sellers in India and its place of establishment holds no relevance. Therefore, the numerous direct selling companies that operate in India without any physical presence would also be covered under the new Direct Selling Rules. These rules have also been made applicable to direct selling entities and direct sellers operating on e-commerce platforms and shall be required to comply with the provisions of the Consumer Protection (e-commerce) Rules, 2020. To ensure compliance under the rules, State Governments have been empowered to establish a mechanism to monitor and supervise the activities of such entities and direct sellers.
The Direct Selling Rules can be broadly divided into the following three key themes:
- obligations of direct selling entities;
- obligations of direct sellers; and
- liabilities under the Direct Selling Rules.
3.2. Obligations of Direct Selling Entities
Incorporation and establishment of registered office
Direct selling entities must ensure that they are incorporated under the Companies Act, 2013 or the Partnership Act, 1932 or the Limited Liability Partnership Act as the case may be. Additionally, direct selling entities are mandatorily required to establish at least one physical location as its registered office in India.
Mandatory maintenance of records
Direct selling entities are required to maintain a number of documents as prescribed under applicable laws at its registered office. An indicative list of documents to be maintained has been provided for in the Direct Selling Rules. For instance, direct selling entities must maintain documents such as incorporation documents, constitutional documents, permanent account number, GST registration, income tax returns, licenses/permits and approvals under legislations such as the Food Safety and Standards Authority of India Act, 2006 and the Drugs and Cosmetics Act, 1940 amongst other documents. Direct selling entities can choose to maintain such documents either physically or electronically.
Maintenance of website
Every direct selling entity is required to maintain a proper website which shall list relevant and important details of the entity and also display the documents it is mandated to maintain as listed above. All information provided on the website must also be duly certified by a company secretary. The Direct Selling Rules also provide an exhaustive list of information that must be clearly displayed in an accessible manner on its website such as:
- registered name, address and contact details including e-mail, telephone numbers of all branches of the direct selling entity.
- information related to return, refund, warranty and guarantee, delivery and shipment, modes of payment, contact details of grievance officers and procedure for redressal of grievances along with and any other information that may be relevant to ensure that customers make informed decisions.
- essential information related to products being sold such as name of purchaser and seller, description of goods and services, estimated delivery time, quantity of goods, warranties provided, terms and process for exchange/refund/replacement, etc.
- record of relevant information allowing for easy identification of direct sellers who have been delisted.
The Direct Selling Rules require that direct selling entities must own, hold or be the licensee of trademarks, service marks or any other identification marks which establishes the identity of such direct selling entity with respect to the products or services it sells or supplies. Additionally, direct selling entities are not permitted to give any commissions, bonuses or incentives on any goods and services it sells or supplies if it does not own/hold or is a licensee of the trademark, service mark or any other identification mark of such goods and services.
Compliances with respect to direct sellers
The Direct Selling Rules require direct selling entities to enter into written contracts with its network of direct sellers to provide the necessary authorizations for selling its goods and services. Additionally, the Direct Selling Rules go one step further in protecting the direct sellers by mandating that the terms and conditions imposed by such contract be fair, just and equitable. Direct selling entities are also required to issue identity cards to its direct sellers. However, this must be done only after physical verification of identity and addresses is undertaken. Adequate safeguards must be implemented to ensure that all products and services offered by direct sellers conform with applicable laws.
Grievance redressal mechanism
The Direct Selling Rules envisage the setting up of a grievance redressal mechanism to adequately deal with any complaints raised by consumers. A mechanism for filing of complaints must be developed through which consumers can file complaints whether in person, through post, telephone, e-mail or the website maintained. The procedure for filing of such complaints must be clearly indicated on the website of the direct selling entity. Depending on the number of grievances ordinarily received, such entities are required to appoint one or more grievance redressal officers. As already mentioned above, the website of the direct selling entity must necessarily list all relevant information related to such grievance redressal officers such as name, e-mail, contact number, etc. The Direct Selling Rules also establish strict timelines for redressal of grievances raised. For instance, grievance redressal officers must acknowledge the receipt of any complaints received within forty-eight hours of receipt of such complaint. Complaints must be resolved within a period of one month from the date of receipt and in case of any delay, reasons for such delay and actions undertaken to resolve the complaint must be communicated to the complainant in writing. To ensure effective dispute resolution, consumers have also been provided with the right to request (in writing) direct selling entities to provide them with information of direct sellers from whom goods and services have been purchased.
