The Consumer Protection (Direct Selling) Rules 2021

Subject – Economy

Context – Centre notifies new rules for direct selling industry

Concept –

The central government on December 28 notified new rules for the direct selling industry banning companies from promoting pyramid and money circulation schemes. The entities have to ensure that these new rules are complied by within 90 days.
According to the new rules, the direct selling companies will also be liable for the grievances arising out of the sale of goods or services by its direct sellers.
Tupperware, Amway and Oriflame are among the key players in the direct selling industry.
The Consumer Protection (Direct Selling) Rules, 2021 notified by the nodal Consumer Affairs Ministry are to be complied with by both direct selling entities and direct sellers using e-commerce platforms for sale.
As per the new rules, state governments will have to set up a mechanism to monitor or supervise the activities of direct sellers and direct selling entities.
Direct selling entities are also liable for the grievances arising out of the sale of goods or services by its direct sellers.

Pyramid Scheme

Pyramid scheme is a business model that recruits or engages members with a promise of payments or services for enrolling others into the scheme, instead of sale of products or services.
The Prize Chit and Money Circulation Schemes (Banning) Act prohibits any company or individual from running any Pyramid or Money Circulation Scheme.