India is the largest market for every new product because of the generous behavior of
the Indian consumers to try the new products. The retail sector companies are burning a
major portion of their revenues or investments just for Brand & products promotion
anticipating their targets achieved. But nothing is guaranteed.
On the other side, it has become next to impossible for medium & small size Startup
companies to introduce their products for promotional activities over numerous media
platforms/channels at the National and Regional levels due to the need for a heavy budget.
Again, it has no guarantee of success.
MLM / Network Marketing / Direct Marketing / Direct Selling is a way of doing business
often called Direct selling (DS) which is a proven arm of Modern Trade. Over a period of two decades, it was a free ride for many fly-by-night companies who have taken for granted due to regulatory free business and exploited the people’s trust and industry credibility.
There are two non-government bodies IDSA and FDSA, familiar as self-regulating
organizations in the direct selling industry in India have joined with FICCI to lead the mission of a disciplined direct selling industry in India and get much-awaited legal sanctity.
On dated, 9th September 2016, it was a historical day for the Indian direct selling industry to end its identity crisis with the Model Guidelines on Direct Selling issued by the Ministry of
Consumer Affairs, Food and Public Distribution. The same has been Gazetted on 26th Oct
2016. Further on 28th Dec 2021, these Guidelines have been made as The Consumer
Protection (Direct Selling) Rules – 2021, under the provisions of The Consumer Protection
Act 2019.
Importance of FOUR P – Profile, Products, Pay plan, and People
Profile of a Direct Selling company promoters should be neat with individual respect and
reachable to everyone. Aspirants of direct selling when they look at a direct selling company to invest lots of their time & energy to build a career and make this opportunity their livelihood, the profile of the company and its promotors should ensure to deliver the results in the long run and fulfill their dreams of financial freedom, successful career and become an achiever.
As per The Consumer Protection (Direct Selling) Rules – 2021, An entity is required to
incorporate as good as any other company or LLP preferably under the provisions of The
Companies Act 2013 so that the entity can do business PAN India without any hassle in
future. Further, the company is required to maintain all the statutory procedures as stated
therein. As a direct selling company, there are a few additional obligations to maintain as
follows.
The company should;
a. Have a physical office within India.
b. Not be a convicted person in the management or key positions.
c. Appoint a Nodal officer.
d. Appoint a Grievance officer.
e. Have a website with complete information about the company, products, and
business opportunities.
f. Grievance redressal mechanism should be available on the website.
g. Should provide a set of company documents visible & download from their official
website, certified by a Company Secretary practitioner.
h. Have a self-declaration as per the prescribed format provided by the Ministry of
Consumer Affairs.
i. Have registration of online convergence partners with National Consumer Helpline.
j. Exercise all the transactions, payments & receipts both should be in digital format
only. In any case, cash transactions should not be entertained.
k. Exercise all applicable taxation policies and follow the best procedures.
l. Store the user’s data within Indian jurisdiction.
Products of a Direct Selling company are the permanent identity, and they will be the
driving force in the business. Hence, the products offered by the Direct Selling company
should be result-oriented, quality, and value for money assured. The history is evident, all
the big successful companies in direct selling over a decade are because of their outstanding products and there are some cases, even the company has gone out of business because of other reasons, people are still looking for the products from every possible source.
As per The Consumer Protection (Direct Selling) Rules – 2021, A direct selling company too
required to follow all applicable laws of consumer products that are offered to sale in India
through another way of retailing. Further, as a direct selling company, there a few additional obligations as following are required.
The company should have;
a. All the products offered in direct selling should be of their own Brands / Trademarks.
Products of 3rd party brands cannot be sold like general trading.
b. Every product required necessary certifications as per the law of land as applicable
depending upon the kind of product and its formulation.
c. Every product should ensure to obey the procedures of The Legal Metrology Act –
2009, along with subsequent amendments till the date.
d. Followed the valid products in direct selling by avoiding a certain list of products that
are treated as negative products.
e. Sales with a proper invoice with applicable GST.
f. A refund policy.
Pay plan of a Direct Selling company is the key element for success. The company should
offer an arithmetically viable, and logical equation of all incomes/bonuses/incentives/rewards & awards, etc. benefits to reasonably remunerate a
Direct Seller for their hard-working efforts. The benefits should be encouraging the talent of
the direct selling time-to-time, thus helping the direct sellers to trust in the business for long term. The company should prominently disclose the disclaimers if any / terms & conditions applicable in the opportunity offers to ensure transparency in the business and build trust among everyone in the business.
As per The Consumer Protection (Direct Selling) Rules – 2021, A direct selling company is
required to follow the obligations as following are required.
The company should have;
a. Offering of all benefits by means of sales volume only. There should not be any
benefits in terms of the headcount of recruitments.
b. A 30-day cooling-off period is applicable.
c. Practice of TDS deduction as applicable by the Income Tax Act – 1962, followed by
subsequent amendments till the date.
d. Disclosure of all incomes for a direct seller with logical reasoning and providing tools
to check the business and income calculations with every possible detailing.
People of a Direct Selling company are the source of success, more people more successful.
And it is possible when all the above three elements of Profile, Products, and Pay plan are
perfect.
As per The Consumer Protection (Direct Selling) Rules – 2021, A direct selling company is
required to follow the obligations as following are followed.
A Direct Seller should;
a. Be an Indian citizen, having a legal age to enter a contract as per The Indian
Contracts Act – 1872, followed by all subsequent amendments till date.
b. Be followed the KYC procedure by submitting a valid document of Personal Identity
proof, Address Proof.
c. Have submitted a valid PAN
d. Have a valid contract with the Direct Selling entity as prescribed by the respective
company.
e. Not be convicted in any civil/criminal offenses.
f. Have a proper understanding of the offered opportunity, policies & procedures,
applicable laws and do’s & don’t before entering the business.
g. Not induce anyone by giving a false representation of this business.
Direct Selling business is a way of doing modern retailing and it is not any investment
business. One can benefit in direct selling only by way of doing business of retailing products through word of mouth, based on the volumes of sales by self & team developed under him.
There won’t be any quick or easy money. Earnings are truly depending upon the efforts you
make in the genuine direct selling business. Every individual should have a clear
understanding of this before involved in the direct selling business.
Mr. Kishore Varma
General Secretary, Federation of Direct selling Association