Consumer Protection (Direct Selling) Rules, 2021: Regulating India's Multi-Level Marketing Industry - IMPRI Impact And Policy Research Institute

Policy Update
Sruti Halder

Background

India’s direct selling sector, encompassing multi-level marketing (MLM) companies selling wellness, cosmetics, and household products through networks of independent sellers rather than fixed retail outlets, operated for decades without a binding statutory framework. The only regulatory reference point before 2021 was the Model Framework for Guidelines on Direct Selling, issued by the Department of Consumer Affairs on October 26, 2016, following consultations with the Ministry of Finance, the Department of Industrial Policy and Promotion, and select states including Delhi, Andhra Pradesh, and Kerala.

These 2016 Guidelines were advisory rather than legally enforceable, a weakness exposed in Amazon Seller Services Pvt. Ltd. v. Amway India Enterprises Pvt. Ltd. (2020), where the Delhi High Court’s Division Bench held that the 2016 Direct Selling Guidelines were advisory rather than legally binding, and that their notification in the Gazette did not by itself confer the status of law or make them enforceable against third parties. This judicial gap, combined with rising complaints of pyramid and money-circulation schemes disguised as direct selling businesses, created pressure for a statutory instrument.

That instrument arrived with the enactment of the Consumer Protection Act, 2019, whose Section 101(2)(zg) read with Section 94 empowered the central government to frame rules specifically for direct selling. Exercising this power, the Department of Consumer Affairs, Ministry of Consumer Affairs, Food and Public Distribution, notified the Consumer Protection (Direct Selling) Rules, 2021 in the Official Gazette on December 28, 2021 (PIB, 2021; Ministry of Consumer Affairs, 2021). The Rules’ stated objective is to prevent unfair trade practices in direct selling, curb pyramid and money-circulation schemes, and protect the legitimate interests of both consumers and genuine direct sellers by mandating disclosure, registration, and grievance-redressal obligations.

The Rules apply comprehensively: to all goods and services sold through direct selling, all direct-selling business models, all direct-selling entities (DSEs) operating in India including foreign entities offering goods or services to Indian consumers without a domestic establishment and to all forms of unfair trade practice across these models (PIB, 2021).

Target beneficiaries include 93.2 lakh active direct sellers in FY 2024–25, including a growing share of women, as well as consumers who purchase wellness, nutraceutical, and personal-care products through this channel (IDSA, 2025).

Existing DSEs were given ninety days from the gazette notification, that is, until March 28, 2022, to comply. Key provisions include a mandatory prior written contract between DSEs and direct sellers; a “cooling-off period” allowing buyers to cancel purchases; a bar on DSEs and direct sellers from promoting or enrolling any person into a pyramid or money-circulation scheme; a requirement that DSEs incorporate under Indian company law, maintain a registered office and a functional website with grievance-redressal details, and appoint a nodal grievance officer; obligations to disclose complete pre-purchase information on pricing, returns, refunds, and after-sale service; requirements to store consumers’ sensitive personal data within India and to implement safeguards against unauthorised access or misuse, under Rule 5(5), alongside the data-protection duties under Rule 7; and a mandate under Rule 11, for every state government to establish its own mechanism to monitor and supervise direct sellers and DSEs operating within its territory.

The Rules also clarify that DSEs and direct sellers using e-commerce platforms must simultaneously comply with the Consumer Protection (e-Commerce) Rules, 2020 (PIB, 2021). No amendment has been made to the substantive text of the 2021 Rules to date, though the Central Consumer Protection Authority (CCPA) has since issued the complementary Guidelines for Prevention and Regulation of Dark Patterns, 2023, which apply concurrently to deceptive online sales practices, including those used by some direct-selling platforms (CCPA Notification, 2023).

Functioning

The regulatory architecture operates on a dual-track, Centre–State model. At the Centre, the Department of Consumer Affairs frames the substantive rules, while the CCPA, the statutory regulator created under Section 10 of the Consumer Protection Act, 2019, investigates systemic unfair trade practices and misleading advertisements “prejudicial to the interest of consumers as a class,” and can issue notices, direct corrective advertising, or impose penalties on non-compliant DSEs. Individual consumer grievances, by contrast, are routed through the National Consumer Helpline (toll-free 1800-11-4000 or 1915) and the e-Jagriti portal, not directly to the CCPA, which handles only class-action-type matters.

