2016 Direct Selling Guidelines

SCC Online Web Edition, © 2022 EBC Publishing Pvt. Ltd.
Page 1 Monday, November 14, 2022

Printed For: Kashish Jumani, National Law University, Dwarka
SCC Online Web Edition: http://www.scconline.com
© 2022 EBC Publishing Pvt. Ltd., Lucknow.
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Direct Selling Guidelines, 20161

[26th October, 2016]
The Government constituted on consisting an Inter-Ministerial Committee

representatives from Ministry of Finance, the Department of Industrial Policy and
Promotion, Department of Legal Affairs, Department of Information Technology and
Ministry of Corporate Affairs, besides representatives of State Governments of Delhi,
Andhra Pradesh and Kerala to look into the matters concerning the direct selling
industry.
Based on the deliberations of the Inter-Ministerial Committee and consultations
with the Stakeholders, the model guidelines for States & Union Territories, on direct
selling, have been formulated for protecting the legitimate rights and interests of
Industry and Consumers. It is envisaged in the guidelines that the State Governments
will set up a mechanism to monitor/supervise the activities of Direct Sellers, Direct
Selling Entities regarding compliance of the guidelines for Direct Selling.
Any direct selling entity, conducting direct selling activities, shall submit an
undertaking to the Department of Consumer Affairs by 9th December, 2016 stating
that it is in compliance with these guidelines and shall also provide details of its
incorporation. Being enforcement agencies, the State Governments & Union Territories
may take necessary action to implement these guidelines. The Guidelines are available
on the website www.Consumeraffairs.nic.in.
Enclosure: Model Guidelines on Direct Selling English and Hindi
With proforma for declaration Undertaking are attached.
Advisory to State Governments/Union Territories:
Model Framework for Guidelines on Direct Selling
These guidelines, may be called the Direct Selling Guidelines 2016. These are
issued as guiding principles for State Governments to consider regulating the business
of “Direct Selling” and Multi-Level Marketing (MLM) and strengthen the existing
regulatory mechanism on Direct Selling and MLM, for preventing fraud and protecting
the legitimate rights and interests of consumers.
Clause 1. Definitions.—In these Guidelines unless and otherwise required:
1. “Act” means the Consumer Protection Act, 1986 (68 of 1986);
2. “Consumer” shall have the same meaning as provided under the Consumer
Protection Act, 1986;
3. “Prospect” means a person to whom an offer or a proposal is made by the
Direct Seller to join a Direct Selling opportunity;
4. “Direct Seller” means a person appointed or authorized, directly or indirectly,
by a Direct Selling Entity through a legally enforceable written contract to
undertake direct selling business on principal to principal basis.
5. “Network of Direct Selling” means a network of direct sellers at different levels
of distribution, who may recruit or introduce or sponsor further levels of direct
sellers, who they then support:
Explanation: “network of direct selling” shall mean any system of
distribution or marketing adopted by a direct selling entity to undertake direct
selling business and shall include the multi-level marketing method of
distribution.
6. “Direct Selling” means marketing, distribution and sale of goods or providing
of services as a part of network of Direct Selling other than under a pyramid
scheme,
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Provided that such sale of goods or services occurs otherwise than through
a “permanent retail location” to the consumers, generally in their houses or at
their workplace or through explanation and demonstration of such goods and
services at a particular place
7. “Direct Selling Entity”, means an entity, not being engaged in a pyramid
scheme, which sells or offers to sell goods or services through a direct seller.
Provided that “Direct Selling Entity” does not include any entity or business
notified otherwise by the Government for the said purpose from time to time.
8. “Goods” means goods as defined in the Sale of Goods Act, 1930 and “Service”
means service as defined in the Consumer Protection Act, 1986;
9. “Saleable” shall mean, with respect to goods and/or services, unused and
marketable, which has not expired, and which is not seasonal, discontinued or
special promotion goods and/or services;
10. “Cooling-off Period” means the duration of time counted from the date when
the direct seller and the direct selling entity enter into an agreement under
Clause 4 and ending with date on which the contract is to be performed and
within which the direct seller may repudiate the agreement without being
subject to penalty for breach of contract;
11. “Pyramid Scheme” means:
A multi layered network of subscribers to a scheme formed by subscribers
enrolling one or more subscribers in order to receive any benefit, directly or
indirectly, as a result of enrolment, action or performance of additional
subscribers to the scheme. The subscribers enrolling further subscriber(s)
