New norms to protect direct selling agents

Direct selling companies such as Amway, Oriflame and Tupperware will be barred from charging any entry fee from their agents or forcing them to buy back unsold inventory , guidelines prepared by the consumer affairs ministry to regulate the sector showed.

The companies will also have to allow full refund or buy-back guarantee for goods and services sold to direct sellers or agents. This will help protect thousands of housewives and professionals who work part time as agents.

The policy will also spell out the difference between a direct selling firm and a "pyramid scheme" to end any ambiguity. Normally, pyramid scheme is a business model that recruits members via a promise of payments or services for enrolling others into the scheme, instead of sale of products or services.

The direct selling industry has been urging authorities not to treat them as "pyramid" schemes. According to the industry, direct selling businesses are registered with local regulatory bodies under existing laws, while "pyramid schemes" are unregistered. The number of direct sellers in India has almost doubled between 2004 and 2009. In terms of number of direct sellers, India ranked 11th among the top direct selling countries in 2009-10, according to a report by ICRIER (Indian Council for Research on International Economic Relations).

The direct selling industry is set to touch nearly Rs 2,000 crore by 2025. It offers self-employment opportunities to men and women and is seen spreading to Tier 1 and 2 towns across the country. Lack of clear guidelines has hurt the direct selling industry as it has often been clubbed with pyramid schemes.

The guidelines will be notified soon and states will be asked to adopt them quickly. All firms operating across the country will have to comply with the norms within 90 days, which includes mandatory registration with state government agencies.