Centre urges states to monitor, bring transparency in direct selling industry
NEW DELHI: In a move to support and regulate the direct selling industry in India, the central government has called upon the states to establish mechanisms for monitoring the activities of the industry. This initiative aims to distinguish legitimate players from those involved in pyramid and money circulation schemes, as per government sources.
“The introduction of the Consumer Protection Act 2019, which included a clear definition of direct selling, helped increase investor confidence. In addition, the Consumer Protection (Direct Selling) Rules, issued by the central government in December 2021, included a provision for state governments to establish a monitoring committee,” a highly-placed source said. These panels will oversee the operations of direct sellers and direct selling companies. As per him, some states including Kerala, Andhra Pradesh, Madhya Pradesh, Himachal Pradesh and Punjab have set up panels to strengthen the regulatory framework within the direct selling industry.
In August, the Kerala government announced that it would develop guidelines to shape the industry for the benefit of companies, consumers, workers, and the government. India has seen significant growth in the direct-selling industry, with Amway, Vestige, Oriflame, Tupperware, Avon, Herbalife and Mi Lifestyle being the top direct-selling companies.
As per the Indian Direct Selling Association (IDSA) annual survey, the direct selling industry was valued at Rs 19,020 crore in FY22, growing at about 5.3% as against the previous year.
Highlighting the government's intention to safeguard both reputable direct-selling companies and consumers from fraudulent activities, a government source stated, "We acknowledge the good practices in the direct selling sector and there are many legitimate and highly respected players in the segment. The government wants to protect such players and consumers from those engaged in Ponzi schemes. So, we have asked the top states to put in place a monitoring mechanism on a priority basis."
To support this endeavour, the Ministry of Consumer Affairs modified the Consumer Protection (Direct Selling) Rules, 2021, through a notification dated June 21, 2023. In one of the changes, the definition of "network of sellers" was clarified as a network formed by a direct selling entity to sell goods or services and receive consideration solely from such sales. Meanwhile, for the words, "through direct sellers", the words "directly through a network of sellers were substituted."
The industry has maintained a compound annual growth rate (CAGR) of 13% between 2017-18 and 2021-22.
"The government seeks to protect consumers and promote transparency in the direct selling sector. The monitoring mechanisms aim to ensure the continued growth and legitimacy of the industry while safeguarding consumer interests," a top government source stated.