occupy higher position and the enrolled subscriber(s) lower position, thus,
with successive enrolments, they form multi-layered network of subscribers.
Provided that the above definition of a “Pyramid Scheme” shall not apply to
a multi layered network of subscribers to a scheme formed by a Direct Selling
Entity, which consists of subscribers enrolling one or more subscribers in order
to receive any benefit, directly or indirectly, where the benefit is as a result of
sale of goods or services by subscribers and the scheme/financial arrangement
complies with all of the following:
a) It has no provision that a Direct Seller will receive remuneration or
incentives for the recruitment/enrolment of new participants.
b) It does not require a participant to purchase goods or services:
i. for an amount that exceeds an amount for which such goods or services
can be expected to be sold or resold to consumers;
ii. for a quantity of goods or services that exceeds an amount that can be
expected to be consumed by, or sold or resold to consumers;
c) It does not require a participant to pay any entry/registration fee, cost of
sales demonstration equipment and materials or other fees relating to
participation;
d) It provides a participant with a written contract describing the “material
terms” of participation;
e) It allows or provides for a participant a reasonable cooling-off period to
participate or cancel participation in the scheme and receive a refund of any
consideration given to participate in the operations;
f) It allows or provides for a buy-back or repurchase policy for “currently
marketable” goods or services sold to the participant at the request of the
participant at reasonable terms;
g) It establishes a grievance redressal mechanism for consumers, more
particularly described in Clause 7 herein.
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Explanation 1—For the purposes of this proviso the term “material terms” shall
means buy-back or repurchase policy, cooling-off period, warranty and refund
policy
12. “Money Circulation Scheme” has the same meaning as defined under the
Prize Chits and Money Circulation Schemes (Banning) Act, 1978.
13. “Remuneration System” means the system followed by the direct selling
entity to compensate the direct seller which illustrates the mode of sharing of
incentives, profits and commission, including financial and non-financial
benefits, paid by the direct selling entity to the direct sellers, on a monthly or
periodic or yearly basis or both, as the case may be. This system, for every
Direct Selling entity, shall:
a) Have no provision that a direct seller will receive remuneration from the
recruitment to participate in such direct selling;
b) ensure that direct sellers shall receive remuneration derived from the sale
of goods or services;
c) clearly disclose the method of calculation of remuneration.
14. “State” includes a Union territory.
Clause 2. Conditions for the setting up of Direct Selling business.—Every
Direct selling entity intending to carry out direct selling business subsequent to the
publication of the notification in the Gazette, shall within 90 days comply with the
following set of conditions for the conduct of direct selling business:
It shall
1. be a registered legal entity under the laws of India.
2. Provide a mandatory orientation session to all prospective direct sellers
providing fair and accurate information on all aspects of the direct selling
operation, including but not limited to the remuneration system and expected
remuneration for newly recruited direct sellers;
3. Provide accurate and complete information to prospective and existing direct
sellers concerning the reasonable amount of remuneration opportunity, and
related rights and obligations;
4. Pay all dues and make withholdings from direct sellers in a commercially
reasonable manner;
5. Notify and provide a full refund or buy-back guarantee to every direct seller on
reasonable commercial terms which can be exercised within a period of 30
days, from the date of the distribution of the goods or services to the direct
seller;
6. Notify and provide to every direct seller a cooling-off period which entitles
such direct seller to return any goods/ services purchased by the direct seller
during the cooling-off period;
7. The promoter or key management personnel should not have been convicted
of any criminal offence punishable with imprisonment in last 5 years by any
Court of competent jurisdiction;
8. It shall have an office with identified jurisdiction of its operation in the State
to enable the consumers and direct seller to acquaint themselves with price of
products, return or replacement of products and efficient delivery of goods and
services, and post-sale redressal of grievances;
Clause 3: Conditions for conduct of Direct Selling Business.—Every Direct
Selling entity shall comply with the following conditions:
1. It shall be the owner, holder, licensee of a trademark, service mark or any
other identification mark which identifies the entity with the goods to be sold
or supplied or services to be rendered;
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2. It shall issue proper identity document(s) to its Direct Sellers;

