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MULTI LEVEL MARKETING

Proposed Features

for the Draft Bill

ICS. Srinivas IAS

Secretary (ndusries)

Governmentof Kerala

Multi-level Marketing Regulatory Authority

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The Government shall constitute a Multilevel Marketing Regulatory Authority in the State for the purposes of registration, control and supervision of multi-level
marketing.

Registration

is

mandatory

for

MLM

Entities, Direct Sellers and Distributors.

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AddI. Controller

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The Government may designate in each District an officer to be the Additional Controller of the Authority to assist the Controller and to perform such otlrer
functi-ons as may be prescribed or assigned to him by the Controller.

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Powers & Functions of the Authorifv &3b'"
To implement the provisions of this Act and the rules made there
under. To glve registration or to refuse registration to multi-level marketing entltres.

To give registration or refuse regisration to the direct sellers and distributors under the multi-level marketing entities and to keep registers of such registration
To issue identrtv cards to the direct seller and distributors.

To control and supervise the conduct of multi:level marketing in

the State.

To receive returns relating to the business conducted by the multilevel marketing entities and the direct sellers and distributors under
them.

To monitor the tax being paid b1'the multi-level marketing entities tothe Commercial Taxes Departrnent of the Government of Kerala.
4

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Powers of the Authority

&.ia*t*

To inspect and call for the records relating to direct marketing from the multi-level marketing entities, direct sellers and distributors.

To receive complaints from the direct sellers, distributors,

customers and consumers against the multi-level marketing entities and to provide for seitlement of disputes among them or to give legal advise for taking appropriate legal actions in accordance with the law for the time being in tbrce so as to remedy their grievances.

To ensure that the consumers are not being cheated by

under them.

any

multi-level marketing entities or direct sellers dnd distributors

. To perform such other functions and duties as may be

prescribed.

Registration of MLM Entity

Every multi-level marketing

entity

carrying on multi-level marketing in the

State shall, within such date as the Government may appoint in this behalf,
apply for registration before the Authority and every such entity which intends to caffy on such marketing in the State shall apply for registration.

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How to apply for Registration

The application shall be made in such form and
marurer as may be prescribed.

in such

Application should contain the following:

A gopy of the latest balance sheet, profit and loss account and reports, if any, of the auditois or directors of the
applicant.

Multi- level marketing scheme including the .income plan,

of the applicant in respect of that business.
Such other information and documents as may be prescribed. Receipt of payment of registration fee, which shall be paid in such manner as may be prescribed.

Securif Deposit
Authority,
Where a registration has been granted by the

it shall require the multi_level

prescribed,

marketing entity to deposit an amount as security

as may be
After

proportionate to the total turnover of such entity at the time of registration.

which shall

be

depositing

the security amount,

the

Authority shall issue a certificate of registration in such form as may be prescribed.

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Refusal of Registration
The Authority may refuse registration of a multi-levelmarketing entity on the following grounds, namely:-

- If multi-level

marketing entiry or person or persons responsible for the conduct of such ent-itv hai been convicted under the Prize Chits and Money Circulation Schemes (Banning) Act, 1978 (Central Act 43 of 1978) or the Securities and Exchange Board of India Act,

1992 (Central

Act 15 of 1952) in relation to the conduct of

the

business by such entityl

- If

the previous registration certificate has been revoked for any

a period of

reason.

previous registration has been cancelled within - If the year preceding

one the date ofapplication.

- If the applicant

fails to furnish sufficient details as required under

this Act or the rules made there under.

Validity of Registration Certificate Every Registration Certificate granted

or renewed, unless revoked, shall be valid for a period of three years from the date of issue of the certificate.

Every multi-level marketing entity shall renew the registration certificate within one month of its expiry:

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Revocation of Registration
The Controller may revoke a certificate of registration namely:-

issued under this

Act for the following

reasons,

I.

If the mutti-level marketing entity has been convicted, in relation to the conduct-of its business. under the Acts stated in clause (i) of section 7.
marketing entity has failed to c.o.mRlf with_ any of the conditions specified under this Act or the rules made there undei in relation to the conduct of its business;

il. If the multi-level

III. If the multi-level marketing entity has failed to comply with the conditioni imposed as per the
certifi cate of registration;

Revocation of Registration
IV.

(canr...;

ffi

If its. found that any materiat information in relation to the multr-level marketing entity was not disclosed at the time of regrstratlo_n or renewal of the certificate of registration and 'AfrL, the certificate of registration obtainea ".t"ti"g -was misleading or ina-ccurate information or on" misrepresentation;

V.

If a number of complaints

multi-level marketing entity have been receiv"ed

Government or to theControiler, against suct entity;

affecting the interest of the consumers or direct sellers or distributors working under the

in ih;

u.

