CCPA Cracks Down on Violations of Direct Selling Rules, 2021: 17 Entities Under Scrutiny

Direct selling is a method of marketing, distributing, and selling goods or services directly to consumers outside traditional retail premises.

The Central Consumer Protection Authority (CCPA) has intensified its efforts to ensure compliance with the Consumer Protection (Direct Selling) Rules, 2021, issuing notices to 17 direct selling entities for alleged violations. Of these, 13 are currently under investigation, while replies from three entities are awaited. This move is part of the CCPA's commitment to safeguarding consumer rights and regulating the direct selling sector.

Direct Selling and Its Regulatory Framework

Direct selling is a method of marketing, distributing, and selling goods or services directly to consumers outside traditional retail premises. This business model depends on independent representatives, known as direct sellers, who engage with customers through personal interactions, online platforms, or home presentations. While ethical direct selling companies provide quality products and fair compensation, fraudulent entities misuse the model to perpetrate pyramid schemes, exploiting consumers and undermining trust.

To curb such malpractices, the Consumer Protection (Direct Selling) Rules, 2021 were introduced by the Government of India, creating a robust legal framework to regulate the direct selling industry. These rules aim to promote transparency, ethical practices, and accountability. They complement other legal frameworks like the Consumer Protection (E-Commerce) Rules, 2020, and the Legal Metrology (Packaged Commodities) Rules, 2011, further bolstering consumer protection mechanisms.

Pyramid Schemes: A Threat to Consumer Trust

Fraudulent entities often disguise pyramid schemes as legitimate direct selling businesses, enticing individuals with false promises of wealth, high commissions, and luxury rewards. Key indicators of pyramid schemes include:

• High entry fees or investments to join.
• Earnings primarily through recruitment rather than product sales.
• Lack of transparent return, refund, or cooling-off policies.

Guidelines for Consumers

To avoid falling victim to deceptive practices, consumers should remain vigilant and follow these steps:

1. Check Company Disclosures: Verify company credentials like Certificate of Incorporation, PAN, GST registration, and licenses as required under the Direct Selling Rules.
2. Avoid Recruitment-Based Schemes: Be cautious of businesses that prioritize recruitment over actual sales.
3. Understand Return Policies: Confirm the availability of return, refund, and grievance redressal mechanisms.
4. Read Contracts Thoroughly: Review terms and conditions carefully before making financial commitments.
5. Verify Direct Sellers: Interact only with authorized direct sellers carrying valid identity cards and offering proper sales demonstrations.

CCPA’s Action Against Violators

Notices were issued to 17 entities found allegedly engaging in unfair trade practices and violations of the Consumer Protection (Direct Selling) Rules, 2021. The companies include:

1. Vihaan Direct Selling (India) Pvt. Ltd. (associated with QNet Group, Hong Kong)
2. Triptales Pvt. Ltd.
3. Oriens Global Marketing Pvt. Ltd.
4. Zennesa Wellness Pvt. Ltd.
5. Orgolife Solutions Pvt. Ltd.
6. Oriflame India Pvt. Ltd.
7. Juncture Marketing Pvt. Ltd.
8. Wolte Marketing Pvt. Ltd.
9. Preet Life Care Pvt. Ltd.
10. Enroots Horizon Pvt. Ltd.
11. E Biotorium Network Pvt. Ltd.
12. Meghdoot Marketing Pvt. Ltd.
13. Suii Dhaaga Lifestyle Pvt. Ltd.
14. Winmarg Business Pvt. Ltd.
15. Ayusratna Natural Herbal Pvt. Ltd.
16. Biothon Lifecare Pvt. Ltd.
17. Okflip India Pvt. Ltd.

The CCPA is investigating 13 cases, while replies from three companies are awaited. The authority’s stringent action aims to eliminate deceptive practices in the direct selling industry and ensure adherence to ethical and legal standards.

Future Steps and Consumer Awareness

The government has urged all direct selling entities to strictly comply with the regulations, emphasizing consumer welfare and ethical business practices. Initiatives such as awareness campaigns and closer monitoring of business activities are expected to deter fraudulent practices.

Consumers are encouraged to report suspected illegal activities or violations related to direct selling to the relevant authorities. Together, these efforts aim to create a transparent, fair, and trustworthy marketplace for all stakeholders.