Direct Selling
Referred globally or in common parlance as multi-level marketing, direct marketing, or network marketing is only legal in India when it fits the parameters of Direct Selling as defined under the Consumer Protection Act, 2019 read with The Consumer Protection (Direct Selling) Rules, 2021. India offers a booming society with deep threads; the same is true for the Direct Selling Industry. However, it is no short of runaways or scams which affect the whole industry's reputation.
India has since 2016 tried regularizing the industry by notifying the Direct Selling Guidelines, whose legal effect remains still in question. After that, the replacement of the Consumer Protection Act, 1986 by the 2019 Act defined for the first time “Direct Selling” followed by notification of rules on the same in 2021. Few states have followed suit by notifying their monitoring mechanism and all Direct Selling Entities shall be compliant to be treated as Direct Selling Entity or attract penalties. The industry also needs to be careful of punitive acts such as The Prize Chits and Money Circulation Schemes (Banning) Act, 1978; The Prevention of Money Laundering Act, 2002; Digital Personal Data Protection Act, 2022; The Information Technology Act, 2000; among others.
At SRN Legal, the law firm deals with direct selling laws in India using a holistic approach due to its sensitive nature. We offer services to aid direct-selling businesses to become compliant with the law and help the public make informed decisions.
Direct Selling Market in India
India’s unique culture and society, woven together by interwoven relationships, make it an ideal choice for the direct selling industry. This is evident from the robust growth the industry has shown year-on-year. The first significant step towards legally recognizing the industry was taken by the Government of India through the Direct Selling Guidelines, 2016. The industry received a further boost with the inclusion of the definition of Direct Selling in the Consumer Protection Act, 2019, followed by the notification of the Consumer Protection (Direct Selling) Rules, 2021. These steps have helped clarify the legal status of the industry and build trust among the masses.
Continuing the inclusion of the direct selling industry in governance, the FSSAI has also included the kind-of-business (KoB) category of “Direct Sellers,” reflecting a positive outlook towards the industry by the government.
The direct selling industry in India grew by 12% year-on-year in 2022-23, achieving an overall turnover of ₹21,282 crore. The industry recorded a compound annual growth rate (CAGR) of 8.3% between 2019-20 and 2022-23. This growth has propelled India to become the 11th largest market for direct selling worldwide, according to the annual survey by the World Federation of Direct Selling Associations (WFDSA) in 2023. The top product categories contributing to this turnover and growth were as follows:
- Wellness & Nutraceutical- 59%
- Cosmetic and Personal Care- 22%
The industry also registered a staggering growth in active direct sellers, reaching approximately 1 crore. Of these, females accounted for a 45% share. Additionally, around 80% of the total direct sellers are 18-44 years old.
