Direct Selling Guidelines 2016: To protect consumers from Ponzi frauds  government’s  model guidelines for states 

Current AffairsCurrent Affairs: To protect consumers from Ponzi frauds, the Centre on Mondayissued model guidelines for states to regulate direct selling and multi-level marketing businesses while prohibiting pyramid structures as well as money circulation schemes.
Highlights of Direct Selling Guidelines 2016
  • The guidelines will help protect consumers as direct sellers can now be identified, and goods exchanged.
  • The guidelines also mandate direct sellers to constitute a grievance redressal committee to protect consumers right.
  • It has also laid down remuneration system for the person engaged by direct selling firms on sharing of incentives, profit and commission.
  • The guidelines have also made provision for appointment of monitoring authority at both Central and state level to deal with the issues related to direct selling.
  • The guidelines have also put conditions for contract between direct sellers and direct selling entity, saying that all such agreements should be in writing describing the material impact of the participation.
  • The agreement should not compel or induce the direct seller to purchase goods or services in an amount that exceeds an amount that can be expected to be sold to consumers within a reasonable period of time.
  • The contract should provide direct sellers a “reasonable cooling-off period” in which they can cancel it and receive a refund for goods and services purchased.
  • The guidelines have also specified certain obligations of direct sellers such as carrying identity card, and full disclosure of the good and services offered by the entity represented by them.
  • The new guidelines mandate a seller to provide information about the name of the purchaser and seller, delivery date of goods, procedure of its return and its warranty.
The process for framing a proper guidelines was started in 2013 by the government after the police had arrested the then Amway’s India Chairman William S Pinckney and two company Directors over allegations of fraud in Kerala under the Prize Chits and Money Circulation Schemes (Banning) Act.
The ministry had held round of discussions with all stakeholders to frame guidelines to make a clear distinction between genuine direct-selling companies and fraudulent Ponzi schemes.

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