Central Consumer Protection Authority Issues 17 Notices to Non-Compliant Direct Selling Entities

Central Consumer Protection Authority Issues 17 Notices to Non-Compliant Direct Selling Entities

The Central Consumer Protection Authority (CCPA) has issued notice to 17 entities that were found violating Consumer Protection (Direct Selling) Rules, 2021. Of these, 13 entities are currently under investigation. Reply from three of the entities is awaited. As a part of its commitment to uphold consumer rights, CCPA has intensified its focus on regulating direct selling activities and ensuring compliance with relevant legal framework. In this regard, the authority carefully examined the websites of these direct selling entities.

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. Ethical direct selling businesses operate transparently, providing quality products and fair compensation for their representatives without misleading consumers.

The Government of India 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.

However, some fraudulent entities misuse the direct selling model to promote illegal pyramid or money circulation schemes. These entities often make unrealistic promises of high commissions, foreign trips, entrepreurship, high returns and 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 are:

To make informed decisions and avoid falling victim to fraudulent schemes, consumers should:

In a significant step to ensure compliance with the applicable legal framework, notices have been issued to the following 17 direct selling entities for alleged unfair trade practices, service deficiencies, and violations of the Consumer Protection (Direct Selling) Rules, 2021:

Currently, 13 of these cases are under investigation, while replies from three companies are awaited. The action aims to address concerns about deceptive and exploitative practices in the direct selling industry and ensure adherence to the regulatory framework designed to safeguard consumer interests.

The Department urges all direct selling entities to adhere strictly to the regulatory framework and prioritize consumer welfare in their operations. The Government remains steadfast in its mission to create a fair, transparent, and consumer-friendly market ecosystem.

Consumers are advised to stay vigilant and report any suspected illegal activities or violations related to direct selling to the appropriate authorities. Together, we can ensure a safe and trustworthy marketplace for all.

Visitor Counter : 843