The-

obtained.

multi-level marketing entity has ceased to carry on the business for which the'regislratlon certincatt ilr"'L;;;

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:E Surrender of Certificate of Registration -f \ A multi-level marketing entity may surrender its certificate of registration at any tiire afti:r eivine one month,s written notice to the Authority and a plblic"notice in its web-site and in four daily newi papers having wide publicity in the
State.

multi-level marketing entity has been paid or remitted a;A he shall fix the amoui-rt andpass orders to pay such a-ourrt due to the consumers, direcisellers and disiributors.

within 15 days of such notice and he shall ascertuin is t[, whether all the payments and other benefits lawfully due to the consumers, direct sellers and distributors from the

On receipt of a notice, the Controller shall make an enquirv

Surrender
Where the amount payable as per the decision of the controller is not paid or remitted within the time allowed by the Controller, he shall order to pay such amount from the security deposit of the multi-level marketing entity deposited with the Authority at the time of registraiion.
Where the amount of security deposit is not sufficient to pay the amount fixed, it shall be recovered from the assets of such multi-level marketing entity as if it is an arrear of land revenue due and in case there is balance amount of security deposit after payment of the amount fixed under sub-section,(1), such amount shall be repaid to the multi_ level marketing entity concerned.

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Registration of Direct SeIIers

his or irs name with the auilroiiry ;;a i,;';ii"';Bii or direct sellers kept in the Authoiiry *a o-utuin u enrollment ln the manner and in such form as may "".tiiii#-#rr"t be prescribed.
F.u".V direct seller of a multi-level marketing entity shall resister

il;r;ii;f

oocuments as may be prescribed.

An application for enroilment as a direct seller shalr be made to the Ile19 quarters ot the Authoriry or at the District Office of the t ne, application shall contain the registration number 111L.,,ry , and other details of the multi_level marketing en-tity, true coov of the marketing contracr with that ;;J ;-u;;iiru';;t"ii5;"a

""tiry

of enronmeni to the uppii."rt *iifiir"

receipt of such applicatioh.

The Authority shall, after conducting an enquiry issug a certificate

ii

h"t",

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a pnoro loentrty card to the direct seller in the prescribeil form.

I-r1ajre91 seller is registered and enroiled, the Authority shail issue

Disqualifications for Direct Seller

'
No person or othe.r entity shail be eligibre to get registered, or continue, as a direct seller if he rs,_
convicted of an offence involving moral turpitude;
declared as an insolvent as per the provisions of the law fo, th" Delng tn torce;

ti*"

' .

not mentally fit to deal with the customers or consumers; is,not having such other qualifications as may be prescribed;

is not permitted by any other law applicable to him.

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Registration of Distributors

ffi

Every person who is sponsored as a distributor of a multi-level direct marketing entity by u direct seller shall, by himself or through his direct seller, get registered and enrolled in the ro11 of distributors kept in the District Office of the Authority.

An application for enrollment shall be made to

the District Officer concerned of the Authority with such fee and in such form and in such manner as may be prescribed.
17

Appeal

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Any person aggrieved by an order of the Controller may appeal to the Government, within such time and with such fee and in
the manner as may be prescribed.

Any person aggrieved by an order of

District Officer of the Authority may appeal to the Controller within such time and with such fee and in the manner as may be
prescribed.

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CPC Powers to Controller &i-**

In deciding all_matters under. this Act, the_controller shail have the power to regulate his own procedures and for the purpoie 6lriklne rni"rq;it"; irG;iie#on ,n0.,
Procedure. t908 (centrila.is following matters, namely:-

of

thjs^f9!. he shall have the same powers

civil

as are vested'in a

orliost*tii. t.yire.

biril court

*iil,

un8ei the cooe

i.rp.a ortn.

summoning and enforcing the attendance of any person and examining him on
oath; object producible as

- lj::q::ry and production ofany documenr or other material evloence; - reception of evidence on affidavits; - issue of commissions for examination of witnesses.

Any enquiry or investigation before the controller shall be deemed to be a iudicial proceeo.rng wrthln the meaning of sections I93 and 22g of the Indian pendl code (central Act 45 of, I 860) and th"e contro[eist ai G a"erned i" b; ;;;ii *;ri for the purposes or sectron I95 and chapter XXVI of the Code of criminal procedure, lg73 (Central Act2 of t974).

Conditions for Direct Selling

It.shall be a legal entity authorised to conduct business in India in accordance with the provisi-ons of tlre laws in forti.--"---- ---'
II.

It

services distributed."

shall have a resistered trademark which identifies the entity, goods or

III.

