Direct selling industry draws strict guidelines for govts consideration

Written by Ashish Sinha | New Delhi | Updated: Jun 7 2013, 08:26am hrs
Having voiced the need for a separate legal structure to regulate the R7,000-crore organised direct selling industry, its apex body, IDSA, has mooted its own set of strict guidelines for distinguishing genuine direct sellers from those duping consumers through illegal money/pyramid schemes or chit fund companies.

The Indian Direct Sellers Association (IDSA) has moved these draft guidelines and wants the government to consider them while formulating any separate norms for the sector.

We will present our suggestions including the draft guidelines to the parliamentary committee which is looking into the matter, Chhavi Hemanth, secretary general of IDSA, told FE.

The IDSA, which represents Amway and Tupperware among 18 direct selling companies, has proposed in its draft guidelines that any direct selling entity will need to have a minimum paid-up capital/net worth of R1 crore and its promoters or management should not have been convicted of any criminal offence.

The draft norms will also ask the direct seller to quit the business with refund of unsold saleable inventory within 30 calendar days from the date of joining, subject to deduction of non-refundable indirect taxes and reasonable handling charges not exceeding 10% of the net sale price.

The norms also do not allow direct sellers to buy more products than they can reasonably be expected to sell and the remuneration and/or incentives provided to direct sellers shall be primarily based on the proceeds of the goods sold or services provided, the IDSA's draft guidelines, submitted to the government including the finance and corporate affairs ministries, said.

As per the draft norms, no direct selling entity will require a direct seller to purchase any product or collect any membership fee as a condition for enrolment, something which is widely reported in instances of money circulation schemes.

Also, the direct selling entities will be required to maintain proper records of direct sellers, including but not limited to enrolment, termination, active status, earnings, etc.