Direct Selling Monitoring System

How Indian Government Regulates Every MLM Company

The Direct Selling Monitoring System is the backbone of how the Indian Government controls, supervises, and protects the direct selling industry. It exists to ensure that every direct selling company, every MLM company, and every direct seller operates in compliance with the Direct Selling Rules, 2021 and the Consumer Protection Act, 2019. Without this system, illegal pyramid schemes would easily hide behind the name of direct selling.

This monitoring framework gives legal power to government authorities to inspect, investigate, and take action against non-compliant MLM companies while protecting genuine direct selling companies and honest direct sellers.

Why the Direct Selling Monitoring System Was Created

Before 2021, thousands of fake MLM companies were operating without control. Many of them collected money from direct sellers in the name of joining fees, training fees, and starter kits. When these schemes collapsed, lakhs of people lost their savings. To stop this, the government created a structured Direct Selling Monitoring System so that every direct selling company and MLM company would be accountable to the law.

The system ensures that a direct selling company sells real products, follows consumer protection laws, and does not run a pyramid-style recruitment model.

Three Levels of Monitoring Authorities

The Direct Selling Monitoring System works at three levels: Central, State, and District.

At the Central level, the Department of Consumer Affairs and CCPA (Central Consumer Protection Authority) supervise all direct selling companies and MLM companies across India.

At the State level, each state government appoints a State Direct Selling Monitoring Authority to register, review, and regulate every direct selling company operating in that state.

At the District level, local authorities receive complaints from direct sellers and consumers and take immediate action if any MLM company is found violating the law.

This three-layer system ensures that no illegal MLM company can hide behind location or scale.

What Direct Selling Companies Must Submit

Every direct selling company and MLM company must submit key information to the State Monitoring Authority, including:

• Company registration details
• Office address and directors
• List of products
• Compensation plan
• Refund and buy-back policies
• Grievance officer details

This allows the government to examine whether the direct selling company is legal or operating like a pyramid scheme.

How Complaints Are Handled

If a direct seller or customer faces a problem — such as non-payment, forced purchases, or fake promises — they can file a complaint with the District or State Direct Selling Monitoring Authority. These authorities have the power to call the MLM company, demand documents, freeze accounts, and even recommend criminal action if violations are found.

This system gives every direct seller real legal protection, not just company promises.

Why This System Is Dangerous for Non-Compliant MLM Companies

Most MLM companies get caught not through raids but through complaints. Once a complaint is filed, the monitoring authority checks whether the direct selling company is registered, compliant, and legally structured. If the compensation plan or joining system is illegal, the MLM company can be shut down regardless of how large it is. This is why legal compliance is no longer optional.