Published by:
Government of India
Ministry of Consumer Affairs, Food and Public Distribution
Department of Consumer Affairs
Model Framework for Guidelines on Direct Selling
These guidelines, may be called the Direct Selling Guidelines 2016. These are issued as guiding principles for State Governments to consider regulating the business of "Direct Selling" and Multi-Level Marketing (MLM) and strengthen the existing regulatory mechanism on Direct Selling and MLM, for preventing fraud and protecting the legitimate rights and interests of consumers.
In these Guidelines unless and otherwise required:
1. "Act" means the Consumer Protection Act, 1986 (68 of 1986);
2. "Consumer" shall have the same meaning as provided under the Consumer Protection Act, 1986;
3. "Prospect" means a person to whom an offer or a proposal is made by the Direct Seller to join a Direct Selling opportunity;
4. "Direct Seller" means a person appointed or authorized, directly or indirectly, by a Direct Selling Entity through a legally enforceable written contract to undertake direct selling business on principal to principal basis.
5. "Network of Direct Selling" means a network of direct sellers at different levels of distribution, who may recruit or introduce or sponsor further levels of direct sellers, who they then support:
Explanation: "network of direct selling" shall mean any system of distribution or marketing adopted by a direct selling entity to undertake direct selling business and shall include the multi-level marketing method of distribution.
6. "Direct Selling" means marketing, distribution and sale of goods or providing of services as a part of network of Direct Selling other than under a pyramid scheme.
Provided that such sale of goods or services occurs otherwise than through a "permanent retail location" to the consumers, generally in their houses or at their workplace or through explanation and demonstration of such goods and services at a particular place.
7. "Direct Selling Entity" means an entity, not being engaged in a pyramid scheme, which sells or offers to sell goods or services through a direct seller.
8. "Goods" means goods as defined in the Sale of Goods Act, 1930 and "Service" means service as defined in the Consumer Protection Act, 1986;
9. "Saleable" shall mean, with respect to goods and/or services, unused and marketable, which has not expired, and which is not seasonal, discontinued or special promotion goods and/or services;
10. "Cooling-off Period" means the duration of time counted from the date when the direct seller and the direct selling entity enter into an agreement under Clause 4 and ending with date on which the contract is to be performed and within which the direct seller may repudiate the agreement without being subject to penalty for breach of contract;
11. "Pyramid Scheme" means a multi layered network of subscribers to a scheme formed by subscribers enrolling one or more subscribers in order to receive any benefit, directly or indirectly, as a result of enrolment, action or performance of additional subscribers to the scheme.
Provided that the above definition of a "Pyramid Scheme" shall not apply to a multi layered network formed by a Direct Selling Entity where:
12. "Money Circulation Scheme" has the same meaning as defined under the Prize Chits and Money Circulation Schemes (Banning) Act, 1978.
13. "Remuneration System" means the system followed by the direct selling entity to compensate the direct seller which:
14. "State" includes a Union territory.
Every Direct selling entity shall comply with the following conditions:
Every Direct Selling entity shall execute a written contract with Direct Sellers before enrolment.