Kerala (India) issues guidelines for direct selling firms such as Amway

As per my previous post Amway India has been having challenges in that country with some poorly worded laws and a lack of regulation for the direct selling industry. Amway is implementing some changes from November 1, including removing all joining fees. The changes were a response to the Indian state of Kerala issuing some guidelines for direct selling firms. This is a great step forward for the industry in India! The guidelines are a prelude to proper legislation, which will hopefully be implemented nationwide.


1. Direct selling

Direct selling means marketing of consumer products/services directly to the consumers generally in their homes or homes of others, at their work place and other places away from the permanent retail locations, usually through explanation or demonstration of the products by a direct seller or by mail order sales.

2. Direct selling Entity

Direct selling Entity means a business entity which sells or markets products with its trademark or services mark or nay other identifying mark through a direct selling individual or organisation .

3. Direct seller

Direct seller means a person who is a member of a distribution system of the direct selling entity engaged in direct selling.

4. Mail order sales

Mail order sales means sale of goods and services which a person conducts either by himself or through any person authorised by him, by receiving an offer for a sale contract by mail.

5. Pyramid schemes/money change scheme is a scheme ;or arrangement which also includes any money circulation scheme as defined within the meaning of the Section 2 (c) and 2 (e) of the Prize Chits & Money Circulation Schemes (Banning) Act, 1978, involving sale of goods and services, where a person for a consideration acquires the opportunity to receive a pecuniary benefit which is not dependent on the volume of goods or services sold or distributed but is based wholly or partly upon the inducement of additional persons to participate in such a scheme or arrangement.

6. Consumer

Consumer means any person who buys or agrees to buy goods from a direct seller for a consideration.

I. Conditions for a valid direct selling

The following conditions are to be complied with by the Direct Selling entities and Direct Sellers.

a) The Direct Selling Entity should be a legal entity authorised to conduct business in India and which files all returns as mandated by law.

b) The Direct Selling Entity should be a valid licensee or a permitted user of a registered trademark which identifies the promoter, goods or services distributed.

c) The Direct Selling Entities should maintain websites with complete details of their products/services, terms and conditions, price, details of direct sellers and all relevant information about the company and business. The websites shall be updated regularly and shall furnish all necessary information required by the District Industries Centre.

d) The Direct Selling Entity shall not require a direct seller to purchase any product or collect any membership fee as a condition precedent for enrollment.

e) The compensation to direct sellers shall only be based on the quantity of sale of goods and services.

f) The Direct Selling Entity should ensure that a consumer purchasing goods or services from a direct seller shall have at leat thirty days from the date of delivery of such goods and services to return the same and to receive full refund.

g) A Direct Selling Entity shall require direct sellers to provide the following information to the consumers at the time of the sale:

i. Name, address and telephone number of the direct seller and direct selling entity.

ii. The Direct Selling Entity shall display details of their direct sellers on their websites.

iii The Direct Selling Entity/Direct sellers or their representatives shall at all times carry identity proof of their respective companies along with any photo IDs issued by any Government agency.

iv A description of the goods or services to be supplied.

v The order date, the total amount to be paid by the consumer along with the bill and receipt

vi Time and place for inspection of the sample and delivery of goods.

vii A notice to the consumer of the consumer’s rights to cancel the order and to receive a full refund of sums paid.

viii Details regarding the complaint redress mechanism of the Direct Selling Entity.

h) The Direct sellers/Direct selling entities who call at any premises of the customers for the purpose of negotiating direct sales shall take prior permission of appointment and immediately indicate the purpose of the visit before entering the premises, identity himself/herself with credentials and shall leave the premises at the request of the occupier of the premises or any person acting with the actual or implied authority of the occupier.

II. The sale activities not following the above guidelines shall not be considered as Direct selling and will be dealt appropriately under relevant provisions.

These guidelines offer far clearer and more sensible definitions than the The Prize Chits & Money Circulation Scheme Banning Act I highlighted in my previous post and make clear the difference between legitimate direct selling companies like Amway and illegimate schemes and scams. Kudos to the Kerala State Government for acting professionally and sensibly!

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