DS Rules - Compliance Guidance

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The Consumer Protection (Direct Selling) Rules 2021, issued by the Ministry of Consumer Affairs, Food & Public Distribution, Govt. of India during Dec 2021, is an end of identity crisis for the Noble business of Direct Selling in India.

A set of rules, policies & procedures are sufficiently framed under provisions of The Consumer Act 2019, providing a balanced roles & responsibilities for Consumers, Distributors and the Direct Selling companies in order to conduct a legitimate business.

For example,

The Consumer Protection ( Direct Selling) Rules 2021 – Key Clauses applicable for Direct Selling Companies in India.

Clause 4. Mandatory maintenance of records.

Every direct selling entity shall maintain at its registered office, either manually or electronically, all such documents as are required under any law for the time being in force, including the following documents or records, as may be applicable, namely:–

  1. Certificate of Incorporation.
  2. Memorandum of Association and Articles of Association.
  3. Permanent Account Number and Tax Deduction and Collection Account Number.
  4. Goods and Services Tax registration;
  5. Goods and Services Tax Returns.
  6. Income Tax Returns.
  7. Balance Sheet, Audit Report and such other relevant reports
  8. Register of direct sellers.
  9. Certificate of Importer-Exporter code (in case of imported goods)
  10. License issued under the Food Safety and Standards Authority of India Act, 2006 (34 of 2006) for the purposes of manufacture or sale of food items.
  11. License and Registration Certificate issued under the Drugs and Cosmetics Act, 1940 (23 of 1940) for the purposes of manufacture or sale of drugs, including Ayurvedic, Siddha and Unani drugs and Homoeopathic Medicines.
  12. Certificate of Registration of Trademark.

Clause 5. Obligations of direct selling entity.