3. It shall maintain proper records either manual or electronic of their business
dealings, with complete details of their goods, services, terms of contract,
price, income plan, details of direct sellers, including but not limited to
enrolment, termination, active status, earning etc;
a) Every Direct Selling entity shall maintain a “Register of Direct Sellers”
wherein relevant details of each enrolled Direct Seller shall be updated and
maintained;
b) The details of Direct Sellers shall include and not be limited to verified
proof of address, proof of identity and PAN;
4. It shall maintain proper and updated website with all relevant details of the
entity, contact information, its management, products, product information,
product quality certificate, price, complete income plan, terms of contract with
direct seller and complaint redressal mechanism for direct sellers and
consumers. The website should have space for registering consumer
complaints and should ensure that grievances are addressed within 45 days of
making such complaints;
5. It shall provide to all direct sellers their periodic account/information
concerning, as applicable, sales, purchases, details of earnings, commissions,
bonus and other relevant data, in accordance with agreement with the direct
sellers. All financial dues shall be paid and any withholding made in a
commercially reasonable manner;
6. It shall monitor the value of the purchases of all its Direct Sellers/Distributors
on a monthly basis and once the purchase value crosses the VAT threshold; it
must intimate the Direct seller/Distributor to pay the VAT;
7. A Direct Selling entity shall not:
a) Use misleading, deceptive or unfair recruiting practices, including
misrepresentation of actual or potential sales or earnings, in their
interaction with prospective or existing direct sellers;
b) Make any factual representation to a prospective direct seller that cannot
be verified or make any promise that cannot be fulfilled;
c) Present any advantages of direct selling to any prospective direct seller in a
false or deceptive manner;
d) Make or cause, or permit to be made, any representation relating to its
direct selling business, including remuneration system and agreement
between itself and the direct seller, or to the goods or services being sold
by itself or by the direct seller which is false or misleading;
e) Engage in, or cause or permit, any conduct that is misleading or likely to
mislead with regard to any material particulars relating to its direct selling
business, including remuneration system and agreement between itself and
the direct seller, or to the goods or services being sold by itself or by the
direct seller;
f) Use, or cause or permit to be used, fraud, coercion, harassment, or
unconscionable or unlawful means in promoting its direct selling practice,
including remuneration system and agreement between itself and the
direct seller, or to the goods or services being sold by itself or by the direct
seller;
g) Require its direct sellers to provide any benefit, including entry fees and
renewal fees or to purchase any sales demonstration equipment or material
in order to participate in its direct selling operations;
h) Provide any benefit to any person for the introduction or recruitment of one
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or more persons as direct sellers;