At the state level, Rule 11 requires each state government to establish a mechanism to monitor or supervise direct-selling entities and sellers. Several states have since issued state-specific monitoring orders or guidelines, including Andhra Pradesh, Kerala, Tamil Nadu, Haryana, Mizoram, Nagaland and Rajasthan. However, the absence of a regularly updated central government compilation makes it difficult to establish a definitive current count, and implementation remains uneven across states

No dedicated central funding line exists for implementation; enforcement is absorbed within the Department of Consumer Affairs’ and CCPA’s regular administrative budgets under the Ministry of Consumer Affairs, Food and Public Distribution. This has practical consequences: because Rule 11 leaves the design of monitoring mechanisms to each state, the intensity, staffing, and enforcement rigor vary widely, with commentators noting that a majority of states and union territories have still not operationalised a functioning mechanism years after notification. This non-uniformity is widely flagged as the single largest structural weakness in the Rules’ functioning.

Performance

The direct selling sector’s reported turnover has grown steadily since the Rules took effect, though the causal contribution of regulation versus post-pandemic demand recovery is difficult to isolate.
Data from the IDSA’s annual “State of the Industry” surveys, conducted with Ipsos as knowledge partner, show the following trend:

Financial Year	Industry Turnover (₹ crore)	YoY Growth	Active Direct Sellers	Women’s Share
FY 2019–20	16,800	—	—	—
FY 2021–22	~19,000	5.3%	~82 lakh	—
FY 2022–23	21,282	~12%	86 lakh	37%
FY 2023–24	22,142	4.4%	88 lakh	44%
FY 2024–25	23,021	4.0%	93.2 lakh	48%

Source: Indian Direct Selling Association (IDSA), Annual Survey Reports FY 2022-23, FY 2023-24 and FY 2024-25 Outlook, (IDSA, 2024; IDSA, 2025).

Category concentration remains high and largely unchanged over this period: Wellness and Nutraceuticals accounted for 64.15% of total sales, followed by Cosmetics and Personal Care at 23.75% and Household Goods at 3.71%, together accounting for approximately 91.6% of industry turnover (IDSA, 2024). Regionally, the industry was concentrated in a few regions: the North accounted for 29.8% of sales, followed by the East (24.2%), West (22.4%), South (15.3%), and Northeast (8.3%). At the state level, Maharashtra (13%), West Bengal (11.3%), Uttar Pradesh (10%), Bihar (6.2%), and Karnataka (5.7%) were the largest contributors to FY 2023–24 sales (IDSA, 2024).

On the enforcement side, the CCPA’s most significant public action to date came in December 2024, when it issued show-cause notices to 17 direct-selling entities, including Vihaan Direct Selling (a QNet sub-franchise), Oriflame India, Triptales, and Orgolife Solutions, among others, for alleged unfair trade practices and non-compliance with the 2021 Rules, based on scrutiny of their websites and disclosure practices; of these, 13 were placed under investigation and three were awaiting a formal reply (Ministry of Consumer Affairs, 2024). This remains the largest coordinated enforcement action under the Rules since their notification, though no comprehensive, sector-wide compliance audit or CAG performance review of the Rules has been made public to date, which itself constitutes a monitoring gap.

Impact

The Rules have had a mixed but generally positive impact when assessed against their stated objectives of legitimising the industry and curbing fraud. On the positive side, industry surveys and legal commentary consistently credit the Rules with providing “on-ground legal certainty” that had been missing after the Amazon v. Amway judgment, enabling both direct sellers and e-commerce intermediaries to operate with clearer compliance benchmarks. The steady, moderate turnover growth and rising share of women participants (44% in FY24 to 48% in FY25) indicate that the sector continued to expand under the new framework. However, this growth cannot be attributed solely to the Rules, as broader market and post-pandemic factors may also have contributed.

However, the persistence of fraudulent pyramid-style operators, evidenced by the December 2024 CCPA notices naming both well-established and obscure entities, indicates that notification of the Rules has not eliminated bad-faith actors from the market, more than five years after the Consumer Protection Act was enacted and three years after the Direct Selling Rules were notified. Legal and academic analysis argues that the impact of the central Rules is substantially diluted by uneven state-level implementation: although Rule 11 places monitoring responsibility on states, several states have since notified or strengthened their monitoring mechanisms, including Kerala, Gujarat, Haryana, Mizoram, Nagaland and Rajasthan.

