Consumer Protection (Direct Selling) Rules, 2021, A Step Towards Making Direct Selling Companies Accountable – Part II

This is part II of the series of three-part blog posts on the relevance of making the direct selling companies accountable under the Consumer Protection (Direct Selling) Rules 2021 and providing relief to the consumers.

Part I of this series had dealt with the applicability of the 2021 rules and the obligations imposed on the direct selling entities regarding their management and conduct.

Grievance Redressal Mechanism

Consumer ProtectionThe Consumer Protection (Direct Selling) Rules 2021 has laid down an effective Grievance Redressal Mechanism for the protection of innocent consumers. The rules mandate that every entity which falls under the category of direct selling entity has to establish an adequate and effective grievance redressal mechanism. Furthermore, it is mandated that the direct selling entity has to display the current and updated name of the officer, contact details including telephone number, email address, and designation of such Grievance Redressal officer on its website. The entity is also obligated to print the details of its website prominently on the product information sheet or pamphlet that is shared along with the product to the consumers.

The grievance redressal officer has to acknowledge the receipt of any consumer complaint which is submitted to them within a period of forty-eight working hours of filing such complaint. The complaint has to be redressed normally within a period of one month i.e. a period of thirty days from the date of receipt of the complaint and in case of delay of more than a period of one month i.e. a period of thirty days, the reasons for such delay, and the actions which have been taken in the interim on the complaint, have to be informed to the complainant in writing.

Furthermore, the 2021 rules mandate that the direct selling entity has to establish an accessible grievance redressal mechanism for their customers to ensure that their complaints are heard and addressed in due time. The rules mandate that a grievance redressal mechanism for filing complaints by consumers has to be established through its offices or branches or direct sellers. Such complaints can be filed either in person or through post, telephone, e-mail, or website. The complete details regarding the complaint redressal mechanism which is available to the consumers must be provided to them prior to the time of the initial sale or at the time of the sale.

Nodal Officer

The 2021 rules state that every direct selling entity has to appoint a nodal officer who shall be responsible for ensuring compliance with the provisions of the Act and the rules made in accordance with the act. The nodal officer will act as a monitoring and supervisory authority to ensure effective and strict compliance with the Act and rules made for the protection of consumers. The nodal officer also has to ensure compliance by the direct selling entities with any order, or requisition, made in accordance with the provisions of any other law in addition to the 2021 rules or any other law made for the protection of the consumers.

The mechanism for filing complaints by consumers

Every direct selling entity has to establish a grievance redressal mechanism for filing complaints by consumers, established through its offices or branches or direct sellers. Such complaints can be filed either in person or through the post, telephone, e-mail, or website. The complete details regarding the complaint redressal mechanism which is available to the consumers must be provided to them prior to the time of the initial sale or at the time of the sale.

Every direct selling entity has to maintain a record of all its direct sellers, including their identity proof, address proof, e-mail, and such other contact information which would be useful for the consumers to file the complaint.

The 2021 rules also establish individual accountability on the respective direct seller who has made the sale. According to the rules, the direct selling entity is obligated to provide the customer with the requested information regarding the direct seller. The information given about the direct seller has to include the name, address, e-mail, contact number, and any other information which is necessary for making communication with such direct seller for effective dispute resolution and effective grievance redressal of the consumer.

Every direct selling entity has to ensure that the advertisements that are made for marketing their respective goods or services are consistent with the actual characteristics, access, and usage conditions of such goods or services and are not misrepresented or falsely represented to the consumers.

The rules also state the significance of reviews and peer evaluation of the products and hence mandate that the direct selling entity shall not be allowed to, directly or indirectly, falsely represent itself as a consumer and post reviews about its goods or services or misrepresent the quality or features of any of its goods or services.

The authenticity and valuation of the goods also need to be carried out by the direct seller. The rules state that a direct selling entity that explicitly or implicitly vouches for the authenticity of the goods or services sold, or guarantees that such goods or services are authentic, has to bear the liability in any action related to the authenticity of such goods or services, thereby making the direct selling entity liable for any action related to the authenticity of the goods or services.

The monitoring and supervision rules laid downstate that notwithstanding the distribution system adopted by the direct selling entity, it has to ensure that there is strict and effective monitoring of the practices adopted by its direct sellers and it is the obligation of the direct selling entity to ensure compliance with these rules by means of legally binding contract with such direct sellers.

The rules ensure an effective tracking mechanism to detect the identity of the direct sellers and state that every direct selling entity has to maintain a record of all the necessary and relevant information which can be utilized for the identification of all direct sellers who have been delisted by the direct selling entity and such list shall be publicly shared on its website. Such actions will ensure that the consumers are aware of their sellers and make them better informed.

The rules also highlight that every direct selling entity has to become a partner in the convergence process of the National Consumer Helpline of the Central Government. These protection mechanisms will go a long way in protecting the interests of the consumers and protect them from the fraudulent practices by these pyramid schemes.

The next part of this series of blog posts will discuss the obligation upon Direct Sellers laid down by the 2021 rules and the suggestions for the effective enactment and implementation of the Consumer Protection (Direct Selling) Rules 2021.

Author: Shradha Pandey (intern)– a student of   Tamil Nadu National Law University (Tiruchirapalli), and Chhavi Pande – Sr. Associate Litigation  at Khurana & Khurana, Advocates and IP Attorney,  in case of any queries please contact/write back to us via email vidushi@khuranaandkhurana.com

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