What Are the Direct Selling Rules, 2021?
The Consumer Protection (Direct Selling) Rules, 2021 were introduced to regulate direct selling companies and protect Indian consumers from fraud, misleading claims, and pyramid schemes.
These rules apply to:
- All direct selling mlm entities (including foreign Direct Selling MLM companies selling in India)
- All individual direct sellers
- Both online and offline direct selling MLM
Objective of the Rules
- Ensure transparency in direct selling MLM
- Ban pyramid schemes and money circulation schemes
- Protect the interests of consumers and genuine sellers
- Establish a legal compliance framework
Key Compliance Requirements for Direct Selling MLM Companies (Explained Simply)
1. No Pyramid or Money Circulation Schemes
These are completely illegal. No direct selling MLM company or Direct seller can promote or take part in such models.
2. Direct Selling MLM Company Must Be Registered
The company must:
- Be legally incorporated in India (like Pvt. Ltd., LLP)
- Have a registered office and GST number
- Appoint a Nodal Officer to ensure legal compliance
3. Mandatory Website Disclosures
The Direct Selling MLM company’s website must show:
- Company name, address, CIN, PAN, GST
- Products/services and price details
- Return/refund/exchange policy
- Contact details of Grievance Officer
- Seller details and complaint tracking system
4. Rules for Direct Sellers
Every seller must:
- Sign a Direct Seller agreement with the Direct Selling MLM company
- Carry a valid ID card issued by the Direct Selling MLM company
- Provide correct information to customers
- Give proper invoices
- Avoid false promises or unethical marketing
5. Grievance Redressal System
Each company must:
- Appoint a Grievance Officer
- Acknowledge complaints within 48 hours
- Resolve issues within 30 days
- Publish monthly complaint records online
6. State-Level Monitoring Authority
Every state will:
- Appoint an official to monitor direct selling
- Take action against fraud and illegal schemes
Penalties for Non-Compliance
Failure to comply can lead to:
- Legal action under the Consumer Protection Act, 2019
- Blacklisting of the Direct Selling MLM company
- Cancellation of business operations
- Seizure of assets if involved in fraud
Why These Rules Matter
- These rules protect genuine sellers and consumers
- They eliminate fake MLM and pyramid scams
- They give legal recognition to ethical direct selling
- They bring accountability to the entire industry
Legal Support from Gavel Law Firm
Gavel Law Firm is India’s expert in Direct Selling Law. We help clients with:
Entity setup and registration
Compliance with the 2021 Rules
Drafting seller agreements and compensation plans
Website legal disclosures
Grievance system and state-level representation
Contact us today for a compliance check or legal consultation. Visit: Contact us – gavellawfirm.in