The remaining challenge is therefore not simply the absence of state mechanisms, but the uneven and evolving implementation of the Rules across jurisdictions, which can create differences in monitoring and enforcement capacity. The broader regulatory overlap is also relevant to the Parliamentary Standing Committee on Commerce’s 172nd Report on Promotion and Regulation of E-Commerce in India, which examined wider regulatory issues in India’s e-commerce ecosystem. However, the Report should not be treated as a direct assessment of the implementation of the Direct Selling Rules.

Emerging Issues

Non-uniform state implementation: Rule 11 leaves monitoring-mechanism design entirely to individual states, resulting in inconsistent registration processes, complaint-handling standards, and enforcement intensity across India; several states have yet to notify any mechanism years after the deadline.
Persistent pyramid and money-circulation schemes: The December 2024 CCPA action against 17 entities shows that fraudulent operators continue to exploit the direct-selling label despite an explicit statutory prohibition, suggesting detection and enforcement capacity lag behind the scale of the industry.
Absence of a central registry: The Consumer Protection (Direct Selling) Rules, 2021 do not provide for a distinct registration system for direct-selling entities, while Rule 11 places monitoring and supervision with individual State Governments. The resulting absence of a unified national registry is therefore an identified regulatory gap, with registration and monitoring information potentially fragmented across state-level mechanisms.
Overlap and ambiguity with e-commerce rules: DSEs selling via online marketplaces must simultaneously satisfy the Direct Selling Rules and the Consumer Protection (e-Commerce) Rules, 2020, creating compliance complexity that smaller entities may struggle to navigate.
Weak data on grievance redressal outcomes: Individual complaints go through the National Consumer Helpline rather than the CCPA, and no consolidated, sector-specific data on direct-selling complaint volumes, resolution rates, or repeat offenders is routinely published.
Limited institutional coordination: Enforcement responsibilities are dispersed across the CCPA, state consumer affairs departments, police (for the Prize Chits and Money Circulation Schemes (Banning) Act), and GST authorities, without a formal inter-agency coordination protocol specific to direct selling.
No independent compliance audit: No CAG or third-party performance audit of the Rules’ implementation has been published, leaving policymakers reliant primarily on industry-funded surveys (IDSA/Ipsos) for performance data.

Way Forward

Mandate state compliance with a deadline-bound directive: The Department of Consumer Affairs could issue a time-bound advisory requiring all states and union territories to notify Rule 11 monitoring mechanisms, with periodic public reporting of compliance status, similar to accountability mechanisms used for other centrally sponsored consumer-protection schemes.
Create a national digital registry of direct-selling entities: A centralised, publicly searchable database, potentially integrated with the existing e-Jagriti or National Single Window System infrastructure, would let consumers verify a DSE’s registration status and complaint history before engaging with it.
Strengthen inter-agency coordination: Formalising a coordination protocol linking the CCPA, state monitoring committees, and law-enforcement agencies handling the Prize Chits and Money Circulation Schemes (Banning) Act, 1978, would help close jurisdictional gaps that fraudulent operators currently exploit.
Publish disaggregated enforcement data: Regular, standardised reporting by the CCPA on the number of notices issued, entities under investigation, and case outcomes specific to direct selling would improve transparency and allow independent researchers to track enforcement trends.
Commission an independent performance review: A CAG or NITI Aayog-led evaluation of the Rules’ implementation, five years after notification, would provide an evidence base independent of industry-sponsored surveys for any future amendments.
Harmonise direct selling and e-commerce compliance: Issuing consolidated guidance clarifying how the Direct Selling Rules, 2021 and e-Commerce Rules, 2020 apply jointly to hybrid online-offline DSEs would reduce compliance ambiguity, particularly for smaller entities.
Build on the IDSA–NLSIU initiative: The IDSA-funded NLSIU project developed recommendations and a draft framework for implementing Rule 11, with the final draft shared with State Governments in 2023. The proposed next step is for the Department of Consumer Affairs to formally endorse or adopt this existing framework as a model template to promote uniform implementation across remaining states and UTs.