i) Require the direct sellers to pay any money by way of minimum monthly
subscription or renewal charges;
8. Notwithstanding the distribution system adopted by a direct selling entity, the
Direct Selling Entity shall be responsible for compliance of these Guidelines by
any member of its network of direct selling, whether such member is
appointed directly or indirectly by the Direct Selling Entity.
Clause 4: Conditions for Direct Selling contract between Direct
Seller/Distributor and Direct Selling Entity:
1. Every Direct Selling entity shall execute a contract agreement, whether
directly or indirectly, with Direct Sellers before enrolment:
a) The Agreement shall be provided in a manner consistent with Section 10 of
the Indian Contract Act, 1872;
b) In addition to the rights and obligations of parties to this agreement under
these guidelines or any other law in force, parties shall have rights and
obligations that are coextensive with rights and obligations of parties under
the Indian Contract Act, 1872;
2. The agreement shall be made in writing, describing the material terms of
participation and shall:
a) Not compel or induce the direct seller to purchase goods or services in an
amount that exceeds an amount that can be expected to be sold to
consumers within a reasonable period of time;
b) Allow or provide the direct seller a reasonable cooling-off period in which to
cancel participation and receive a refund for goods or services purchased;
c) Allow for the termination of contract, with reasonable notice, in such
instances and on such terms where a direct seller is found to have made no
sales of goods or services for a period of up to two years since the contract
was entered into, or since the date of the last sale made by the direct
seller;
d) Allow or provide for a buy-back or repurchase policy for currently
marketable goods or services sold to the direct seller at the said direct
seller's request at reasonable terms
Clause 5: Certain obligations of Direct Sellers
1. Direct Seller engaged in direct selling should carry their identity card and not
visit the customer's premises without prior appointment/approval;
2. At the initiation of a sales representation, without request, truthfully and
clearly identify themselves, the identity of the direct selling entity, the nature
of the goods or services sold and the purpose of the solicitation to the
prospective consumer;
3. Offer a prospective consumer accurate and complete explanations and
demonstrations of goods and services, prices, credit terms, terms of payment,
return policies, terms of guarantee, after-sales service;
4. Provide the following information to the prospect/consumers at the time of
sale, namely:
a) Name, address, registration number or enrollment number, identity proof
and telephone number of the direct seller and details of direct selling
entity;
b) A description of the goods or services to be supplied;
c) Explain to the consumer about the goods return policy of the company in
the details before the transaction;
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d) The Order date, the total amount to be paid by the consumer along with
the bill and receipt;
e) Time and place for inspection of the sample and delivery of good;
f) Information of his/her rights to cancel the order and/or to return the
product in saleable condition and avail full refund on sums paid;
g) Details regarding the complaint redressal mechanism;
5. A direct seller shall keep proper book of accounts stating the details of the
products, price, tax and the quantity and such other details in respect of the
goods sold by him/her, in such form as per applicable law.
6. A direct seller shall not:
a) Use misleading, deceptive and/or unfair trade practices;
b) Use misleading, false, deceptive, and/or unfair recruiting practices,
including misrepresentation of actual or potential sales or earnings and
advantages of Direct Selling to any prospective direct seller, in their
interaction with prospective direct sellers;
c) Make any factual representation to a prospective direct seller that cannot be
verified or make any promise that cannot be fulfilled;
d) Present any advantages of Direct Selling to any prospective direct seller in
a false and/or a deceptive manner;
e) Knowingly make, omit, engage, or cause, or permit to be made, any
representation relating to the Direct Selling operation, including
remuneration system and agreement between the Direct Selling entity and
the direct seller, or the goods and/or services being sold by such direct
seller which is false and/or misleading;
f) Require or encourage direct sellers recruited by the first mentioned direct
seller to purchase goods and/or services in unreasonably large amounts;
g. Provide any literature and/or training material not restricted to collateral
issued by the Direct Selling entity, to a prospective and/or existing direct
sellers both within and outside the parent Direct Selling entity, which has
not been approved by the parent Direct Selling entity;
h) Require prospective or existing direct sellers to purchase any literature or
training materials or sales demonstration equipment.
Clause 6: Relationship between Direct Selling Entity and Direct Seller:
1.1 The relationship between Direct Selling entity and Direct Seller shall be
determined as per the written agreement between the parties which shall
contain the rights and obligations that are expressly provided as conditions for
the conduct of Direct Selling business as well as provide for the obligation of
the direct selling entity and the direct seller in terms of these guidelines;
1.2 All other rights and obligations shall be determined as per the express terms
