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By Adv. P. M. Mishra
Despite an ongoing global pandemic, the direct selling industry all across the globe has been fructifying. Business entities involved in direct sales embraced the “new normal” and moved towards a digital course of action to promote their products and reach their customer bases.
Direct Selling in India
The Indian Direct Selling Association (IDSA) regulates direct Selling in India. IDSA connects the industry and policy-making bodies of the Government in order to facilitate direct Selling in India. The Model Framework for Guidelines on Direct Selling, which was notified on October 26, 2016, provided the basis for the direct selling industry’s regulatory framework. However, the Model Framework for Guidelines on Direct Selling 2016 was advisory based on which states were expected to frame their policies and implement their own mechanisms to keep an eye on the direct selling activities within their states. Only a couple of states notified their guidelines throughout a four-year-long period, while no other state adopted or formulated under any state or central legislation.
Therefore, the Consumer Affairs Ministry has introduced the Consumer Protection (Direct Selling) Draft Rules, 2021.
Consumer Protection (Direct Selling) Draft Rules, 2021- A boon to the Direct Selling Industry
In the case of Amazon Seller Services Pvt. Ltd. and Ors. v. Amway India Enterprises Pvt. Ltd. and Ors, the Supreme Court passed a landmark judgment wherein the Delhi High Court allowed E-commerce entities to advertise and sell products of Amway without their consent. This judgment, in a way, highlighted the failure of the Model Framework for Guidelines on Direct Selling 2016 and indicated a pressing need for new regulations for Direct Selling, which led to the formation of Consumer Protection (Direct Selling) Draft Rules 2021.
The Consumer Protection (Direct Selling) Draft Rules, 2021 lays down a proper mechanism that has increased the revenue generated in the direct selling industry. It has also been promoting entrepreneurship, job creation, women’s empowerment, skill development, and projects that address crucial social concerns. The direct selling industry in India is currently pegged at around Rs. 17,000 crores and is expected to touch Rs. 64,500 crores by 2025.
According to industry projections, by 2025, the sector will employ nearly 18 million people. Therefore, due to its growth potential, it would be pivotal for the direct selling industry to be recognized and governed by Indian laws. These draft rules are intended to protect and promote the interests of India’s more than 7 million direct sellers and their clientele and help the Indian direct selling industry grow. Apart from that, it aims to protect ethical business models.
According to a recent IDSA survey, millennials account for about 40% of direct sellers in India. These numbers are anticipated to expand as the millennial population grows and conducts business efficiently. With over 3.6 million female entrepreneurs, the industry also significantly encourages women’s entrepreneurship.
As customer satisfaction and corporate success go hand-in-hand, businesses need to design effective ways to defend their customers’ interests. The direct selling industry is not immune from the same. According to the proposed direct selling guidelines, every direct selling entity must have dedicated executives to resolve issues and comply with government regulations. Such businesses would also be obliged to have a customer service line available 24 hours a day and seven days a week to address any difficulties. Direct Selling will be prohibited from charging distributors any admission or registration fees and will also be banned from charging distributors for the cost of equipment and materials used in sales demonstrations. Furthermore, all direct selling companies must have a product return and refund policy in place so that any client may return the products purchased if necessary.
Considering India’s enormous market size and economy, the direct sales industry is expected to increase threefold in the near future. Streamlining direct selling regulatory procedures will aid enterprises in exceeding their growth thresholds, resulting in the creation of millions of new entrepreneurs across the country. As a result, the publication of the Draft Rules has been warmly welcomed by all stakeholders involved. These laws, once enacted, would close the regulatory vacuum in India’s direct selling business and aid to its growth, benefitting all stakeholders, including direct selling companies, direct sellers, and consumers in general.
About the Author –
Adv. P. M. Mishra is a lawyer working as Managing Partner of Finlaw Associate, Director at Finlaw Consultancy Pvt. Ltd., India, Finjuris Counsels LLC, UAE & BCH Consulting, Estonia, and Europe.
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