Safeguards for consumers
The Direct Selling Rules have been drafted in a manner to also ensure that adequate safeguards are put in place from the point of view of the consumer and ample protection is provided in the framework itself. For instance, direct selling entities must ensure compliance with the declarations to be made as under the Legal Metrology (Packaged Commodities) Rules, 2011. This ensures that there is a mandatory obligation on entities to provide all relevant information that a consumer may need to make an informed decision about the goods or services being sold. A nodal officer must also be appointed who shall be responsible for ensuring that the direct selling entity is in compliance with the Direct Selling Rules at all times. Direct selling entities are strictly prohibited from representing itself as a consumer and posting any reviews with respect to goods and services offered.
3.3. Obligations of Direct Sellers
In order to be a holistic framework governing direct selling businesses, the Direct Selling Rules envisages to bring within its ambit direct sellers and casts numerous obligations on them. For instance, direct sellers must always clearly and truthfully identify themselves, disclose the identity of the direct selling entity and its place of business along with the nature of goods or services being offered prior to any sale representation. Direct sellers must also provide accurate and complete information with respect to prices, terms of payment, return/exchange/refund policies, after-sale services and demonstrate the goods and services.
A direct seller must take all steps necessary to protect the sensitive personal information provided by the consumers and must not:
- visit the consumer's premises without the identity card given and prior appointment/approval;
- make any claim which is not consistent with the claims authorised by the direct selling entity;
- provide any literature to the prospect which has not been authorised by the direct selling entity; and
- require a prospect to purchase any literature from it.
An 'order form' must be provided to consumers either at the time or prior to the time of such sale which must inter alia clearly identify the name and details of the direct selling entity along with a complete description of the goods and services being sold, amount paid by customer, time and place for inspection and delivery of the goods/services, consumer's right to cancel the order, details on availing refund on amount paid already and most importantly the procedure for raising complaints and the grievance redressal mechanism adopted by the direct selling entity. Direct sellers must also ensure that the actual product is delivered to the buyer.
3.4. Liabilities Under the Direct Selling Rules
The Consumer Protection Act, 2019 ("Act") introduced the principle of product liability and the same as been referenced in the Direct Selling Rules. The Act envisages that the product seller must be made accountable for any harm that is caused to consumers by sale of defective products. Pursuant to this, the Act provides consumers with the right to approach dispute redressal commissions set up under the Act and file complaints for any harm caused. The reference to this principle in the Direct Selling Rules means that even direct selling entities and direct sellers would fall under the ambit of the Act and could be held liable. Additionally, the Direct Selling Rules have also built-in provisions that require direct selling entities to mandatorily accept returns of such defective goods and provide a refund that is in line with the consideration amount already paid by the consumer.
Protection of personal data
Direct selling entities must also ensure that all sensitive personal data being shared by consumers are stored within the jurisdiction of India and adequate mechanisms must be built in to prevent any access or misuse of such data by any unauthorised person.
Direct seller liability
Direct selling entities are liable for any grievances arising out of the sale of goods and services by its network of direct sellers.
4. GLOBAL DIRECT SELLING REGIMES
The modern-day direct selling industry can be traced back to the 1800s with the establishment of Avon in the USA in 1886.19 The industry began evolving rapidly with a diverse range of products such as household appliances, beauty/cosmetics and food and wellness products being offered. To further develop its reach, companies attempted to come up with innovative ways to reach the ordinary customer. The introduction of direct selling gave companies the perfect opportunity to build a large customer base and a bigger workforce than they could imagine. As these direct selling companies began saturating their hold in their respective home countries, they started venturing out to other countries. Jurisdictions across the globe found the need to ensure regulation of such companies and did so by either introducing new legislations or amending existing laws. This section aims to briefly highlight laws on direct selling in countries such as the US, Malaysia and Singapore.
United States of America
The USA is known to be the oldest and largest direct selling market in the world. However, no specific legislation has been implemented at the federal level to regulate direct selling companies. Legislations have however been implemented in all states to prohibit the promotion or operation of pyramid schemes. Various States such as Louisiana, Montana, Oklahoma Texas, etc. have implemented their own anti-pyramid statutes which are in line with code of ethics developed by the Direct Selling Association. While some of these legislations have been drafted with the specific mention of pyramid schemes, others use lottery laws and other related legislations to deal with frauds of such nature. These statues prescribe either criminal or civil penalties for violations.