of written agreement between a Direct Selling entity and Direct Seller;
2. The Direct Selling entity will be liable for grievances arising out of sale of
products, services or business opportunity by its Direct Sellers;
3. It will be the responsibility of the Direct Selling entity to monitor and control
the practices/methods adopted by the Direct Sellers;
Clause 7: Conduct for the Protection of Consumer:
1. Direct Sellers and Direct Selling Entity shall take appropriate steps to ensure
the protection of all private information provided by a consumer;
2. Direct Sellers and Direct Selling Entity shall be guided by the provision of the
Consumer Protection Act, 1986;
3. All complaints received over phone, email, website, post and walk-in should
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have a complaint number for tracing and tracking the complaint and record
time taken for redressal;
4. Every Direct Selling company shall constitute a Grievance Redressal
Committee whose composition, nature of responsibilities shall include but not
limited to:
a) The Grievance Redressal Committee shall consist of at least three officers of
the Direct Selling entity;
b) The Grievance Redressal Committee shall address complaints and inform
complainants of any action taken;
c) Complaints may be made by any member of the general public against a
Direct Seller of the company, an employee or any other officer of the entity;
d) All such grievances will be resolved directly by the Direct Selling Entity;
5. The direct selling entity shall provide information to the consumer upon
purchase which shall contain:
(a) the name of the purchaser and seller;
(b) the delivery date of goods or services;
(c) procedures for returning the goods; and
(d) warranty of the goods and exchange/replacement of goods in case of
defect. Provided that no Direct Seller shall, in pursuance of a sale, make
any claim that is not consistent with claims authorized by the Direct Selling
Entity.
6. Any person who sells or offers for sale, including on an e-commerce
platform /marketplace, any product or service of a Direct Selling Entity must
have prior written consent from the respective Direct Selling Entity in order to
undertake or solicit such sale or offer.
Clause 8: Prohibition of Pyramid Scheme & Money Circulation Scheme:
1. No person or entity shall promote a Pyramid Scheme, as defined in Clause 1
(11) or enroll any person to such scheme or participate in such arrangement
in any manner whatsoever in the garb of doing Direct Selling business.
2. No person or entity will participate in Money Circulation Scheme, as defined in
Clause 1(12) in the garb of Direct Selling of Business Opportunities.
Clause 9: Appointment of Monitoring Authority:
1. The Nodal department to deal with the issues related to Direct Selling will be
Department of Consumer Affairs at the Union and the respective State
Governments in the States;
2. The State Governments will also set up a mechanism to monitor/supervise the
activities of Direct Sellers, Direct Selling Entity regarding compliance of the
guidelines for Direct Selling;
3. Any direct selling entity conducting direct selling activities shall submit an
undertaking to the Department of Consumer Affairs, stating that it is in
compliance with these guidelines and shall also provide such details of its
incorporation and other business details as may be notified from time to time.
DECLARATION BY DIRECT SELLING ENTITIES/COMPANIES
PROFORMA PART − A
1 (i) Name of the Company (As Registered)
(ii) CIN No:
(iii) Name and address of Directors on Board
(Enclose details)
2 DETAILS OF REGISTRATION (WITH JURISDICTION)
(a) Address of Registered Office (Enclose copy of
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Registration Certificate):
(b) Email:
(c) Telephone Nos:
(d) Company Website:
(e) Details of other registrations (with
jurisdiction), if any ( Attach copy of
Registration Certificate)
(f) Type of Entity (Private, Public, Trust, Ltd.
Etc.)
3 HEAD OFFICE
(a) Address
(b) E-mail
(c) Details of Key Management Personnel as per
registration under the Companies Act:
(d) Details of Regional Offices:
(e) Nodal Officer for interacting with D/o
Consumer Affairs; (Name, designation, Tel No.,
e-mail, Fax, mobile No.)
4. Whether anyone from the Management was
convicted by any court in the past within the past 5
years (from the date of application). If so, the
details thereof;
5. Whether direct selling is of Products or services or
both?
6. Details of License(s), Trade Mark or Principal Brand
which indentifies the company:
7. i. Address/Telephone Nos./e-mails etc. of Customer
Care & Grievance Redress Cells (HQ & Branches);
ii. Details of Consumer Grievance Redress
Committee as per guidelines:
a. Member Name, Phone No and email:
b. Member Name, Phone No and email:
c. Member Name, Phone No and email:
PART B
(Direct Selling Business Details)
8. Details of Products/Services offered (Give link of Yes/No
websites)
9 Please confirm the following about your direct selling Yes/No
scheme:-(a) It has no provision that a Direct Seller will
receive remuneration or incentives for the
recruitment/enrolment of new participants and provide
that direct sellers will receive remuneration derived only
from the sale of goods or services.
(b) It does not require a participant to purchase goods or Yes/No
services: Yes/No
i. for an amount that exceeds an amount for which such Yes/No
goods or services can be expected to be sold or resold
to consumers;
ii. for a quantity of goods or services that exceeds an
amount that can be expected to be consumed by, or
sold or resold to consumers;
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(c) It does not require a participant to pay any Yes/No

