The Central Consumer Protection Authority (CCPA) has issued notice to 17 direct selling firms including Oriflame India, and Suii Dhaaga Lifestyle,  that were found in unfair trade practices, service deficiencies, and violations of the Consumer Protection (Direct Selling) Rules, 2021. According to the CCPA, of  these 13 entities are currently under investigation while  reply from three of the entities is awaited.

Direct selling is a method of marketing, distribution and sale of goods or services directly to consumers, away from fixed retail premises. This method relies on independent representatives of the entity, known as direct sellers, selling products directly to customers, typically through personal contact, online platforms, or home presentations.

The list includes multiple firms and the action comes in response to concerns about deceptive practices in the direct selling industry. “However, some fraudulent entities misuse the direct selling model to promote illegal pyramid or money circulation schemes. These firms  often make unrealistic promises of high commissions, foreign trips, entrepreneurship, high returns and a wealthy future, contingent on recruiting others, which violates consumer trust and established laws, thereby exposing consumers to fraudulent pyramid and money circulation schemes. Three major signs that a product is being used to disguise pyramid schemes include large joining fee or investment, compensation paid for recruiting and no right of return, buy-back or cooling off period offered,” the CCPA said. “The government remains steadfast in its mission to create a fair, transparent, and consumer-friendly market ecosystem,” the statement said.

Consumers have been advised to exercise caution by checking disclosures carefully, avoiding recruitment-based earnings, understanding return and refund policies, reading contracts thoroughly and verifying direct sellers’ credentials. The Consumer Protection (Direct Selling) Rules, 2021, were introduced to regulate direct selling entities and protect consumer interests and consumers will have to check certificate of Incorporation, PAN, GST Registration, important licenses as per the goods and services offered, Certificate of Registration of Trademark of the direct selling companies.

These rules complement other existing regulatory frameworks, including the Consumer Protection (E-Commerce) Rules, 2020, and the Legal Metrology (Packaged Commodities) Rules, 2011. The Department has advised consumers  to stay vigilant and report any suspected illegal activities or violations related to direct selling to the appropriate authorities.

According to the Department of Consumer Affairs, the government has notified the Consumer Protection (Direct Selling) Rules, 2021, establishing a comprehensive framework to regulate direct selling entities and protect consumer interests.

These rules aim to promote transparency, accountability, and ethical practices within the direct selling industry, enabling consumers to make informed decisions. Additionally, the rules complement other regulatory frameworks, including the Consumer Protection (E-Commerce) Rules, 2020 and the Legal Metrology (Packaged Commodities) Rules, 2011 further strengthening consumer protection mechanisms.