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Model Guidelines Released to Curb Ponzi Schemes

The Union Government on 12 September 2016 issued model guidelines for states to regulate direct selling and multi-level marketing businesses while prohibiting pyramid structures as well as money circulation schemes. The guidelines were issued to protect consumers from Ponzi frauds.
The Direct Selling Guidelines 2016 framework was released by the Food and Consumer Affairs Minister Ram Vilas Paswan.
•    Direct selling means marketing, distribution and sale of goods or providing of services as a part of network of direct selling other than under a pyramid scheme.
•    To conduct direct selling business, the guidelines have prescribed many conditions that need to be complied within 90 days.
•    The guidelines also mandate direct sellers to constitute a grievance redressal committee to protect consumers’ right.
•    They also prohibit direct selling entities from using misleading and deceptive or unfair recruitment practices.
•    The contract should provide direct sellers a reasonable cooling-off period in which they can cancel it and receive a refund for goods and services purchased.
•    The new guidelines mandate a seller to provide information about the name of the purchaser and seller, delivery date of goods, procedure of its return and its warranty.

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