entry/registration fee, cost of sales demonstration
equipment and materials or other fees relating to
participation;
(d) It provides a participant with a written contract Yes/No
describing the “material terms” of participation;
(e) It allows or provides for a participant a reasonable Yes/No
cooling-off period to participate or cancel participation in
the scheme and receive a refund of any consideration given
to participate in the operations;
(f) It allows or provides for a buy-back or repurchase
policy for “currently marketable” goods or services sold to
the participant at the request of the participant at
reasonable terms;
Note: 1. Give details in regard to the above in an
enclosure.
2. In case any of the answers in this para is ‘No’, please
provide full details with reasons in an enclosure.
10. (a) Whether proper identity document(s) to all the Direct Yes/No
Sellers are issued. Yes/No
(b) Whether you maintain “Register of Direct Sellers”
wherein relevant details of each enrolled Direct Seller is
updated and maintained with details including verifiable
proof of address, proof of identity and PAN as per the
Income Tax Act.
(c) What is the mechanism for payment of VAT? Give
details.
11. (a) The website is proper and updated regularly with all Yes/No
relevant details, contact information, details pertaining to
management, products, product information and complaint
redress mechanism for direct sellers and consumers. Yes/No
(b) There are arrangements for registering consumer
complaints online or otherwise and grievances are
resolved within 45 days of date of making such
complaints. Details to be provided.
12. Notes/Remarks, if any.
Part − C
(UNDERTAKING)
***
I/We, …………… in the capacity of ……………… of the.. …………… company/firm declare
that we are compliant with the following:
(a) We do not promote a Pyramid Scheme, as defined in Clause 1(11) or enroll
any person to such scheme or participate in such arrangement in any manner
whatsoever in the garb of doing Direct Selling business.
(b) We do not participate in Money Circulation Scheme, as defined in Clause 1
(12) in the garb of Direct Selling of Business Opportunities.
(c) We are compliant with all the remaining aspects mentioned in the guidelines
issued vide F. No. 21/18/2014-IT (Vol-II) dated 9th September, 2016 by the
Department of Consumers, Ministry of Consumer Affairs, Food and Public
Distribution and shall also provide such details as may be notified from time
to time.
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Place: SEAL OF THE COMPANY Sd/-
Name…………………...….
Designation…..……………
Tel No……………..…….…
E-mail:…………………….
List of documents to be provided:
1. Certificate of Registration/Bye-laws/Memorandum of Association
2. List of Board of Directors, with contact details
3. Brief details of direct selling scheme and compensation plan.
4. Sample of contract with direct sellers/distributors.
GUIDELINES FOR THE DIRECT SELLING ENTITIES
FAQs
1. Clause 1.4
“Direct Seller” means a person appointed or authorized, directly or indirectly, by a
Direct Selling Entity through a legally enforceable written contract to undertake direct
selling business on principal to principal basis.” How shall digital and e-contracts
be treated?
Answer: The ‘written contract’ includes e-contracts or digital contracts and the
same shall be governed as per the provisions of the Information Technology Act, 2000.
2. Clause 1.6 (Proviso)
“Provided that such sale of goods or services occurs otherwise than through a
“permanent retail location” to the consumers, generally in their houses or at their
workplace or through explanation and demonstration of such goods and services at a
particular place”. Does this Proviso mean that every sale needs to take place
away from permanent retail location only?
Answer: Clause 1.6 does not restrict/preclude sales made from permanent
retail location. However, direct selling entity will be governed by these
guidelines.
3. Clause 2.2
“Provide a mandatory orientation session to all prospective direct sellers providing
fair and accurate information on all aspects of the direct selling operation, including
but not limited to the remuneration system and expected remuneration for newly
recruited direct sellers”. Whether the training/orientation provided by the Direct
Seller to other prospective Direct Sellers would be in compliance to this
clause?
Answer: Yes, the training/orientation will be provided by the Direct Selling Entity
or by a Direct Seller or by any authorized representative of Direct Selling Entity, either
in person or through any digital means.
4. Clause 2.8
“It shall have an office with identified jurisdiction of its operation in the State to
enable the consumers and direct seller to acquaint themselves with price of products,
return or replacement of products and efficient delivery of goods and services, and
post-sale redressal of grievances” Whether an office in one State can be
