Nearly a decade of struggle between legitimate direct selling operators and those running Ponzi schemes under the garb of direct selling operations should end, now that the central government has finally put in place guidelines that distinguish the two and bring order in the Rs 8,000-crore direct selling business.
Before the guidelines, the local police often initiated investigations and arrested senior executives of direct selling firms due to a grey area in law that painted pyramid schemes (money circulation schemes that resulted in scams like Saradha and others) and legitimate direct selling operators like Amway, Oriflame or Tupperware with the same brush. One may recall the arrest of William Pinckney, managing director (MD) & CEO of Amway, two years ago. The charges were unethical circulation of money under the Prize Chits and Money Circulation Schemes (Banning) Act, 1978 among others.
On 9 September 2016, the Department of Consumer Affairs came out with detailed guidelines for direct selling companies. State governments will now have to incorporate them and monitor direct sellers in their respective states. Central government too will set up a monitoring authority to address any disputes arising out of direct selling business operations.
Under the new norms, direct sellers will be barred from any remuneration or incentives for recruitment/enrolment of new participants. Also, participants will not be required to pay any entry/registration fee to direct sellers. These firms will have to set up grievance redressal mechanism for consumers and all direct sellers will have to mandatorily comply with the rules within 90 days of their publication in the official gazette. The guidelines also lay down a remuneration system for those engaged by direct selling firms on sharing of incentives, profit and commission.
Ministry officials say that in near future, the government could amend the Consumer Protection Act, 1986 suitably to include legitimate direct selling operators under its fold.
Shilpa Ajwani, MD, Tupperware India, says the guidelines will make the environment more conducive for ethical direct selling companies to grow and create more job opportunities, especially for the women and youth of India. “The guidelines will safeguard the interests of consumers, as well as identify and help protect ethical direct selling companies,” says Anshu Budhraja, CEO, Amway India. Vivek Katoch, director-corporate affairs, Oriflame India, says the direct selling industry now has an operational and definitional clarity. The e-commerce websites won’t be able to sell products of direct selling companies without their approval. Jitendra Jagota, chairman, Indian Direct Selling Association, says the association welcomes the guidelines with open arms
Does this mean that going forward, the police will not harass any direct selling operator? Will these guidelines get statutory teeth? Only time will tell.
BW Reporters
Ashish Sinha is an experienced business journalist who has covered FMCG, auto, infrastructure, tourism, telecom among several other beats. Ashish has keen interest in the regulatory scenario impacting different sectors. He writes on aviation, railways, post and telegraph, infrastructure, defence, media & entertainment, among a wide variety of other subjects.