References

PRS India / ICRIER. (2023). Promotion and Regulation of E-Commerce in India, 172nd Report of the Department-Related Parliamentary Standing Committee on Commerce. https://icrier.org/wp-content/uploads/2023/02/Parliamntry-Standing-Committee-on-Commerce-Report-on-Promotion-and-Regulation-of-E-commerce-in-India.pdf

Press Information Bureau (PIB), Ministry of Consumer Affairs, Food & Public Distribution. (2021). Centre notifies the Consumer Protection (Direct Selling) Rules, 2021. https://www.pib.gov.in/PressReleasePage.aspx?PRID=1785873

Central Consumer Protection Authority (CCPA). (n.d.). Official portal. Department of Consumer Affairs. https://www.ccpa.doca.gov.in/

Indian Direct Selling Association (IDSA). (2024). Indian Direct Selling Industry FY 2023-2024: Insights and Trends, Annual Survey Report, Knowledge Partner Ipsos. https://idsa.co.in/resources/media/updates/1754470272_2023-24-Publishing_0.pdf

Indian Direct Selling Association (IDSA). (2025). Annual Reports. https://idsa.co.in/annual-reports/

PSA Legal. (2022). Consumer Protection (Direct Selling) Rules, 2021: Legitimising the Industry. https://psalegal.com/issue-iii-consumer-protection-direct-selling-rules-2021-legitimising-the-industry/

Tamil Nadu Government Gazette. (2023). Notification under Rule 11, Consumer Protection (Direct Selling) Rules, 2021. https://consumer.tn.gov.in/pdf/gazette_51_271223.pdf

Business Standard. (2023). Eight states notify guidelines for monitoring direct selling entities. https://www.business-standard.com/economy/news/eight-states-notify-guidelines-for-monitoring-direct-selling-entities-123042100792_1.html

Business Standard. (2024). 17 direct selling firms face CCPA notices over alleged ‘unfair practices’. https://www.business-standard.com/india-news/oriflame-india-16-others-face-ccpa-notices-over-alleged-unfair-practices-124121300897_1.html

Business Standard. (2025). India’s direct selling industry crosses ₹23K crore in FY25, says IDSA. https://www.business-standard.com/amp/industry/news/india-s-direct-selling-industry-crosses-23k-crore-in-fy25-says-idsa-126051501721_1.html

DataGuidance. (2022). India: Department of Consumer Affairs notifies new rules for direct selling entities. https://www.dataguidance.com/news/india-department-consumer-affairs-notifies-new-rules

Indian Retailer. (2025). India’s Direct Selling Industry Reaches Rs 22,142 Cr in FY 2023-24. https://www.indianretailer.com/news/indias-direct-selling-industry-reaches-rs-22142-cr-fy-2023-24

IndiaCorpLaw. (2020). Delhi High Court Allows E-commerce Platforms to Sell Products of Direct Selling Entities. https://indiacorplaw.in/2020/02/09/delhi-high-court-allows-e-commerce-platforms-to-sell-products-of-direct-selling-entities/

International Journal of Business and Economics (IELAS). (2023). Direct Selling Activities in India Through the Consumer Protection (Direct Selling) Rules, 2021. https://ielas.org/ijbe/index.php/ijbe/article/download/2/1/1

Lumiere Law Partners. (2022). The Consumer Protection (Direct Selling) Rules, 2021. https://lumierelp.com/articles/the-consumer-protection-direct-selling-rules-2021/

Moneylife. (2024). Consumer Protection Authority Issues Notices to 17 Direct Sellers, including QNet Franchise Vihaan. https://www.moneylife.in/article/consumer-protection-authority-issues-notices-to-17-direct-sellers-including-qnet-franchise-vihaan/75861.html

WilmerHale WilMap. (2020). Amazon v. Amway & Ors (2020). Stanford Law School. https://wilmap.stanford.edu/entries/amazon-v-amway-ors-2020

YourStory. (2023). Eight states form monitoring committees to supervise direct selling. https://yourstory.com/2023/04/eight-states-form-monitoring-committees-to-supervise-direct-selling

About the Contributor

Sruti Halder is pursuing an MSc in Economics at the Gokhale Institute of Politics and Economics. She is committed to leveraging data-driven research and evidence-based policymaking to promote inclusive and sustainable socio-economic development.

Acknowledgment

I am writing to express my sincere gratitude to IMPRI (Impact and Policy Research Institute) for providing me with the opportunity to prepare this policy update article and for fostering a rigorous learning environment that connects research with public policy practice.

Reviewers: Khushi, Anamika P K