designated as focal point for jurisdiction of two or more states?
Answer: An office in one particular State can be designated having jurisdiction
over two or more states, subject to the accessibility of the consumers, where Direct
Sellers/consumers can interact with the Direct Selling Entity/Authorized representative
of Direct Selling Entity.
5. Clause 3.3 (b)
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“The details of Direct Sellers shall include and not be limited to verified proof of
address, proof of identity and PAN”.
Should the Direct Selling Entity take verified proof of address, identity and
PAN?
Answer. The requirement of PAN shall be as per the provisions of the Income Tax
Act, 1961. Direct Sellers should submit to Direct Selling Entity, any photo ID card as
issued by the State or Central government. These ID cards could be from the following
-: Aadhaar Card, Driving License, Voter ID Card, Passport and Ration Card or any other
identity document issued by the state or central government which can be verified.
6. Clause 3.8
“Notwithstanding the distribution system adopted by a direct selling entity, the
Direct Selling Entity shall be responsible for compliance of these Guidelines by any
member of its network of direct selling, whether such member is appointed directly or
indirectly by the Direct Selling Entity”. How will a Direct Selling Entity ensure
compliance of these Guidelines by Direct Sellers?
Answer: To comply to this clause, Direct Selling Entity shall sign an addendum to
the current contracts with the existing Direct Sellers. For the Direct Sellers to be
appointed herein-after, this clause shall be added in the contract signed by both the
parties. The Direct Selling Entity should ensure that it contractually binds its Direct
Sellers to comply with these Guidelines and take disciplinary action against reported
non-compliance.
7. Clause 4.2(c)
“Allow for the termination of contract, with reasonable notice, in such instances and
on such terms where a direct seller is found to have made no sales of goods or
services for a period of up to two years since the contract was entered into, or since
the date of the last sale made by the Direct Seller”. When can the contract between
Direct Selling Entity and Direct Seller be terminated?
Answer: The date of termination shall be provided or governed by the respective
conditions of the contract executed between Direct Selling Entity and Direct Seller or
by giving notice of reasonable period by either party say one month or as per the
provisions of the Indian Contract Act.
8. Clause 6.2
The Direct Selling Entity shall be liable for grievances arising out of sale of products
and services or business opportunity by the Direct Seller. And
Clause 6.3
“It will be the responsibility of the Direct Selling entity to monitor and control the
practices/methods adopted by the Direct Sellers”.
Does this mean that only the direct selling entity will be liable for all
grievances arising out of sale of products and services or business opportunity
by the direct seller?
Answer. It is clarified that the Direct Selling Entity will be responsible for the
quality of products and services and it will guide and help the Direct Seller to follow
best practices in the interest of consumers. The scope and specific liabilities of the
Direct Seller in such cases will be defined in unambiguous terms in the contract
signed. By way of providing in the contract, every Direct Selling Entity shall define and
develop some mechanism to monitor the practices being adopted by its Direct Sellers.
9. Clause 7.5
Industry: It appears to be a typographical error in this Clause. As the consumer is
buying the products or services from the Direct Sellers, it should be the Direct Seller
which will provide various details listed in this sub-clause. Please clarify.
Answer − Yes, it should be the Direct Seller. Please read Direct Seller in place of
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Direct Selling entity in this sub-clause.

———
1.Vide G.S.R. 1013(E), Extra., Part II, S. 3(i), dated 26-10-2016, published in the Gazette of India, No. 747,
dated 26-10-2016.
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2016 Direct Selling Guidelines

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2016 Direct Selling Guidelines

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SCC Online Web Edition, © 2022 EBC Publishing Pvt. Ltd.

Page 1 Monday, November 14, 2022

Direct Selling Guidelines, 20161

The Government constituted on consisting an Inter-Ministerial Committee

2. It shall issue proper identity document(s) to its Direct Sellers;

or more persons as direct sellers;

(c) It does not require a participant to pay any Yes/No

Place: SEAL OF THE COMPANY Sd/-

Direct Selling entity in this sub-clause.

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