Hundreds of unemployed women around the country have become distributors or agents of companies that sell their products through ‘direct marketing’ or ‘multi-level marketing’. Now, if such a person has a dispute with the company over the quality of the product or refunds, can she complain to the consumer court constituted under the Consumer Protection Act? Is there a remedy for such a person under this law? Does she become a consumer as defined under the Act?

Sometime ago, the apex consumer court examined this issue and its decision should bring cheer to women who are in this business. The complainant in this case was Ms Gayathri . Nimbalkar. She joined the Network Marketing Plan of Frontier Trading, which was using a network of users and distributors to sell ‘Japan Life India - Total Sleeping System’. Accordingly she paid Rs 77,830 by a demand draft on March 28,2000 towards the purchase of the magnetic mattress. The company was to import the bed from abroad, but before that could happen, she read newspaper reports that raised questions on the suitability and effectiveness of the mattress. She immediately wrote to the company and said she was no longer interested in the product and that they should return her money.

On getting no response from the company, she filed a complaint before the District Forum, which directed the company to return the amount along with 12 per cent interest. When the Maharashtra State Commission dismissed the appeal filed by the company, a revision petition was filed before the National Consumer Disputes Redressal Commission. The argument of the company before the apex consumer court was that the dispute did not pertain to sale or purchase of goods between a consumer and a seller. Ms Nimbalkar had actually become a business partner of the company in the form of its independent representative and the product was being acquired as part of the network marketing plan. Thus it was a purely commercial transaction which did not come under the purview of the Consumer Protection Act.

The Commission disagreed. It pointed out that her purchasing the mattress and becoming a member of the scheme were two separate transactions as the purchase of the mattress was a pre-condition to her joining the scheme. As far as the first transaction was concerned, she would certainly be a consumer as defined under the Consumer Protection Act. Even assuming that both the above transactions were linked, she would still be a consumer and would have the right to seek justice through the consumer courts, the Commission said (RP NO 48 of 2002).

Given the expanding businesses of those selling a wide range of products from soaps and detergents to cosmetics and vitamins through direct marketing or multilevel marketing, this is an extremely important order that provides certain protection to those who join such schemes.