Consumer Protection Direct Selling Rules 2021, notified under the Consumer Protection Act, 2019, have brought clarity and uniformity to the Indian Direct Selling Industry. One of the most important aspects of these Rules is the Definitions section, which lays the legal foundation for understanding rights, obligations, and regulatory compliance.
At Gavel Direct Selling Law Firm, we are recognized as India’s first dedicated Direct Selling Law Firm, helping companies, entrepreneurs, and stakeholders interpret these definitions correctly and stay compliant with the law.
Direct Selling Rules 2021 Important Definitions
1. Act
Refers to the Consumer Protection Act, 2019 (35 of 2019), the foundation for these Direct Selling Rules 2021.
2. Cooling-Off Period
A time period where a participant can cancel their agreement without penalty. Protects sellers/consumers from being trapped in unfair contracts.
3. Direct Seller
A Direct Seller is a person whom a Direct Selling Entity authorizes through a written contract to sell goods or services.
4. Direct Selling Company
A Direct Selling Entity is the principal company that sells or offers goods/services through direct sellers. Indian law does not recognize entities running Pyramid or Money Circulation Schemes as DSEs.
5. Money Circulation Scheme
The Prize Chits and Money Circulation Schemes (Banning) Act, 1978 defines such schemes. These schemes operate mainly on recruitment and remain illegal in India.
6. Mis-Selling
A seller commits Mis-Selling when they misrepresent products/services, hide information, or exaggerate claims to close a sale.
7. Prospect
A Prospect is a person who receives an offer to join a Direct Selling Entity.
8. Pyramid Scheme
A Pyramid Scheme creates a multi-layered network of subscribers where older members earn money from enrolling new ones, not from selling genuine products. Such schemes are banned under Indian law.
9. Saleable Goods/Services
Saleable goods are unused, valid, marketable products that have not expired, are not seasonal or discontinued, and remain fit for resale.
10. Sensitive Personal Data
Section 43A of the Information Technology Act, 2000 defines Sensitive Personal Data. This includes personal, biometric, and financial information.
11. State
Includes Union Territories for the purpose of these Direct Selling Rules 2021.
Why These Definitions Matter for Direct Selling Companies?
- ✅ Helps ensure legal compliance
- ✅ Protects consumers against frauds and mis-selling
- ✅ Shields legitimate Direct Selling Entities from being confused with illegal MLM/Pyramid schemes
- ✅ Builds transparency and trust
Gavel Direct Selling Law Firm Advantage:
As India’s First Direct Selling Law Firm, Gavel Law Firm helps companies interpret these rules, draft legally sound contracts, ensure compliance with “saleable goods” requirements, safeguard sensitive data, and protect against pyramid/money circulation allegations.
FAQs on Direct Selling Rules, 2021 Definitions
Q1. What is the Cooling-Off Period under Direct Selling Rules, 2021?
It is the time given to participants to cancel their agreement without penalty or breach of contract.
Q2. Who is considered a Direct Seller under the Rules?
A Direct Seller is someone legally authorized by a Direct Selling Entity through a written enforceable contract.
Q3. What is a Direct Selling Entity?
It is the principal company selling goods/services through direct sellers. Entities engaged in pyramid or money circulation schemes are excluded.
Q4. How is a Pyramid Scheme different from Direct Selling?
Direct Selling focuses on genuine product sales. Pyramid Schemes rely on recruitment for income, which is illegal.
Q5. What is Mis-Selling in Direct Selling?
Misrepresentation of product/service, hiding important details, or making false claims to complete a sale.
Q6. What are Saleable Goods as per Direct Selling Rules?
Goods that are unused, marketable, valid, and not expired, seasonal, or discontinued.
Q7. Who is a Prospect in Direct Selling?
A Prospect is a person offered the opportunity to join a Direct Selling business before enrollment.
Q8. What is Sensitive Personal Data in Direct Selling business?
It includes financial details, health records, biometric data, or any personal information covered under IT Act, 2000.
Q9. Are Money Circulation Schemes legal under Direct Selling Rules?
No. They are strictly banned under the Prize Chits and Money Circulation Schemes (Banning) Act, 1978.
Q10. Do these Rules apply only to States or also to Union Territories?
They apply across India, and State includes Union Territories.
Contact Us 7011520061
YouTube Page – Advocate Priyanka Sharma – YouTube