Tamil Nadu, a place with diverse manufacturing has brought out several guidelines and compliance for effective running of Direct Selling businesses in India. Below are the guidelines of Tamil Nadu’s for Direct Selling companies as per Tamil Nadu Direct Selling Guidelines dated 2018:
- The Direct Selling company is mandated to provide information to the consumer upon purchasing which shall contain the name of purchaser and seller, delivery date of goods or services, procedures for returning the goods and warranty of the goods and exchange or replacement of defective goods.
- Any business owner who wishes to sell either by offline or by an e-commerce platform / marketplace , the Direct Selling company owner must take written consent from respective Direct Selling Entity in order to undertake or solicit such sale or offer.
- No company under the disguise of direct selling business will promote a pyramid scheme i.e. recruiting members via promise of payments or services for enrolling others into the scheme, rather than supplying investments or sale of products.
Direct selling is a relatively new business model in India that has generated self- employment opportunities for 5 million people out of which 60 percent are women as per a report from KPMG.
- It is mandatory for the businesses to have a complaint number for tracing and tracking the complaint and keep records of time taken for redressal of complaints received over phone, email, website, post and walk-in.
- Direct selling businesses should provide prospective consumers with accurate and complete explanations and demonstrations of goods and services, prices, credit terms, terms of payments, return policies, terms of guarantee and after sales service.
- The companies shall maintain a proper book of records mentioning the details of the products, price, tax and quantity.
- There will be no unfair recruitment practices by display of misleading sales information or potential earnings of direct selling.
- There will be prior permission taken to visit the customer’s premises for selling directly and it is mandatory for direct sellers to carry identity cards.
- The direct selling businesses shall maintain a proper and updated website containing relevant information of entity, management , product information, product quality certificate , complete income plan, terms of contract with direct seller and complaint redressal mechanism for direct seller and consumers. It is compulsory for the sellers to create a space in the website for registering consumer complaints and should ensure complaints are attended within 45 days of registering complaints.
What is in it for the startups?
The businesses that will operate under direct selling model must adhere to the direct selling guidelines set by Tamil Nadu government. The direct selling sector in India has been in the limelight for several reasons due to several lawsuits that have been registered in the past. Direct selling is a novel business model in India that has generated self- employment opportunities to 5 million people out of which 60 percent are women as per a report from KPMG. But there exists a lack of clarity on the legislations governing the industry, due to which often direct selling companies are mistaken to be fraud involved in pyramid or Ponzi schemes and eventually have been harassed in the past from police and local state government. Such incidents tend to hinder the growth of the industry eroding customer trust and confidence.