  1. Every direct selling entity shall :-
    1. If a company, be incorporated under the Companies Act, 2013 (18 of 2013) or if a partnership firm, be registered under the Partnership Act, 1932 (9 of 1932) or if a limited liability partnership, be registered under the Limited Liability Partnership Act, 2008 (6 of 2009);
    2. Have a minimum of one physical location as its registered office within India.
    3. Make self-declaration to the effect that it has complied with the provisions of these rules and is not involved in any Pyramid Scheme or money circulation scheme.
    4. Maintain proper and updated website with all relevant details of that entity, including the documents or records specified in clause 4, the self-declaration specified in clause (c), contact information, which is current and updated, details of its nodal officer, grievance redressal officer, its management, products, product information, price and grievance redressal mechanism for consumers;
    5. Own, hold or be the licensee of a trademark, service mark or any other identification mark which identifies that entity with the goods or services to be sold or supplied, but shall not give commissions, bonus or incentives on sale of goods or services of which it is not the owner, holder or licensee of trademark, service mark or other identification marks.
    6. Obtain all applicable trade registrations and licenses, including Permanent Account Number and Goods and Services Tax Registration.
    7. Get all information provided by it on its website duly certified by a Company Secretary. Explanation:- For the purposes of this clause, "Company Secretary" means a person as defined in clause (c) of sub-section (1) of section 2 of the Company Secretaries Act, 1980 (56 of 1980);
    8. Have a prior written contract with its direct sellers in order to authorize them to sell or offer to sell its goods or services, and the terms of such agreement shall be just, fair and equitable.
    9. Ensure that all its direct sellers have verified identities and physical addresses and issue identity cards and documents only to such direct sellers.
    10. Create adequate safeguards to ensure that goods and services offered by its direct sellers conform to applicable laws; be liable for the grievances arising out of the sale of goods or services by its direct sellers.
  2. Every direct selling entity shall provide the following information on its website in a clear and accessible manner, which shall be displayed prominently to its users, namely:–
    1. Registered name of the direct selling entity.
    2. Registered address of the direct selling entity and of its branches.
    3. Contact details, including e-mail address, fax, land line and mobile numbers of its customer care and grievance redressal officers.
    4. A ticket number for each complaint lodged through which the complainant can track the status of the complaint.
    5. Information relating to return, refund, exchange, warranty and guarantee, delivery and shipment, modes of payment, grievance redressal mechanism and such other information which may be required by the consumers to make informed decisions.
    6. Information on available payment methods, the security of those payment methods, the fees, or charges payable by users, the procedure to cancel regular payments under those methods, charge-back options, if any, and the contact information of the relevant payment service provider.
    7. Total price of any goods or service in single figure, along with its break-up price showing all compulsory and voluntary charges, including delivery charges, postage and handling charges, conveyance charges and the applicable tax.
    8. Provide correct and complete information at pre-purchase stage to enable buyers to make informed purchase decisions, and such information shall, in addition to the mandatory declarations to be provided under the Legal Metrology (Packaged Commodities) Rules, 2011, contain the following information,
      1. The name of purchaser and seller.
      2. Description of goods or services.
      3. Quantity of goods or services.
      4. The estimated delivery date of goods or services.
      5. The process of refund.
      6. Warranty of the goods.
      7. Exchange or replacement of goods in case of it being defective.
      8. All contractual information required to be disclosed by or under any law for the time being in force.
  3. No direct selling entity shall adopt any unfair trade practice during its business or otherwise, and shall abide by the requirements specified in any law for the time being in force
  4. All products of a direct selling entity shall comply with the declarations to be made under the Legal Metrology Act, 2009 (1 of 2010).
  5. Every direct selling entity shall store sensitive personal data within the jurisdiction of India, in accordance with the applicable law for the time being in force and shall take appropriate steps to ensure protection of such data provided by a consumer and also ensure adequate safeguards to prevent access or misuse of such data by any unauthorized person.
  6. Every direct selling entity shall, having regard to the number of grievances ordinarily received by such entity from persons in India, establish an adequate grievance redressal mechanism and appoint one or more grievance redressal officers for redressal of consumers' grievances and display the current and updated name, contact details including telephone number, email address and designation of such officer on its website, and the details of its website shall also be prominently printed on the product information sheet or pamphlet.
  7. Every direct selling entity shall ensure that the grievance redressal officer referred to in sub-rule (6) acknowledges the receipt of any consumer complaint within forty-eight working hours of receipt of such complaint and redresses the complaint normally within a period of one month from the date of receipt of the complaint and in case of delay of more than a month, reasons for the delay, and the actions taken on the complaint, are informed to the complainant in writing.
  8. Every direct selling entity shall appoint a nodal officer who shall be responsible for ensuring compliance with the provisions of the Act and the rules made thereunder, and to ensure compliance with any order, or requisition, made in accordance with the provisions of any other law for the time being in force or the rules made thereunder.
  9. Every direct selling entity shall establish a mechanism for filing of complaints by consumers through its offices or branches or direct sellers, either in person or through post, telephone, e-mail or website.
  10. Every direct selling entity shall maintain a record of all its direct sellers, including their identity proof, address proof, e-mail and such other contact information.
  11. Every direct selling entity shall, on the request in writing made by a consumer after the purchase of any goods or services, provide him with the information regarding any direct seller from whom such consumer has made a purchase, and such information shall include the name, address, e-mail, contact number and any other information which is necessary for making communication with such direct seller for effective dispute resolution.
  12. Every direct selling entity shall ensure that the advertisements for marketing of goods or services are consistent with the actual characteristics, access and usage conditions of such goods or services.
  13. No direct selling entity shall, directly or indirectly, falsely represent itself as a consumer and post reviews about its goods or services or misrepresent the quality or features of any of its goods or services.
  14. A direct selling entity which explicitly or implicitly vouches for the authenticity of the goods or services sold, or guarantees that such goods or services are authentic, shall bear the liability in any action related to the authenticity of such goods or services.
  15. Notwithstanding the distribution system adopted by it, a direct selling entity shall monitor the practices adopted by its direct sellers and ensure compliance with these rules by means of legally binding contract with such direct sellers
  16. Every direct selling entity shall maintain a record of relevant information allowing for the identification of all direct sellers who have been delisted by the direct selling entity and such list shall be publicly shared on its website.
  17. Every direct selling entity shall become a partner in the convergence process of the National Consumer Helpline of the Central Government. Here's the link regarding this https://consumerhelpline.gov.in/register-as-brand.php . and you can download the form from here Company Registration Form

SmartSoft, with a deep level understanding of these policies & procedures and provisions, we are offering to provide consultancy services to Direct Selling companies to follow the Rules appropriately.


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