Rule 7 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Rule 7 is the consumer-facing core of the Direct Selling Rules. It binds direct selling entities and direct sellers together: twenty-two things they must ensure about offers, claims, guarantees, delivery, cancellation, returns, instalments and payment, six things they must not do, a duty to follow all relevant laws, and a bar on inducing purchases by promising price cuts for referrals.
This article takes the rules as amended up to G.S.R. 454(E) dated 21 June 2023, which changed rule 3 only. Later amendments should be checked on the website of the Department of Consumer Affairs.
Subject to Chapter VI of the Act on product liability, every direct selling entity and direct seller must ensure that offers are clear, claims are substantiated and not misleading, delivery is on time or the consumer is told of delay and may cancel, and the right of return is in writing. They must not commit fraud, mislead, mis-sell, use coercion, refuse to take back spurious goods or deficient services, or charge any entry or subscription fee, and must not induce purchases by promising price reductions for referring customers.
The opening words
Rule 7 begins "Subject to the provisions of Chapter VI of the Act, relating to Product Liability, the following shall be the duties of direct selling entity and direct seller, as may be applicable". Chapter VI of the Act is covered in our posts on sections 82 and 83, section 84, section 85, section 86 and section 87. "As may be applicable" means each duty falls on the entity, the seller or both, depending on who is doing the act.
A consumer who has been let down on any of these points can start with a consumer complaint filing review of the facts. A numbering note: the rule is printed with sub-heads "(i)" and "(ii)" and then continues with sub-rules "(3)" and "(4)". They are cited below as printed.
Rule 7(i): what the entity and seller must ensure
| Clause | The duty, in short |
|---|---|
| (a) | The terms of the offer are clear, so the consumer knows the exact nature of the offer and the commitment involved in placing an order |
| (b) | Presentations contain no description, claim, illustration or element likely, directly or by implication, to mislead |
| (c) | Explanation and demonstration are accurate and complete, particularly on price, credit, payment, cooling-off periods or right to return, guarantee, after-sales service and delivery |
| (d) | Claims relating to verifiable facts can be substantiated |
| (e) | No misleading, deceptive or unfair trade practices |
| (f) | Direct selling is not presented as market research |
| (g) | Promotional material carries the company's name and address or telephone number and the direct seller's mobile number |
| (h) | No statement or implication that a guarantee or warranty offers rights additional to those in law when it does not |
| (i) | The terms of any guarantee or warranty, including the name and address of the guarantor, are easily available, and limitations on remedies are clear and conspicuous |
| (j) | The remedial action open to the consumer is set out in the order form or accompanying literature |
| (k) | Testimonials, endorsements or supportive documents are genuine, verifiable and relevant |
| (l) | After-sales service details, and how to activate it, are in the guarantee or the offer |
| (m) | Products and samples are suitably packaged for delivery and possible return |
| (n) | Orders are fulfilled within the proposed delivery date unless stated otherwise, and the consumer is informed of any undue delay as soon as it becomes apparent |
| (o) | On delay, a cancellation request is granted and the deposit refunded as per the cancellation terms; the consumer is told of the right to return at the entity's or seller's cost |
| (p) | The right of return offered is in writing |
| (q) | Price and payment terms, and the nature of additional charges such as postage, handling and taxes, are clearly stated |
| (r) | For instalment sales, the credit terms, deposit, number, amount and periodicity of instalments and the total price compared with the immediate selling price, if any, are clearly shown |
| (s) | Information needed to understand the cost, interest and terms of any other form of credit is provided |
| (t) | Unless the duration of the offer and price are stated, prices are maintained for a reasonable period |
| (u) | The payment and debt collection procedure is set in writing before any contract is signed and avoids undue inconvenience |
| (v) | The Legal Metrology Act, 2009 and its rules are followed |
"Guarantee", "warranty" and "guarantor" in clauses (c), (h) and (i) are used in their legal sense. For tax in clause (q), see our GST guides.
Delay, cancellation and refund: clauses (n) and (o)
Clause (n) sets the baseline: orders are fulfilled "within the delivery date proposed to the consumer at the time of purchase", unless the offer says otherwise, and the consumer is told of any undue delay "as soon as it becomes apparent". Clause (o) then gives the consumer a right on delay: "any request for cancellation of the order by the consumer shall be granted, irrespective of whether the consumer has been informed of the delay". If delivery cannot be stopped, the consumer must be told of the right to return the product at the entity's or seller's cost.
An invented example: Sunita pays a deposit for a water filter with delivery promised in ten days. On day twelve nothing has arrived and no one has called. She asks to cancel. Under clause (o) the request must be granted and her deposit refunded under the cancellation terms she was given.
Rule 7(ii): what must not be done
A direct selling entity or direct seller shall not:
- (a) indulge in fraudulent activities or sales, and shall take reasonable steps to ensure participants do not indulge in false or misleading representations or any other fraud, coercion, harassment or unconscionable or unlawful means;
- (b) engage in, or cause or permit, conduct that is misleading or likely to mislead on material particulars of its business or goods or services;
- (c) indulge in mis-selling (defined in rule 3(1)(g));
- (d) use fraudulent, coercive, unconscionable or unlawful means, or cause harassment, to promote its business or sell goods or services;
- (e) refuse to take back spurious goods or deficient services and refund the consideration paid; or
- (f) charge any entry fee or subscription fee.
Spurious goods are the subject of section 91 of the Act. Clause (f) means no one can be charged a fee merely to join or stay in the network.
Rule 7(3) and (4)
Rule 7(3): a direct selling entity and a direct seller "shall comply with the requirements of all relevant laws, including payment of taxes and deductions thereunder". See our income-tax guides and GST guides for the tax side.
Rule 7(4): they "shall not induce consumers to make a purchase based upon the representation that they can reduce or recover the price by referring prospective customers to the direct sellers for similar purchases". If a direct selling entity or seller breaks these duties, a consumer can consider a complaint, and a draft is described in our post on a consumer complaint draft template. Contravention is dealt with under the Act (rule 13); see rules 8-13. The seller-side duties are in rule 6.
Need help with a direct selling dispute?
If a direct selling entity or seller has delayed delivery, refused a return or charged you a fee to join, our consumer complaint filing team can help you prepare the complaint.
Key takeaways
- Offers, claims and testimonials must be clear, accurate and verifiable.
- A delayed order can be cancelled on request and the deposit refunded as per the cancellation terms.
- The right of return must be in writing.
- Instalment terms must be shown in full before the sale.
- No entry or subscription fee, no mis-selling and no referral-based price cuts.
Read next
- Rule 6: obligations of a direct seller
- Rules 8-13: barred persons, pyramid schemes, State monitoring
- Consumer Complaint Draft Template
- Section 94: unfair trade practices in e-commerce and direct selling
Disclaimer: Based on the rules, regulations and guidelines named above as published in the Gazette of India or on the CCPA website, with the amending notifications the article names (consulted on 3 October 2026). Later amendments, the Consumer Protection Act, 2019 provisions referred to, State rules and CCPA advisories should be checked. This article is general information, not legal advice; check the official text before acting.