New direct selling guidelines to spur growth in sector: Industry body

New Delhi: Welcoming the model guidelines for direct selling businesses, direct sellers body IDSA today said the move will help in protecting consumers from ponzi frauds and help them differentiate between genuine and fraudulent schemes, besides ensuring growth for the sector.

The Centre today issued model guidelines for states to regulate direct selling and multi-level marketing businesses while prohibiting pyramid structures as well as money circulation schemes.

The norms will help in making a distinction between legitimate direct selling and fraudulent schemes, operating under the guise of direct selling, the Indian Direct Selling Association (IDSA) said in a statement.

"Indian Direct Selling Association welcomes the guidelines on Direct Selling with open arms. This will be very encouraging for the development of the Industry. We wish to thank the government, especially, the Ministry of Consumer Affairs for coming out with guidelines for the direct selling industry," said IDSA Chairman Jitendra Jagota.

"In the absence of proper policy or guidelines, numerous fraudulent players have been taking advantage of the situation. Now that the guidelines are out, it shall address the current concerns of the industry and provide much needed impetus," he added.

Image used for representative purpose only.

Image used for representative purpose only. Reuters

The 'Direct Selling Guidelines 2016' framework was released by the Food and Consumer Affairs Minister Ram Vilas Paswan and has been sent to the states and Union Territories for adoption.

In the guidelines, the government has clearly defined legitimate direct selling and differentiates it from pyramid and money circulation schemes to help investigating agencies identify fraudulent players.

"The guidelines on direct selling, issued by the Ministry of Consumer Affairs, represent an important step which will both safeguard the interests of consumers, as well as identify and help protect ethical direct selling companies," Amway India CEO Anshu Budhraja said.

He further added that the new guidelines will spur the growth of direct selling in India and drive entrepreneurship in the sector.

"We also believe that legislation will help the industry actualize its potential. We, along with others in the industry plan to continue to engage with the central government in pursuit of appropriate regulations for the direct selling industry," said Budhraja.

According to a Ficci report, direct selling is estimated to be around Rs 7,500 crore and has grown up from Rs 4,100 crore in the last five years.

It has potential to grow almost nine times to touch Rs 64,500 crore by 2025 and is likely to provide self-employment to around 1.45 million people, the report had suggested.

Industry body FICCI also welcomed the guidelines saying it was a much awaited move and it will help the industry to grow.

"We are confident these guidelines will certainly help in bringing in regulatory clarity for the sector. FICCI is positive that the state governments will implement these guidelines as the sector is a major contributor towards employment creation and tax revenue," said FICCI Secretary General A Didar Singh.

According to Oriflame India Director - Corporate Affairs Vivek Katoch, now the e-commerce players could not sell the products of direct sellers without their consent.

"The direct selling industry now has an operational and definitional clarity and what makes us more relaxed is that E-commerce websites won’t be able to sell the products of direct selling companies without their approval," he said.

He further said that the move would give a big boost to women empowerment.

PwC Director - Regulatory Services Shilpa Gupta said that the guidelines was a progressive move towards a consumer driven regulatory era.

"It would however be important that these guidelines also get statutory teeth and be anchored to the Consumer Protection Act itself. It would be crucial to define pyramid schemes under unfair trade practices and expose the consumer to his right to protection from such unfair trade practices," Gupta

Updated Date: Sep 13, 2016 13:04 PM