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Government of India has formed new guidelines for direct selling industry and released on 12th September 2016. It has introduced some effective ways on how to take control over increasing numbers of unethical MLM operations. However, new guidelines also contain some bad points which need no attention. For more information, watch this presentation. https://www.strategyindia.com/guidelines-for-direct-selling-mlm-india.html
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1. 30 days’ money back policy. 2. Free registration. 3. No minimum purchase requirement. 4. KYDS (Know your direct seller requirement). 5. 90 days to comply. 6. Explanation about People based and Pyramid Scheme prohibition. 7. Company to provide information to existing direct sellers concerning remuneration, rights and obligations.
8. Bill and receipt. 9. Not provide literature/training material not approved by the company. 10. Company being responsible for monitoring and compliance of practices. 11. Complaint tracking mechanism. 12. Grievance redressal committee –3 official’s from the company 13. The direct selling company to inform the consumer the procedure for returning the goods. 14. Any person who sells or offers to sell on ecommerce platform must have consent of the company.
1. Too complex to be understood by a common man. 2. The word “reasonable” in the commercial terms (in case of 30 days money back policy). 3. Different terms used for describing the same component. 4. No Business Information Kit (with 30 days)made mandatory – which will encourage miscommunications and trouble for all (Customer, Direct Seller, Company and the Police), Higher chances of failures because of no information about the products, polices and the opportunity, Low retention rate, Unnecessary burden on company’s infrastructure, etc.
5. With no minimum efforts requirements, no renewal fees, etc. will ensure product based pyramid structure where the person joined the earliest would continue to earn from the sales happening in his marketing organization. In other words, “Easy money”. 6. KYDS proof requirement unclear. 7. Infrastructure requirement – Offices in every state. 8. States asked to set up/monitor activities. 9. No rules against other 4 types of business models (only for direct selling and for the people based pyramid).
10. Pay all dues and withholdings in a “Reasonable” manner – open to interpretation. 11. No clarity on the word “registered” legal entity. 12. Mandatory orientation for “Prospective” direct sellers – Unviable. 13. Issue proper identity documents to direct sellers – open to interpretation. 14. Indian contract Act 1872 – Loopholes for both parties to exploit. 15. “Reasonable” – open to interpretation. 16. “Satisfaction guarantee” and “Money back guarantee” not researched and used. 17. Book of account to be maintained by direct seller.
18. “Unreasonably” – open to interpretation. 19. No explanation of “Unfair trade practice”. 20. Name of the purchaser and the seller provided to the consumer upon purchase. 21. Process, policies and contacts for monitoring not provided. 22. Does not have a list of products/services not to be promoted. 23. Does not have a list of Products to be promoted under specific conditions.
24. Does not have clear and simple definitions/explanations of commonly used terms by 6 different types of models (which deploy the MLM compensation plans). 25. No mention of VAT on MRP to be paid by the company. 26. No mention of Service tax to be paid by direct sellers earning above INR 10 lac above. 27. Does not fill common loopholes exploited by 6 different types of business models.
