Direct selling companies seek protection under Consumer Protection Act

Affidavits filed to Ministry of Consumer Affairs urge abrogation of criminal proceedings

Direct selling companies have urged the government to extend protection under Consumer Protection Act and do away with the provision for criminal proceedings in case of discrepancies in the product sold by them directly to customers.

Responding to the draft guidelines issued in September 2016 by the Ministry of Consumer Affairs seeking responses from direct selling companies, QNet said, “Certain individuals have been filing criminal complaints directly with the state police, without even attempting to contact the concerned company for resolution first.”

Customers buying products directly from companies bypassing retailers, should approach concerned firms if they find differences in the product from the claim, before registering a complaint with local police, QNet said. The Ministry of Consumer Affairs has asked states to implement direct selling guidelines.

According to Trevor Kuna, Chief Executive Officer of QNet Ltd, the company has submitted its affidavit to the Ministry of Consumer Affairs through its Indian franchisee Vihaan Direct Selling (India) Pvt Ltd in response to the draft guidelines of the ministry.

According to trade sources, other companies in this business including Amway, Mediocre, Herbalife, Tupperware and Oriflame have also filed affidavits to the Ministry of Consumer Affairs.

“These guidelines are a progressive step in the direction of reforms for the direct selling sector. Given the thriving industry in India and a healthy growth trend over the last few years as reported by several trade bodies and chambers of commerce, the guidelines will help with sustainable development of the industry,” said a senior executive of the company in submission to the ministry.

Interestingly, Vihaan’s Indian shareholder and former billiards champion Michael Ferreira was arrested on criminal charges in September 2016 and released on bail by the Supreme Court last week.

In a recent observation, the Karnataka High Court observed, “Criminal law cannot be set in motion to settle civil disputes by giving the colour of criminality.” But, various courts of law have enforced regulations like the Maharashtra Protection of Interest of Depositors (MPID) Act and the Price Chits and Money Circulation (Banning) Act (PCMC), and categorised the complaint under criminal offences due to the lack of regulations.

“Lack of a regulatory framework and concrete laws to guide players in the business has held back the growth of this industry in the Indian context so far. Acts like Maharashtra Protection of Investors Deposit (MPID) Act and the largely misused Price Chits and Money Circulation (Banning) Act (PCMC), have been irrationally been used against the Direct Selling Industry," Vishwanathan Iyer, a city-based independent legal expert.

An industry player has urged industry players and industry bodies to come together on a common platform to work with the Ministry of Consumer Affairs to ensure that these guidelines can be turned into legislation.

While granting bail to Ferreira, the Supreme Court observed direct selling is not a ponzi scheme. Meanwhile, the Indian Direct Selling Industry has generated approximately $1.18 billion in revenues in 2015 and is ranked 22nd in the list of top 25 countries in the world. In India, an estimated four million people are involved in this industry, which is estimated to grow to approximately $9.8 billion by 2025 (Rs 64,500 crore as per a Ficci-KPMG report).