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.