Multi-Level Marketing Regulation in India

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Multi-Level Marketing Regulation in India

The regulatory framework for multi-level marketing (MLM) businesses in India is primarily governed by the Prize Chits and Money Circulation Schemes (Banning) Act, 1978, and the Consumer Protection Act, 2019. However, regulations can change, so it's essential to verify with updated sources.



  1. Prize Chits and Money Circulation Schemes (Banning) Act, 1978:

    • The Act aims to ban the promotion or conduct of prize chits and money circulation schemes.
    • MLM companies need to ensure that their business models do not fall under the definition of money circulation schemes as per this Act.

  2. Consumer Protection Act, 2019:

    • The Consumer Protection Act, 2019, replaced the earlier Consumer Protection Act, 1986, and introduced provisions to protect consumers from unfair trade practices, including misleading advertisements and false representations.
    • MLM companies are subject to the provisions of this Act, and they need to ensure that their marketing and business practices comply with consumer protection laws.

  3. Direct Selling Guidelines:

    • The Ministry of Consumer Affairs, Food and Public Distribution issued guidelines in 2016 for direct selling entities. These guidelines set certain standards for direct selling and aim to protect consumers from fraudulent schemes.
    • MLM companies often need to adhere to these guidelines to operate legally in India.

  4. Goods and Services Tax (GST):

    • MLM companies are subject to the Goods and Services Tax (GST) in India. They need to comply with the relevant GST regulations.

  5. Company Law:

    • MLM companies must comply with the Companies Act, 2013, which governs the incorporation, functioning, and dissolution of companies in India.

It's crucial for MLM businesses to operate ethically and transparently to avoid legal issues. It is also advisable for individuals interested in joining MLM schemes to thoroughly research the company and its practices to ensure legitimacy.

Regulations can be subject to change, and it's advisable to check with legal experts or regulatory authorities for the latest information on MLM regulations in India.

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