Nexora Marketing PVT. LTD

Must Not Be a Pyramid Scheme
- MLM companies must avoid pyramid structures where income is mainly from recruiting others rather than selling products.
- The Prize Chits and Money Circulation Schemes (Banning) Act, 1978 prohibits pyramid and money circulation schemes.
Compliance with the Consumer Protection (Direct Selling) Rules, 2021
- These rules were notified by the Ministry of Consumer Affairs and apply to all direct selling entities and their agents.
- Key provisions include:
  - Mandatory Registration: MLM companies must register with the Department of Consumer Affairs.
  - No Entry or Renewal Fees: Distributors should not be charged for joining or renewing membership.
  - Product-Based Earnings: Commissions must be based on actual product sales, not recruitment.
  - Return and Refund Policies: Companies must offer a clear return and refund policy.
  - Grievance Redressal Mechanism: A grievance redressal system must be in place.
  - Ban on Misleading Claims: False or misleading product and income claims are prohibited.
  - Transparency: Clear disclosure of income, product details, and terms to all participants.
No Money Circulation
- MLM companies must ensure they are not engaging in money circulation schemes, as defined under the 1978 Act.

Consumer Protection (Direct Selling) Rules, 2021
- These rules apply to:
- All direct selling entities offering goods/services in India,
- Their direct sellers (individual participants or distributors),
- Foreign companies selling in India.
Prize Chits and Money Circulation Schemes (Banning) Act, 1978
- Bans pyramid and money circulation schemes.
- Violations are punishable with fines and imprisonment.
Indian Penal Code (IPC), 1860
- Section 420 (Cheating) and Section 120B (Criminal conspiracy) may apply if fraud is involved.

For Direct Selling Entities (Companies):
- Must register with the Department of Consumer Affairs (mandatory).
- Must maintain a website with company information, product details, return policies, etc.
- Must provide a grievance redressal officer with contact details on the website.
- Must keep records of complaints and their resolutions.
- Must not charge joining/registration fees from sellers.
For Direct Sellers (Participants/Distributors):
- Must have a written contract with the MLM company.
- Cannot promise unrealistic earnings or use misleading ads.
- Cannot make claims not supported by the company.
- Should not push unsold stock or inventory to recruits (no inventory loading).
- Must clearly explain the return/refund policy to customers.

Pyramid Schemes (where money is earned by recruiting others, not selling products).
Money Circulation Schemes (where members are promised profits mainly for bringing in new participants).
Misrepresentation or Fake Income Claims.
Selling products without a refund policy or warranty.
Pressuring recruits to buy large amounts of inventory.

Products must have proper labeling and consumer care contact.
Companies must offer a buy-back or refund policy if a customer is not satisfied.
Any complaint must be resolved within 45 days.