Brief of Model Guidelines

The release of Model Guidelines on Direct Setting by Ministry of Consumer Affairs on 9th Sep 2018 also saw an advisory to the State Governments to adopt the same respectively in their  jurisdictions.The Guidelines paved a way towards an end of identity crisis for the Direct Selling business in India which was often confused with the Ponzi schemes.

 Before these Guidelines, in the absence of any regulatory mechanism, many fly-by-night operators have taken free ride and in all cases the innocent people were the sufferers as well as the industry and genuine people who were doing right business. The law enforcement agencies,out of this confusion had dealt with the cases with the nearest possible procedures i.e. The Prize chits & Money Circulation (Banning) Act 1978 Which was an Act made 2O years ago prior the Direct Selling industry in India in 1998

Release of the Guidelines, however,did not sort out all issues.The provisions of the Guidelines is now being interpreted differently by different people to suit their convenience in the absence of suitable training and advocacy. We at FDSA have been receiving queries on these model guidelines requesting clarifications to understand the guidelines in its proper intent and implementation.

FDSA, hereby is trying to explain the key elements of these model guidelines for common man's better Understanding.

 

Direct Selling business is a way of doing  modern  retailing  and it is not any investment  business. One  can  benefit  in direct  selling  only by way of doing business of retailing products through word of mouth, based on the volumes of sales by self & team developed under him. There won't be any quick or easy money. Earnings are truly dependent upon the efforts you make in a genuine direct selling business. You should have clear understanding of rights and responsibilities before getting involved in the direct selling business

A. The Company 

While the Guidelines mentions that a Direct Selling Entity shall be registered under the laws in India, it is preferable to form a company under the companies Act 2013 or a LLP under the LLP Act. The direct selling run by Sole Proprietorship/ Partnerships firms may face challenges as and when business grows across India as they are not registered in a Central Act

1. Shall have mention of Direct Selling business" in the primary objectives of the company in the Memorandum of Association (MOA).. 
2. .Shall have their own trademark/branded products or services to offer in Direct selling.
3. . Shall offer products with reasonable refund policy.
4. Distributors should have provision of 30 days cooling off period to exit from the agreement. If willing to continue, without any charge or obligations.
5. Shall have business/marketing plan with offering of benefits truly on the basis of sale volumes by self & team, should not be on the head-countsand the incomes/ benefits offered should be mathematically viable.
6. Shall comply with all other norms and laws in force, including local and municipal laws, if any.
7. Shall provide a free of cost orientation/training on Direct Selling business, company products/services, marketing plan and procedures to deal with consumers.
8. Shall have an adequate infrastructure & procedures of Grievance Redressal. 

B. The Distributor

a. A satisfied consumer of Direct selling entity may solicit with the company to become a Direct Selling Distributor by entering into an agreement as the Contract Act.

b.The applicant shall be an individual, having legal age to enter into a contract with the company and shall have KYC fulfilled.

c.Must have a valid ID card issued by the company, and present on demand during the business activity.. 

d.Shall not do anything against the company or agreement with the company.

e.Direct Seller shall be entitled to income / benefits as per the marketing plan offered by the company, under the obligations of the agreement.

C..The Consumer 

a.Consumers have all their remedy as per the Consumers Protection Act 1986 which has six basic rights: 

1. Right to Safety (safe products and services.
2. Right to be informed 
3. Right to Choose 
4. Right to Heard
5. Right to Seek Redressal
6. Right to Consumer Education.

b.Consumers do not have any obligation to join the business.

FDSA would be happy to help people to understand direct selling business (direct selling entity, direct sellers and consumers).