.erectronic, **i.ii,ir'"., rncome pran, detairs of direct setters u-nder it unu arr-iiiiu*t lrlli*Iiil. ,uri-ih;;ilj^,ii".,ia '' -" business. The websites

It shall maintain records .both manuar as details of their goods, services, t..*s J'

weI

as

with

comprete

of a murti-iivei';r;iiy

;ilii;.
''

updated

,;dit;iy.

IV.

require a direcr.seller or distributor ro purchase any goods or service lLslyll lot any or to pay membership fee as a condition'pr..ioini'for-;;;iri;ii""';,. ' enrollment of director selleis or distributors. -

charges.

It shall not require the direct seilers to pay any

money by way of renewal

VI. It shall ensure full refund o[ the price of any goods retumed by its consumers on the ground o[anv defect or inierior qruiiiy?i"ugui"ii irr. i.'i""r.;i;ili;"J" .r'Iv'| r'Ira'[rurr 6r ve by it regarding such goods. witt in tniriylay;'"G;r"#;;;.'rr!

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Conditions for Direct Marketing

The income plan of a multi-level marketing entity shall not be based on the number of new direct seliers registered or distributors enrolled. The benefits received by airy multilevel marketing entity, direct seller or distributoi shall be only as a result of selling goods or providing services and shall not be in connection *itn the number -of registration of diregt sellers or enrollment of distributors.

shall not.restrict the number of distributors that can be registered or enrolled by direct sellers under this Act or require them to enroll any fixed number of distributors for receiving any type of commission, incentive or other benefits.

It

Information to be made to the Consumers during Sales

Name, ad^dress' register number or enrolrment number and terephone number of the direit seiler, distributoi,-is'ih. .ur" may be, and of the "
multi-level marketing entity boncernra.

' --

A description of the goods or services to be supplied

The order date. the torar amount to be paid by the consumer arong with the billand receipt. Time and place for inspection of the sample and delivery of goods.

A notice to the consumer of the consumer's - -"-'- rights "c to cancer the order and to receive a full refund of sums paid. marketingintityl
Details regarding the complaint redressal mechanism of the multi_level

The d-irect sellers or their_distributors shall at all times carry identitv oroof issued by the mutti-levet.mu.r."ting
cards issued by the

Authority.

;;tiiy;ilg';th;y urrr ptl'ti"illntity p"v'!v .u!

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Signed Receipt to the Customer

On receiving payments with respect to sale of goods or services, the direct seller shall issue a signed ."""ilt to the customer concerned in accordance with provisioni gf the Indian Stamp Act, 1899 (Central Act 2 o7 tb7Ol in such form as may be prescribed, which shall contain the grounds for cancellation of the transactions and such othei terms and conditions in respect of the sale of goods or services

concerned.

A. customer may rescind a direct sales contract at any time within thirty days from the date of direct sales contiact by serving on the direct seller or distributor a notice in such form as may be prescribed.

Issue of Cash Bill to the Consumer & keeping Registers

.i;*, PS-S.1"

Every direct,s.eller and distributor who sells goods to a consumer shall rssue a cash bill to such consumer in accorda"nce with it -- or the law for the time being in force in tf,i, i"ip""t. ' "-i.*iiibn,
Eve.ry direct seller and distributor shall keep such register or registers stating the.details of the.products, price, iax ana sul"n oit*i'd"t?ir, respect of the goods sord 6y him, in'such form ur *iy t" pi"r"ri6io. in

The Authority and the officers concerned of the commercial Department ihalt be competenr to cail for such registers- raxes purpose in accordance with the provisionr oi uny r;';6; ioi any ti,"" ti*" being in force. Not withstanding anything.contained in this Act, every direct seiler and d istri butor shal I ioniply fi tn iti. pi""iii"rr or ttre reiat a' Vrr r.' Ioo"o -"- r'Tax Act, 2003(30 of ZdO+;.

12
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Relationship of Agency

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Without prejudice to the other provisions of this Act, the relationship among the directlevel marketing entity, direct seller, distributor and consumer or customer shall be that of among the principal, agent, sub-agent and third parties, respectively, under the provisions of the Indian Contract Act, 1872 (Central Act IX of l872) and their rights, duties and liabilities shall be fixed accordingly.

Penalties
. . .
Penalty

for

contravention

of the provisions

relating to registration and enrollment.

Penalty for violation of conditions specified under this Act

Penalty

for

contravention

of any other

Provisions.

. Offences by companies.

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Cognizance of Offences
Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (Central Act 2 of 1974) a court of the Judicial Magistrate of the First Class having jurisdiction over the area concerned shall have jurisdiction to try all offences under this Act and to impose the fine provided for such offences.

No Court shall take cognizance of any offence punishable under this Act, except on a report in
writing of facts constituting such offence, made by the Controller or a District Officer of the Authority
authorised by him.

Itfian{{ou

Department of Industries & Commerce Government of Kerala

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