The move is the latest step to curb unethical business practices by direct-selling firms even after the notification of the Consumer Protection (Direct Selling) (Amendment) Rules, 2023.
Dhirendra Kumar
Published4 Jul 2024, 05:29 PM IST
Common unethical practices by direct-selling firms include product misrepresentation, pyramid schemes and high-pressure sales tactics.
In the latest step in a series of actions aimed at addressing direct sellers' unethical business practices, the Union consumer affairs ministry is planning to organize an awareness campaign for consumers, said two people aware of the development.
“It has come to notice that many direct-selling firms are not following the Consumer Protection (Direct Selling) (Amendment) Rules, 2023 (notified in June last year),” the first person said on the condition of anonymity.
The rules mandate that direct sellers provide consumers with clear, accurate and complete offer terms, including terms of payment, return and guarantee, after-sales service, delivery with factual descriptions, etc.
Also Read: Centre now plans to rein in direct selling industry, tighten regulations
Firms involved in direct selling are also barred from engaging in any misleading, deceptive or unfair trade practices to sell their products.
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Series of actions
Mint reported on 10 May that the department of consumer affairs (DoCA) was planning to scrutinize direct-selling firms' regulatory compliance and prepare a list of rule violators.
The report added that several measures were also being implemented to increase vigilance against violation of direct-selling rules and the industry's other unscrupulous practices.
“Timely action is needed to protect the interests of consumers as direct-selling firms lure them with attractive offers," said the second person, who also spoke on the condition of anonymity.
“Such practices must stop. There is no harm in conducting a direct-selling business, but it needs to be fair and transparent. Consumers should not have to run from pillar to post to get their products returned or repaired," the second person added.
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Office-bearers of the Indian Direct Selling Association (IDSA) refused to comment on the development. Queries emailed to the spokesperson of the consumer affairs ministry remained unanswered until press time.
consumer protections
The Consumer Protection Act of 2019 safeguards consumers against defective products, unsatisfactory services and unfair trade practices. The primary goal of this act is to protect consumer rights by establishing authorities for the timely and effective administration and resolution of consumer disputes.
“Violating the guidelines will result in action according to the provisions specified in the law. The government is committed to acting against violators to safeguard the interests of consumers," said Manish K. Shubhay, partner at The Precept Law Offices.
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Common unethical practices by direct-selling firms include product misrepresentation, pyramid schemes, high-pressure sales tactics, exaggerated income claims and failure to protect consumer data, among others.
According to estimates released by the IDSA, the Indian direct-selling industry witnessed growth of over 12%, recording a gross industry turnover of ₹21,282 crore in 2022–23.
Total sales increased by ₹2,252 crore compared to 2021-22, which was partially impacted by the pandemic. According to the IDSA, the compounded average growth rate (CAGR) of the direct-selling industry stood at 8.3% from 2019-20 to 2022-23.
In India, around 8.6 million people are actively self-employed in the direct-selling industry, as stated in the IDSA report.