Anti-pyramid legislations have been independently enacted by various states and some even require multi-level filings to be made as per the provisions of such statutes. States such as Texas and Oklahoma have implemented specific statutes and codes defining pyramid promotional schemes and prescribing penalties for promoting such schemes.
States such as Georgia, Louisiana, Maryland, etc. regulate multi-level marketing companies and define them as "those which market products or services through independent agents or distributors at different levels and in which participants recruit or sponsor others and receive compensation based upon the recruit's sales of products". Some States also require appointment of an agent by the direct selling companies to ensure compliance with other regulations related to payment of compensation to the direct sellers, buy-back of unsold inventory held by such direct sellers, etc. No restrictions are imposed on selling products to consumers. However, sale of products from certain regulated industries such as liquor, securities, insurance, etc. must conform to the federal/state level legislations regulating it.
Multiple legislations such have been enacted in Singapore to govern the direct selling industry in Singapore. The Multi-level Marketing and Pyramid Selling (Prohibition) Act, 1973, ("MLM Act") the Multi-level Marketing and Pyramid Selling (Excluded Schemes and Arrangements) Order 2000 ("MLM Order") and the Consumer Protection (Fair Trading) Act, 2016 ("CPFT Act") have been implemented to comprehensively regulate the industry.
The MLM Act clearly prohibits pyramid schemes and the MLM Order list certain conditions that must be met to qualify as a multi-level marketing scheme and would not be deemed illegal. Some of these conditions are as follows:
- no entry fee must be charged;
- no recruitment commissions must be charged;
- audited records of benefits accrued by participants must be maintained by the direct selling company;
- no fraudulent activities or sales must be undertaken; and
- definitive buy-back policies must be put in place.
Malaysia strongly believes in the power of direct selling and views the concept as a means to empower its population. Pursuant to this, Malaysia has implemented the Direct Sales Act, 1993 ("Direct Sales Act"). To regulate the direct selling industry and specifically prohibit pyramid schemes, the Direct Sales Act was amended in 2011. The key purpose of the amendment was to introduce a chapter specific to non-pyramid schemes which would be applicable to direct selling companies and lists down the characteristics of such arrangements.
The Ministry of Domestic Trade and Consumers Affairs is the regulatory authority under the Direct Sales Act. Multi-level marketing has been dealt with in the Direct Sales Act itself and no separate legislations have been enacted to regulate the same. Direct selling business are required to obtain a direct sales license prior to commencing business under the Direct Sales Act. No prohibition has been placed on offering products; however, companies are required to obtain an approval from the relevant authority before distributing any new products. Health products must necessarily be registered with the Drug Control Authority under the Ministry of Health before being sold. The direct sellers in Malaysia have been given the status of independent contractors and are not considered as employees of the company. However, direct selling companies are responsible for the conduct of their direct sellers.
The Direct Sales Act is a comprehensive legislation that lays down all the conditions that a direct selling business must adhere to. Non-pyramid schemes must ensure that no payment of bonus is made solely on recruitment of persons, no entry fee is charged, written contracts are mandatorily executed, buy back policies are put in place, etc.
Much relief has been brought to the direct selling industry through the introduction of the Direct Selling Rules. Some features of the Direct Selling Rules are absolutely necessary to regulate this industry and the enactment of a separate legislation containing such features will help boost the industry further and protect the numerous stakeholders involved in the business.
For instance, incorporation of provisions with respect to mandatory maintenance of records, written contracts, refund/return policies, etc. fall in line with the best practices of other countries. In a survey conducted in 2018, it was found that ordinary complaints raised by consumers often escalate to the point of involving the law enforcement as a result of poor grievance redressal mechanisms at the company level.20 This means that legal proceedings could easily be avoided if such complaints were handled internally by the direct selling entity. The inclusion of provisions related to mandatory setting up a grievance redressal system and its functioning is definitely a step in the right direction.
However, the Indian Direct Selling Rules have also failed to address some key issues. For instance, the Malaysian Direct Sales Act clearly lays down the following necessary contents of the direct sales contracts that companies are required to enter into with their network of direct sellers.
