In a democratic nation, certain norms ensure the protection of the consumer from getting missold and falsely represented. There are consumer forums where people can register their complaints if they witness a scam or a hurdle in the marketplace.
The same is true for agents who sell insurance, loan offers, and other financial products. They have a certain mode of operation that restricts them from misselling the products to customers and requires them to follow a certain code of guidelines.
In this blog, we will examine the regulatory framework for direct sellers, what they must adhere to while in the field, and the ethical guidelines they must follow to achieve long-term success in this career option.
- Who are the Direct Selling Agents?
Direct Selling Agents are the individuals who sell a certain product or service of a company to the end customer and make an income from the commission they get from each sale of that product or service.
These are the agents who are not directly employed by the company but rather a group of people who build their network, get clients through the reference and make a commission by providing the required product to the end user. Various DSA franchisees are out there in the market, building their network of references and selling them to customers.
- How DSAs Operate?
The next aspect is the operation of a DSA and how they create an entire network where they get clients and earn a commission from them. These practices of putting DSAs at work for the sale of products are done by many companies such as Amway, Tupperware, and other brands, which allows the DSAs to stock the products and then resell them to the customers and earn a return out of it.
They tend to get customers from their acquaintances, and as long a person stays in the market, the chances are they will build a network that will help them to get new and potential customers for their products and services.
- Evolution of The DSA Regulation in India
As of January 2022, the current market valuation of Dsa is Rs.16,000 crore, and it’s expected that the market will rise to Rs. 64,500 crore by 2025. However, the laws and regulations around direct selling used to remain confusing and have a different set of hurdles.
One of the common problems a person faces is its similarity with a pyramid or a Ponzi scheme. People and regulators often face confusion, and therefore, the whole concept couldn’t thrive until a few years later.
Various governmental bodies were involved in bringing regulation around this industry and in curtailing its presence in the country in the initial days; however, as the operations started to get clear, the Department of Consumer Affairs, Ministry of Consumer Affairs, and other institutes, all were involved in the process.
There is a complete trajectory of the evolution of direct selling regulation and how that shaped the current regulatory norms of the industry.
- “Prize Chits and Money Circulation Schemes (Banning) Act, 1978”
Here, the government banned all the activities of direct selling in order to stop the pyramid selling structure, and that became the first hindrance for this industry.
- Formation of CEIB (Central Economic Intelligence Bureau
Under CEIB authority, the industry was heavily monitored, and after several judicial trials by certain companies, the concept of direct selling was started.
- Formation of a Ministerial Committee Under DCA and DFS
The Department of Consumer Affairs and the Department of Financial Services became the two wings that closely monitor this industry and set further regulations for this industry and its operations.
- Direct Selling Consumer Protection Rules, 2021
Under the new scheme, which has been revised in 2021, the promotion of any money circulation schemes in the direct selling entity is strictly prohibited and penalized. A person who has taken the SBI DSA registration or from some other bank needs to maintain the direct selling rules set by this entity.
These rules are made both for direct selling entities and online operators who work in the e-commerce space and sell certain products.
Through these guidelines, a person who works in this industry can have a clear perspective of what and what not to do while pitching a product or service to customers.
