FDSA-Federation of Direct Selling Association

Narendra Kumar

04 Dec, 2019

With an object to look into the activities of all direct selling/direct marketing /Network Marketing companies in India and to guide them in establishing legalized and ethical business practices (the study of policies and practices of business regarding potentially controversial issues), FDSA came into force as a voluntary social organization. The association is able to assemble good support from several Direct marketing Companies PAN India. For all the member companies of FDSA, it has become imminent to have a uniform code of conduct, ethical business practices and guidelines.

The objective-the only motive of FDSA is to improvise time to time as per the guidelines of Govt. of India and industry experts to maintain a uniform code of conduct among all member companies with transparency in their business and to help

• the customers to protect their rights
• Distributors right to get reasonable remunerations
• The company to sustain their business for years.

FDSA Guidelines- FDSA has issued guidelines that are in the best interest of the direct selling/ Network Marketing by which the company/Distributor/consumer will not face any losses.

Terminology Used in FDSA

What are permissible Direct Selling and its Conditions-Below mentioned conditions should comply with permissible Direct selling-

• Strict Direct selling
• Nature of business should be clearly disclosed in the Partnership deed and Memorandum of Association*

*(Those who do not have such specific clauses within 2 months from the date of publication of these Guidelines) should get their memorandum of Association or Partnership Deed be amended within 2 months from the date of publication of these Guidelines)

• Direct selling entities should maintain websites with complete and should be updated regularly regarding details of their products and services.
• Sales commission at an agreed rate to the direct seller on the sales affected directly by the direct seller.
• On furnishing the Unique Identification Number of the Direct Seller/Distributor, the official website shall give facility to verify the authenticity of the direct seller / Distributor.
• To endeavor redressal of consumer grievances there should be consumer grievance cell. Even Websites shall have provisions for registering consumer complaints online. The entity should maintain a consumer Complaint Register which can be inspected by FDA as and when required.
• At the time of soliciting the sales, the direct selling entity shall provide Photo Identity Cards to the Direct Seller/Distributors.

Appointment and Authorizations-After scrutinizing the application of the intending person Direct Selling Entity shall enter into an agreement for appointment in a prescribed format with necessary supporting documents i.e.

1. Photo ID card 2. Address Proof 3. PAN Card 4. Aadhar Card 5. Other Certificates.

The appointment should be executed between the Direct selling entity and distributor/direct seller.

Applicants should attain the age of majority under the Indian Contract Act at the time of entering into the agreement.

A direct seller shall be allotted Unique Identification Numbers and photo identity card upon granting the license to start a direct selling

Prohibitions- It shall not-

• Allot more than one distributorship to a single individual /entity
• Pay sales commission unrelated to their respective sales volume.
• Sell goods with the knowledge that such goods or services are inferior or exceeded its validity period as per the manufacturer or service provider.

General conditions- Under the weights and measurements Act, packages of the goods sold by the direct selling Entity should display like-

• Name and address of the manufacturer/importer and marketing company.
• Name and address of the Manufacturer/importer and expiry in case of consumables.
• Content, quantity, MRP and Customer care number and Address.
• All sales and consideration for direct sale transaction should be affected through a bank not on accepting “cash”.
• The distributor’s account shall be maintained properly and should be made available through the World Wide Web and/or printed form to be sent periodically to the respective distributor/direct seller.
• Sales commission should be distributed to the respective Distributors on or before the agreed date of settlement as per the terms of appointment as distributor/direct seller.
• No sale shall be affected unless obtained an order form duly signed by the prospective consumer.
• Direct Selling entity should carry guaranty/warranty of the goods sold of the manufacturer where the consumer should be given the opportunity to exchange/return the goods within 7 days from the date of purchase if he/she finds any defect or the product purchased is not useful for the purpose it was meant.
• The distributor should have provision to exit from the distribution ship as and when they wish to do so, provided detailed exit policy & procedures of the distribution ship agreement should be applied.

Rewarding Plan- Rewarding system is also termed as a business model in FDSA-As there is no specific frame to control the model of Rewarding plans but it is mandatory to follow the below-mentioned points-

• Business opportunity offering should be subjected to the solicitation.
• The Rewarding system should have proven arithmetic propositions.
• Scope to achieve commissions by the distributors even without any down-line.
• Only on a single ID or position or Business center in the Rewarding system should be allowed to operate by the distributor.

General Business Ethics / Code of conduct: Every Direct Selling Company should specify general business ethics/code of conduct applicable for every distributor.

The Entity should maintain a register with the relevant documents that include:

• Certificate issued by Registrar Of Companies^[1] and MOA.
• Xerox copies of TIN, DIN of Directors, TAN, and
• Certificate of Sales Tax, Service Tax, GST Registrations and Copies of all Sales Tax Returns, (Copies of Service Tax Returns, copies of IT Returns of the company) and Distributors TDS and Challans.
• Every Direct Selling Company should maintain (Know Your Customer / Know Your Distributor) as a mandatory process.

Grievance Redressal Mechanism: Every Direct Selling Company must have a complaint redressal mechanism to address any problem of their customers and distributors.