- the contract must provide a detailed description of the goods and services that are being supplied and the detailed particulars of the nature of any specific work to be carried on by the direct seller, if any;
- contractual terms of the agreement must be listed including the total consideration paid by the direct seller;
- details of the time, place and method for payment to be made must be listed;
- details of the time and place for delivery of goods and services or performance of services offered must be provided;
If the direct selling entity fails to comply with the Malaysian Direct Sales Act and execute a contract with the aforementioned conditions, such contract would be rendered void.
In comparison to the above, the Indian Direct Selling Rules only provide that the terms and conditions of contracts between the direct selling entity and the direct sellers be just, fair and equitable. Such a provision is vague and ambiguous and issues related to enforceability of such contracts may arise since the Indian Direct Selling Rules do not contain provisions for rendering such contracts void on non-compliance of the 'just, fair, equitable' principle.
Countries such as Singapore and Malaysia have comprehensive frameworks that provide ample emphasis on the protecting the direct sellers. For example, these countries have developed legislations that contain detailed provisions with respect to mandatory buy-back policies, cooling-off periods, etc. Provisions of such nature have not been incorporated in the Direct Selling Rules. In fact, this would mean that direct selling entities have been left with the discretion to formulate their own policies in such matters. As a result, the Direct Selling Rules have missed the opportunity to ensure that direct sellers are provided with adequate safeguards against exploitative policies that may be employed by direct selling companies to generate greater revenue.
Thus, it is apparent that the Indian Direct Selling Rules may be considered as a great first attempt to regulate the direct selling industry in India after decades of misapplication of existing legislations and persisting poor regulatory regime; however, there is a lot of road still left to be travelled as far as Indian laws and regulations governing direct selling in India is concerned.
1. Indian Direct Selling Association, Code of Ethics of Indian Direct Selling Association available at https://idsa.co.in/resources/media/code/IDSA-Coe.pdf.
2. KPMG and FICCI, Direct Selling: A global industry empowering millions in India available at https://assets.kpmg/content/dam/kpmg/pdf/2014/12/Direct-Selling.pdf.
3. Financial Express, Upcoming trends in direct selling industry in 2022 available at https://www.financialexpress.com/brandwagon/upcoming-trends-in-direct-selling-industry-in-2022/2413290/
4. Ministry of Consumer Affairs, No.J-10/9/2018-O/o DS (CPU) available at https://consumeraffairs.nic.in/sites/default/files/file-uploads/latestnews/Draft%20Consumer%20Protection%20%28Direct%20Selling%29%20Rules%2C%202021.pdf
5. Bhavna Raghuvanshi, Mary Kay to invest $9mn in India in next 4 years available at https://www.livemint.com/Companies/yMhbriYMjjIZL5P0eM1ggK/Mary-Kay-to-invest-9-mn-in-India-in-next-4-years.html
6. Hindu Business Line, Mary Kay quits India citing regulatory issues, poor sales available at https://www.thehindubusinessline.com/companies/Mary-Kay-quits-India-citing-regulatory-issues-poor-sales/article20641081.ece
7. Hindustan Unilever, Director's Report, 2013-14, available at https://assets.unilever.com/files/92ui5egz/production/00443f41574c2f56fe811f91a7caeda0e4145536.pdf/directors-report-ar-2013-14.pdf
8. 1982 AIR 949.
9. 2007 (4) ALT 808.
10. 2017 (3) AKR 825.
11. FICCI, Ease of Doing Business in India: The Way Forward for the Direct Selling Industry available at https://ficci.in/spdocument/22924/Report_Ease-of-Doing-Business.pdf
12. Supra, footnote 11.
13. Department of Consumer Affairs, Report of the Inter-Ministerial Committee on Issues Relating to the Entities Engaged in Direct Selling/ Network/ Multi-level marketing available at https://dsdwa.org/pdf/IMC-Report.pdf
14. Supra, footnote 11.
15. Supra, footnote 11.
16. Supra, footnote 11.
17. Direct Selling Guidelines, 2016 available at https://consumeraffairs.nic.in/sites/default/files/file-uploads/direct-selling/Direct%20Selling%20Guidelines%20Final%20_0.pdf
18. The Tribune, Northern states lag behind in regulating direct sellers available at https://www.tribuneindia.com/news/archive/business/northern-states-lag-behind-in-regulating-direct-sellers-790867
19. Supra, footnote 2.
20. PahleIndia, Review of Regulatory Framework of Direct Selling in India available at https://pahleindia.org/pdf/publication/Review_of_Regulatory_Framework_for_Direct_Selling_in_India.pdf
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