Central Consumer Protection Authority Issues 17 Notices to Non-Compliant Direct Selling Entities

The Central Consumer Protection Authority (CCPA) has issued notice to 17 entities that were found violating Consumer Protection (Direct Selling) Rules, 2021. Of these, 13 entities are currently under investigation. Reply from three of the entities is awaited. As a part of its commitment to uphold consumer rights, CCPA has intensified its focus on regulating direct selling activities and ensuring compliance with relevant legal framework. In this regard, the authority carefully examined the websites of these direct selling entities.

Direct selling is a method of marketing, distribution and sale of goods or services directly to consumers, away from fixed retail premises. This method relies on independent representatives of the entity, known as direct sellers, selling products directly to customers, typically through personal contact, online platforms, or home presentations. Ethical direct selling businesses operate transparently, providing quality products and fair compensation for their representatives without misleading consumers.

The Government of India notified the Consumer Protection (Direct Selling) Rules, 2021, establishing a comprehensive framework to regulate direct selling entities and protect consumer interests. These rules aim to promote transparency, accountability, and ethical practices within the direct selling industry, enabling consumers to make informed decisions. Additionally, the rules complement other regulatory frameworks, including the Consumer Protection (E-Commerce) Rules, 2020 and the Legal Metrology (Packaged Commodities) Rules, 2011 further strengthening consumer protection mechanisms.

However, some fraudulent entities misuse the direct selling model to promote illegal pyramid or money circulation schemes. These entities often make unrealistic promises of high commissions, foreign trips, entrepreurship, high returns and wealthy future, contingent on recruiting others, which violates consumer trust and established laws, thereby exposing consumers to fraudulent pyramid and money circulation schemes. Three major signs that a product is being used to disguise pyramid schemes are:

1. Large joining fee or investment.
2. Compensation paid for recruiting
3. No right of return, buy-back or cooling off period offered.

To make informed decisions and avoid falling victim to fraudulent schemes, consumers should:

1. Check Disclosures: Look for clear and complete disclosures about the company on its website, its products/services, as provided in the Consumer Protection (Direct Selling) Rules, 2021 which include Certificate of Incorporation, PAN, GST Registration, important licenses as per the goods and services offered, Certificate of Registration of Trademark.
2. Avoid Recruitment-Based Earnings: Beware of businesses that emphasize earnings primarily from recruiting others rather than selling actual products or services.
3. Understand Return and Refund Policies: Ensure the entity provides transparent return, refund, and grievance redressal mechanisms.
4. Read Contracts Carefully: Review all terms and conditions in detail, including any financial commitments.
5. Verify Direct Sellers: Interact only with direct sellers who possess valid identity cards, provide proper sales demonstrations, and refrain from making unsubstantiated claims and promises.

In a significant step to ensure compliance with the applicable legal framework, notices have been issued to the following 17 direct selling entities for alleged unfair trade practices, service deficiencies, and violations of the Consumer Protection (Direct Selling) Rules, 2021:

1. Vihaan Direct Selling (India) Pvt. Ltd. (a sub-franchise of 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.

Currently, 13 of these cases are under investigation, while replies from three companies are awaited. The action aims to address concerns about deceptive and exploitative practices in the direct selling industry and ensure adherence to the regulatory framework designed to safeguard consumer interests.

The Department urges all direct selling entities to adhere strictly to the regulatory framework and prioritize consumer welfare in their operations. The Government remains steadfast in its mission to create a fair, transparent, and consumer-friendly market ecosystem.

Consumers are advised to stay vigilant and report any suspected illegal activities or violations related to direct selling to the appropriate authorities. Together, we can ensure a safe and trustworthy marketplace for all.