Any direct selling entity, conducting direct selling activities, shall submit an undertaking to the Department of Consumer Affairs by 9th December, 2016 stating that it is in compliance with these guidelines and shall also provide details of its incorporation. Being enforcement agencies, the State Governments & Union Territories may take necessary action to implement these guidelines.
“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
“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 enrollment, action or performance of additional subscribers to the scheme. The subscribers enrolling further subscriber(s) occupy higher position and the enrolled subscriber(s) lower position, thus, with successive enrollments, they form multi-layered network of subscribers.
Provided that the above definition of a “Pyramid Scheme” shall not apply to a multi layered network of subscribers to a scheme formed by a Direct Selling Entity, which consists of subscribers enrolling one or more subscribers in order to receive any benefit, directly or indirectly, where the benefit is as a result of sale of goods or services by subscribers and the scheme/ financial arrangement complies with all of the following:
a) It has no provision that a Direct Seller will receive remuneration or incentives for the recruitment/ enrollment of new participants.
b) It does not require a participant to purchase goods or services:
i. for an amount that exceeds an amount for which such goods or services can be expected to be sold or resold to consumers;
ii. for a quantity of goods or services that exceeds an amount that can be expected to be consumed by, or sold or resold to consumers;
c) It does not require a participant to pay any entry/ registration fee, cost of sales demonstration equipment and materials or other fees relating to participation;
d) It provides a participant with a written contract describing the “material terms” of participation;
e) It allows or provides for a participant a reasonable cooling-off period to participate or cancel participation in the scheme and receive a refund of any consideration given to participate in the operations;
f) It allows or provides for a buy-back or repurchase policy for “currently marketable” goods or services sold to the participant at the request of the participant at reasonable terms;
g) It establishes a grievance redressal mechanism for consumers, more particularly described in Clause 7 herein.
Explanation 1. – For the purposes of this proviso the term “material terms” shall means buy-back or repurchase policy, cooling-off period, warranty and refund policy
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