Report Topics:
1:- General Information
2:- Cooling-off Period
3:- Pyramid Schemes
4:- Multi-Level Marketing
5:- Prohibition on Products
6:- Credit Restrictions Country
7:- Money Collections
8:- Licenses
9:- Status of Direct Sellers
10:- Earnings Claims
11:- Taxes and Fees
12:- Social Security
13:- Others
General Information
Australian direct selling often exists in a regulated environment at product and transactional levels. Each company has its own selling methods so different considerations will determine if they are affected by regulatory or other legal requirements.
Cooling-off Period
Direct selling is affected by laws of the Commonwealth, States and Territories. All jurisdictions have adopted the new Australian Consumer Law which ensures consistent cooling-off rights.
The Australian Consumer Law gives consumers who enter into an unsolicited contract, the right to cancel the contract within a ‘cooling-off’ period.
Contracts which have been initiated by a service provider over the phone such as a telemarketing call or at a location other than the provider’s place of business (for example, a door-to-door sale or being approached in a public place such as a shopping centre) are generally subject to a cooling-off period. Cooling-off periods do not apply where a consumer visits a provider’s store, calls to request a service or orders a service online. The purpose of a cooling-off period is to protect a consumer from being bound by an unsolicited contract that does not fit their needs, by giving them time to reassess and cancel the contract if necessary.
The cooling-off period for individuals is 10 business days. This period starts:
The consumer can cancel the contract for any reason during the 10 business days. The consumer needs to take note of how they can cancel the contract, which sometimes involves mailing a written cancellation letter to the provider.
Under DSA’s code of practice Clause 10, “A consumer who has purchased a product under a direct selling agreement, not being an unsolicited consumer agreement, may cancel the agreement by giving the direct seller or member notice of cancellation within ten clear business days of entering the agreement.”
Pyramid Schemes
Pyramid schemes make money by recruiting people rather than by selling actual products or services, even if the scheme includes the selling of a product. These schemes work by asking new participants to make a payment, known as a ‘participant payment’, in order to join. New members are promised payments for recruiting other investors or new participants.
The Australian Consumer Law (Schedule 2 to the Competition and Consumer Act 2010) clearly defines the meaning of pyramid schemes under Section 45 of the Act. A person must not participate in a pyramid scheme nor induce, or attempt to induce, another person to participate in a pyramid scheme. (Section 44 of the Act) Judicial analysis of this regulation has delivered a clear distinction between pyramid selling and legitimate network marketing.
Multi-Level Marketing
Multi-level marketing is not specifically regulated although it may be affected by the Australian Consumer Law’s control of referral selling. It prohibits consumers being induced to purchase goods or services by promises of rebates, commissions or other benefits for referrals, but only if referrals produce sales.
Prohibition on Products
Generally there is no prohibition on the sale of any consumer products by direct sellers with the exception of therapeutic goods which is governed under Therapeutic Goods Act 1989. Therapeutic goods or services must be registered or listed with the Therapeutic Goods Administration if there are therapeutic claims on the products. Food products may come under the Food Act 2003 where the purpose of the Act is to ensure that food for sale is both safe and suitable for human consumption. There may be restrictions on the sale of other products and companies would need to determine this against various other regulations in Australia.
Credit Restrictions
Credit, other than interest free arrangements, is regulated under the complex National Consumer Credit Protection Act 2009 and National Credit Code. It provides for licensing of credit providers and transactional requirements. It is important to highlight although obtaining credit facilities is common in purchasing goods these days, a direct seller should not be offering financial advice to consumers as to their ability to borrow or repay credit loans.
Licenses
Direct sellers are not required to be licensed.
Status of Direct Sellers/Distributors
The majority of direct selling organisations in Australia operate under wholesale (buy/resell) arrangements, where legal ownership of products is transferred from the organisation to the salesperson before being passed on to the consumer. Commission arrangements, where property or ownership is retained by a direct selling organisation until payment by a consumer, remains as the model used by a minority of DSA members. This is known as an agency model. Direct sellers are independent contractors Distributor/Direct Seller Agreements and Policies and Procedures for Distributors/Direct Sellers establish the criteria for this status and the relationship between organisations and distributors/direct sellers must reflect this in substance. The independent contracting status, as opposed to employment, is pivotal for the treatment of taxation, superannuation, workers compensation, workplace safety and other issues.
Earnings/Income Claims
The Australian Consumer Law prohibits false or misleading statements concerning the profitability, risk or any other material aspect of a business activity promoted as being able to be conducted from a person’s residence.
Taxes and Fees
Direct selling is affected by the Goods and Services Tax which is a tax (10%) applied to the retail sale of the product.
Social Security
There are no social security obligations on direct selling organisations in relation to the activities of their direct sellers.
Privacy
The Australian Privacy Principles (APPs), which are contained in schedule 1 of the Privacy Act 1988 (Privacy Act), outline how most Australian Government agencies, all private sector and not-for-profit organisations with an annual turnover of more than $3 million, all private health service providers and some small businesses (collectively called ‘APP entities’) must handle, use and manage personal information.
Others
The principal legislation affecting the activities of direct selling organisations and their direct sellers in Australia is the Australian Consumer Law. DSAA members are also bound by the Association’s Code of Practice.
The WFDSA International Guide to Direct Selling Legislation is a guide and is not exhaustive either in terms of subjects presented or for all areas of concern to direct selling companies. It is intended to cover general areas of concern. The Guide is not a substitute for legal counsel but only intended to alert you to the general nature of laws and regulations affecting the direct selling industry in a particular country. Consequently, before beginning an operation in any foreign country, it is strongly recommended that competent legal counsel be consulted. While every effort has been made to insure that the information contained in this Guide is accurate, the variety of sources used makes absolute verification difficult. Further, laws and regulations also can change from time to time without notice. Therefore, the WFDSA cannot be held liable for the information included in this publication.