In India, multi-level marketing (MLM) is regulated under specific rules to ensure ethical practices and protect consumers. The key legal framework is the Consumer Protection (Direct Selling) Rules, 2021, issued by the Ministry of Consumer Affairs. These rules lay down the code of conduct for direct selling and MLM companies.
Here’s a summary of the Code of Conduct for MLM companies and direct sellers in India:
- Registration:
- Must be a registered legal entity in India.
- Must register with the Department of Consumer Affairs.
- No Pyramid Schemes or Money Circulation:
- Cannot promote or participate in pyramid or money circulation schemes (banned under the Prize Chits and Money Circulation Schemes (Banning) Act, 1978).
- Grievance Redressal:
- Must have a proper grievance redressal mechanism.
- Complaints should be resolved within 45 days.
- Product Transparency:
- Clear, accurate information about products/services must be provided.
- No misleading or false claims.
- Buy-Back/Return Policy:
- Should have a transparent return, buy-back, or refund policy.
- Fair and Ethical Promotion:
- No exaggeration or false promises of income or product benefits.
- Must not mislead consumers or potential recruits.
- Training and Education:
- Companies must provide adequate training to direct sellers.
- No Entry Fees:
- Direct sellers should not be asked to pay joining fees or buy large quantities of products upfront.
- Prohibition of Inventory Loading:
- Forcing or encouraging sellers to buy more products than they can sell is prohibited.
✅ Code of Conduct for Direct Sellers
- Identification:
- Must carry and present their identity card issued by the company.
- Transparency:
- Must provide accurate and complete information about products, pricing, and terms.
- Respect for Consumer Rights:
- Must allow a cooling-off period and honor return/refund policies.
- Ethical Behavior:
- No misleading or coercive recruitment or sales tactics.
- No False Income Claims:
- Cannot make unrealistic or exaggerated income claims.
